Saw Vises


Masters' Library


Why Manufacturers Lose Money by Robert Grimshaw, 1922



This work is the outcome of several series of lectures on Cost Reduction, delivered in Germany and Austria in 1913 and 1914, in New York University in 1915 and 1916, and still later in the College of the City of New York; supplemented by an article on " Why Foundries Lose Money" in The Foundry, (reprinted twice in my Industrial Bulletin.)

While it does not pretend to cover the ground exhaustively, or even concretely, it does name practically all the principal and most of the minor causes of loss; and should at least serve as food for thought and incentive to action.

The classifications, which have given me no end of trouble, may please my critics even less than they do me. They are, however, the best that I have been able to evolve from the great variety of possible treatments that suggested themselves.

August, 1922.

Financial Causes of Loss


These are such as affect every line of manufacturing business, and are caused by the financial management, as distinct from the commercial or sales department.

Insufficient Capital - Very little need be said under this title. While fortunes have been, still are, and probably ever will be made on a "shoestring" basis, this is seldom the case with manufacturing. "Biting off more than one can chew" is a frequent cause of loss, even of bankruptcy.

As I write I have a letter from a manufacturing concern having a valuable specialty, lamenting in ability to take part in a pool for exporting American products. Owing to financial weakness there is not enough money to run the plant to sufficient capacity even to satisfy the domestic demands, much less to go after foreign trade.

Credit had been given recklessly, in some instances; a new manager had been appointed solely because he bought the stock but orders had to be refused because there was no cash to buy raw materials, and so on.

Over-Capitalization - This refers principally to "water." A concern that is expected to pay ten per cent on $10,000,000 when it could not possibly earn that amount on $5,000,000, must record "losses."

There are instances, however, where real over-capitalization exists and causes loss because a large part of the capital is drawing only six per cent at most, while the rest, constituting the real working capital, is earning ten or twelve. In such a case the "loss" consists in diminished potential profits.

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