One of the jobs of a firm is to transform "inputs" of labor and capital into "outputs" of product and service. For most of us, that means using money to buy equipment and paying labor to produce clean garments.
If the prices of labor or technology change, new production methods may be needed to reduce unit costs. Unfortunately, the industry isn’t lucrative enough to support more R&D, but it can take advantage of other industries’ “knowledge leaks” and adapt their innovations.
Historically, the most significant innovation in industrial production is probably the assembly line. Henry Ford — a great inventor and businessperson, according to friend and mentor Thomas Edison — was the driving force (pun intended) behind it.
Ford launched his assembly line April 1, 1913 in the company’s flywheel magneto ignition department, reducing the man-hours required to finish a unit from 20 minutes to five. The concept spread from ignition, to engine, to transmission and chassis, at which point the assembly line was responsible for building the entire automobile.
The assembly line democratized automobile ownership. While it was taking hold at Ford from 1913 to 1916, the price of a Model T dropped from $525 to $345. Buicks and Studebakers at the time cost $600 to $1,000; Cadillacs cost up to $2,000.
Price was a major factor in Ford’s success, and soon, one-third of all cars on the road were Fords. The company raised “the automobile out of the list of luxuries, bringing it to the point that the average citizen may own and enjoy [an] automobile,” Ford said. Today, we can hardly imagine life without one.
Ford’s inspiration came from a visit to a Chicago meatpacking plant run by Gustavo Swift, where an overhead trolley carried carcasses through the production floor. Ford imagined how such a trolley might move parts to his workers, rather than vice-versa. It was a knowledge leak that helped him benefit from another industry.
Though Ford was regarded as a social reformer, his success came first. For example, he introduced the “Five-Dollar Day” in 1914 to alleviate labor shortages caused by the success of the automobile industry. Many firms had entered the industry, inflating wages, and good workers were scarce.
Ostensibly trying to spread temperance, responsibility and wages sufficient to buy more cars, Ford was really trying to fix a 370% turnover problem with an estimated $1.8 million in annual costs. The wage ($5.00) was broken into two parts: a $2.34 daily wage, on average, plus $2.66 in profit-sharing. To take advantage of the profit-sharing, however, workers were directed to avoid saloons, smoking and gambling, prove participation in a savings account, and support their families.
While an assembly line and 100% incentive pay may be impossible goals for our industry (we can’t break pressing into segments to increase specialization, for example), automation is spreading, thanks to another knowledge leak.
It began in 1978 when unemployed engineer Augusto Santicchi went to a drycleaning show in Milan with his brother-in-law. Augusto wondered why no European firms offered conveyors to meet local demand. As the men rode an escalator from one floor to another, Santicchi figured out how his product would be different: It would feature a moving belt as its base with a continuous piece of stainless steel on top.
By 1994, MetalProgetti had married its conveyors to modern point-of-sale systems to bring computerized assembly to the “average” drycleaner. Now, most conveyor manufacturers have introduced automated assembly systems, and more may soon saturate the market. They’re successful because they reduce the labor required to assemble an order with garments in hand.
Ford may or may not have been right — that technology would improve the lives of every American — but if we, as small-business owners, can share our knowledge, we can ensure each participant’s success against the tyranny of the status quo.