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When I tell you that something over 80,000 cows have advanced through the advance registry and that the annual production of those purebred cows is about three times the average production of all cows in America, you will concede that we have made some progress toward a better dairy cow in America. [Applause.).
I am informed by your chairman that you will have to abbreviate the session this afternon, and I suppose that that contained an implied hint that I should abbreviate my discourse and, therefore, before closing, I want to say to you representatives from other countries that we are perfectly delighted to have you within our midst. We are very glad that you are going to journey with us up to Syracuse to attend our National Dairy Show. We hope really to be pretty well acquainted with you all before you leave, and we hope that when your pilgrimage is ended you will have so enjoyed yourselves that your last word, as you set sail, will be a promise to come again. I thank you.
Chairman SCOVILLE. I am sure we are greatly indebted to Governor Lowden for his message containing, as his messages always do, so much sage advice coupled with shrewd enthusiasm.
Lest some of you might not have been here this morning, the reason for our early adjournment is, as you all probably know, that we must leave here at five minutes to 4 in order to attend the reception at the White House, where the President has kindly consented to receive this congress.
It would be a willful waste of your time to spend any words introducing the next speaker. For a good many years he was chief of the Dairy Division. He was always an unending source of enthusiasm and counsel to us and he grew to be known by the name of the " Big Chief.” No matter what the program may say he is now, to those of us who have been in the industry for a long time he always will be our chief. He has left to go into commercial activity, as so many good men have, and the program says something about his being in business in California, but I know you will want to hear from him as our old friend. Mr. B. H. Rawl, former chief of the Dairy Division. [Applause.]
THE RELATIONS BETWEEN THE MANUFACTURER AND THE PRO
BERNARD H. Rawl, assistant general manager, Golden State Milk Products Co.,
San Francisco, Calif.
The relations between the manufacturer and the producer of milk products determine in considerable measure the status of the dairy industry in a community or in a nation. In these relations are reflected the ability of both to apply certain principles necessary to coordinated effort and hence to a prosperous industry. Any plan involving the manufacturer and producer, therefore, must be economically sound and just. One can not prosper at the expense of the other nor, indeed, without the aid of the other.
That these are the basic principles upon which any successful relationship between manufacturer and producer must rest is so obvious as to make the discussion of the subject of this paper appear almost unnecessary. When we view the situation as it actually stands throughout our country, however, we are compelled to recognize that there are still unsolved problems in this relationship; that there is failure either in the recognition of the fundamental principles involved or else in the methods of applying them. Otherwise there could not be the contention that sometimes exists between the manufacturer and producer; contention that leads to bitter and expensive fights, that results in good for neither, and that costs both the confidence of the consumer.
In the production of milk and the marketing of it in its various forms, there exists a condition found in but few important industries. On account of its perishable character, milk must be consumed or manufactured within a short time after it is produced, and within a comparatively short distance from the farms whence it comes. This makes it desirable for the producer to patronize his nearest factory and for the factory to secure all of the milk in the territory immediately adjacent. In order that these advantages might be enjoyed, the plans by which the manufacturer and producer work must be definite and fair and each must understand his part in those plans. In this way a mutual relationship is brought about that is valuable to both and that is essential to the growth of the dairy industry.
There are, of course, between the manufacturer and producer, certain joint problems around which their closest relations exist. These include such matters as volume of product and its relation to farm and factory efficiency; the extent to which quality affects the value of the product and the part each has in securing it; the proper division of the returns in order that each may receive just reward for his effort: the value of confidence and the relation it bears to organized and coordinated efforts; the type of manufacturing organization as it affects the interests of both; and finally service to others, rendered jointly by the manufacturer and producer, whicli constitutes the basis of all successful industry.
The significance of volume to efficient plant operation and to efficient production is seldom fully recognized. Small volume in the factory increases the cost of manufacture and decreases the returns to the producer. Small volume on the farm increases the cost of production, and, of course, is a factor in increasing the cost of manufacture. In either case the factory suffers and in either case the producer suffers.
When a single plant has small volume it may be attributed to bad management; but when every plant in an entire region has small volume, as is sometimes the case, the cause must be attributed to too many plants.
No factory with insufficient volume to operate at full capacity can render the best service. The producer often regards this a factory problem, hence of no concern to him. Indeed, sometimes he encourages small volume in the factory by encouraging the greatest number of factories. He does this on the ground that it will increase competition, and thereby benefit him.
The value of competition is, of course, well recognized. We may even assume that in the end competition will work out maximum efficiency. There is such a thing, however, as too much competition. In such cases the processes of elimination become necessary and they are in the end expensive to all. One inevitable result of suci a situation is that the quality of the products suffers, and this is always harmful to both manufacturer and producer.
The remedy for such a situation does not sie in stifling clean competition. Indeed, an immediate remedy is hard to find. The wise course is to prevent such a situation from arising and this can be accomplished if all parties concerned have a clear understanding of their own best interests.
Such a course of prevention means that the manufacturer must realize in advance and must proceed on the basis that the producer is entitled to all that efficient service and fair dealing will justify, not for the good of the producer alone, but for his own as well. It means also that the producer must not be unreasonable in his demands upon the manufacturer and must not expect more of him than efficient service and fair dealing will justify, for indeed more than this is impossible. The producer must realize in advance, also, that too many plants inevitably reduce manufacturing efficiency, from which he too must suffer eventually.
A clear understanding, then, on the part of both manufacturer and producer, of their own best interests, can prevent too many plants and the losses incident thereto.
Coming now to the matter of volume on the farm; no amount of plant efficiency and no reasonable price can make the farm profitable unless it, too, has volume that is commensurate, first, with the investment, and second, with the number of cows in the herd. The first requirement may be met by enlarging the herd, but unless the cows are efficient producers, advantages thus obtained will be fully offset by increased cost of production. Neither small volume then, nor higher volume inefficiently secured, will make a properous and satisfied producer. The effect of this upon the manufacturer is easy to see, for without successful producers the manufacturer will soon find himself without raw material.
The manufacturer therefore is quite as much concerned over volume on the farm as is the producer over volume in the plant. It is essential in both cases, and can be secured only through the coordinated effort of both parties.
The permanent prosperity of the dairy industry rests very largely upon the qualitiy of its products. The proof of this is found in the fact that our highest grade products come usually from those regions that are foremost as successful dairy districts.
Quality is always a factor in consumption, and consumption always a factor in price. Quality always requires extra expense and can be secured by neither manufacturer nor producer alone. This being the case, the methods by which it can be obtained are of the greatest importance.
Let us consider this matter first from the producer's standpoint. He has a large investment in land, buildings, equipment, and cattle.
This investment is but slightly greater where high-grade products are produced than where low-grade products are produced. The labor costs in the former case, however, are considerably greater. Where no attention is paid to quality and the utmost economy is practiced, the producer omits the sterilization of the utensils and the cooling of the milk or cream; he fails to discriminate against feeding stuffs that impart objectionable flavor to the milk, and to protect it from odors that are absorbed. In such ways the quality of the raw material is injured and its value reduced. To prevent this requires greater expense, of course. In some cases that expense is considerable, yet compared with the total cost of production, even where no attention is paid to quality, the extra expense of securing quality is but a trifle. Even so, the producer cannot be expected to bear that extra expense if first-class raw material brings him no more than the cheapest he can produce.
Here the manufacturer's part begins. He must find a way to pay more for first-grade raw material than he does for second or third grade. or he will receive largely the latter. That way lies in selling high-grade products for more money than is secured for inferior ones. This requires effort and increased expense, and even then is sometimes not easy to do. But it is right, it can be done and it must be done if high-grade products are to be supplied. Quite contrary to the belief sometimes expressed, the producer is by no means averse to supplying first-class raw material if he receives a premium for it. Even a small premium with proper instructions brings surprising results. The producer alone, therefore, must not bear all the blame for inferior raw material.
Great progress in factory operation is being made; nevertheless, it is easy for the factory to turn out goods of inferior quality even though the raw material is first class.
It must be said of the factory, as of the farm, that to do the extra work required to maintain the highest quality involves extra expense. This expense, however, as on the farm, is small compared with the total cost of manufacture. Both producer and manufacturer, efficient as they may be, have greater expenses when they supply products of high quality. On account of this extra effort greater values are obtained which should be shared by both parties.
It occurs sometimes that the producer wants the results of high quality without furnishing high quality raw material; or that the manufacturer desires high quality raw material without paying extra for it. One is just as unreasonable and in the end, just as impossible as the other. High quality in dairy products depends upon the joint effort of manufacturer and producer and upon the recognition that it brings prosperity to both.
DIVISION OF RETURNS.
Since the manufacturer and producer are dependent upon each other in so many ways, the methods whereby they share in the results of their joint efforts are worthy of attention.
There are two such methods in general use. They are as follows: First, the price to the producer is determined by competition, the manufacturer taking his chances on what remains. Second, the manufacturer pays all that sound business will permit, whether above or below competition, realizing that his permanent prosperity rests largely upon the prosperity of the producer.
By the first method competition at times forces the plant to pay more than its returns justify. This is done, however, with the expectation that a more favorable season will follow during which it will be able to recover the losses thus sustained.
Competing plants often manufacture different products. In this way one plant is favored at one season and another at another. The assumption that in the long run supply and demand will hold the different products in proper relation to each other is the theory upon which plants continue to meet competition when their returns do not justify it. Adjustment in the prices between different commodities, however, are sometimes slow, thus increasing the hazard of plant management where this method of paying the producer is used.
The second method, whereby the plant pays all that it can to the producer, and more than competition requires when conditions will permit, must be based upon the assumption that its patrons will not desert it during unfavorable seasons when the plant is unable to meet competition. This plan is possible only where there is no competition or where there is complete confidence between the manufacturer and the producer; confidence in the manufacturer, that he will pay all that the business will justify, also that he will maintain his efficiency; confidence in the producer, that he, having enjoyed the largest possible returns during favorable seasons, will not withdraw his patronage during the unfavorable ones.
Both the manufacturer and producer must share in determining which method is to be followed. They may do it through understanding and confidence in each other, or they may do it through the absence of such understanding and confidence. In either case they both take part in the decision and they both share in the results whether good or bad.
All business is of course, based upon confidence. Without confidence there is little cooperation; without understanding there is little confidence.
Failures in general business are often caused by insufficient capital. And what attracts capital? First, the skill for doing a useful job; and, second, the understanding of that skill by the owners of capital. Ability and understanding then create confidence. How frequently does failure occur from lack of capital when there is unrestricted confidence behind the enterprise? Not often. Confidence, therefore, is an essential factor in all business. Where two individuals like the manufacturer and producer are intimately concerned with the same product, dependent upon each other at every turn, confidence is the very life of success.
Each must have the ability to do his own part well, the desire to do it well; and each must understand the other. There are forces constantly in action to prevent understanding and confidence between the worthy manufacturer and worthy producer. Such forces result from unsound theories or from narrow selfishness. Happily, the professional confidence destroyer is finding his business growing smaller.