H D FINDING THE FACTS C3 GIFT or http://vV\IM:ait;niV6;o'fg/ddtai1S/findin^ ^s=^ FINDING THE FACTS Traffic Department LEHIGH AND NEW ENGLAND H RAILROAD COMPANY BETHLEHEM, PA. COPYRIGHT, 1922 LEHIGH AND NEW ENGLAND RAILROAD COMPANY BETHLEHEM Gift FINDING THE FACTS *' Business is warfare. It is a hard, constant fight to the finish. The moment a contestant enters the field of industry or commerce, he is challenged by a host of. competitors. All his movements are dis- puted and opposed by those already in possession of the field. He must fight to live. He must conquer to succeed.'' — ^Walter H. Cottingham. TO BE forewarned Is to be forearmed. Having advance knowledge is hav- ing a battle half won. The old method of ascertaining costs was to discover them after work was completed. The new way is to ascertain them before work is begun. A factory manager once turned out a first lot of a special type of machine at a labor cost of ten thousand dollars each. An industrial specialist investigated the opera- tions and put through another lot at a cost of five thousand dollars each, an economy of ^200,000 on the entire job. 0^ 4r% r\C^ 4 i\ LEHIGH AND NEW ENGLAND RAILROAD CO. After many years of haphazard group- ing and arrangement of activities we find business merging into a major profession, sub-divided into a multitude of minor pro- fessions. Each of these minor professions, such as accounting, advertising, credit, man- agement and salesmanship has become a highly specialized science. Other major pro- fessions, particularly engineering, have fol- lowed the same trend of specialization. A century ago a man in any branch of engi- neering was identified simply as an engineer. Fifty years ago he was a civil, mechanical or electrical engineer, while today, these latter terms give only a vague idea of his qualifica- tions or his occupation. Specialization finds its way into all indus- tries and professions, sub-dividing single occu- pations into many, and confining the individual more and more to specializing in one line. Today the industrial specialist is uni- versally accepted and acknowledged to be a necessary adjunct to every large industry. These specialists have widened their scope of operations and usefulness, increased their [4] FINDING THE FACTS knowledge of special subjects and become more valuable to industry every year. Today they not only lay out and plan the building of an industrial plant so that the movement of a manufactured article will travel in the most direct line from start to finish, thereby saving time, labor and money, but their usefulness extends even to the organizing, financing and launching of an enterprise. One very important phase of their work constitutes the detailed and exhaustive investigations necessary to logically decide upon the best location in which any particular industry will thrive. Just as the modern chemist predicts reactions and obtains them; just as the mining engineer assays a situation and determines the value of the ore, so the industrial specialist assays a situation and predicts with surprising accuracy what the cost and production will be. He plans with the same certainty of results that the naval engineer plans a Mauretania, the bridge engineer a Brooklyn bridge, the civil engineer a Simplon tunnel, the modern architect a Woolworth building. [5] THE LOCATION SPECIALIST "Place on my tombstone this epitaph: *Here lies a man who knew enough to keep around him men who were cleverer than himself/ " — Andrew Carnegie. PERHAPS the most important sub- division in the industrial specialist field that has been developed in the last decade or so has been that of the location specialist. More and more manufacturers are coming to realize that the location of their plant directly affects the profits of the busi- ness. Raw materials, transportation, labor, power and markets are the primary factors to be analyzed, while several hundred second- ary factors must also be considered, any one of which may assume primary importance in regard to a particular industry. The specialist in location must be excep- tionally well versed in the fundamentals and practical experience of business. He [6] FINDING THE FACTS must have accurate knowledge concerning all the different characteristics of every sec- tion of the country. His knowledge of fac- tory operation must also be extensive, while the question of markets is one that he must understand in its most intimate details. Many of the larger corporations that are continually branching out in new lines and extending established businesses, find it prof- itable to maintain a permanent staff of location specialists^ paying the members of these staffs large fees and salaries. These location staffs conduct extensive investi- gations, going into minute details in their quest lor j acts before any move is made by the principals. The large, successful organizations main- taining them know that the data obtained and the decisions resulting therefrom have paid them many times over in increased profits and larger production. No more are they building plants by guess-work, rule-of- thumb, or chance. The location of a plant in a town where the leaders of the organi- zation may be residing is now looked upon as a pretty expensive convenience. The scien- 71 LEHIGH AND NEW ENGLAND RAILROAD CO. tific selection of the section of the country in which a particular industry will have the most advantages is now recognized as the most profitable way. HOW ONE SPECIALIST WORKS Some years ago an important implement manufacturing company decided to locate in a distant and unfamiliar farming section. What the ruling factor in such a choice might be, none of the officials knew. A specialist on industrial sites was given the problem. To the four plants of the concern the speci- alist sent blanks for the tabulation of con- ditions, rates and costs at each plant. On a master sheet he arranged columns and headings for comparison of present and prospective locations, point by point. He sent forward other blanks to the man- agers of sales in the district in which loca- tion was desired, requesting reports on land developments, present and probable, acreage and crops, implements likely to be bought within two years, and finally, factory sites or plants on the market. [8] FINDING THE FACTS He was constantly on the lookout for manufacturers whose plants he could inspect, and with whom he could consult on trans- portation, fuel, ore, building costs, equip- ment, etc. The situation was complex and he tabulated a few choice locations in great detail. Moreover, the sales reports and forecasts that reached him suggested a change in demand so he directed an investigation into the value of tractors on big ranches. Personally he inspected supply mills and mines, and plants similar to the one which he wished to locate, in three great districts, hundreds of miles apart. One of these plants was located near the central metropolis of the new section. Gen- eral conditions and costs for that locality, and what details he learned, marked it favorably. As he went through the plant he mentally checked off the advantages it offered. Upon meeting his principal soon afterwards he recommended acquiring it at once. "What — buy an engine plant to make farm implements.^'' the noted manufacturer exclaimed. *'Why not?" was the reply. **Not only do we get foundries and machine [ 9 ] LEHIGH AND NEW ENGLAND RAILROAD CO. shops and a force all easily fitted to our work, but within five years this territory will be demanding farm engines in quantity." The specialist drew out his reports and established his point. '*But what about metal — your ore beds are five hundred miles south/* said the manu- facturer. **You would not give that section a second thought after touring it/' said the specialist. He then told how he had found success in manufacturing within the south- ern district to be a rare exception because certain classes of its inhabitants were quar- relsome, making a labor supply unwilling to co-operate and constantly embroiled with its employers over some grievances. On a slip of paper he added the triple freighting costs, made up of incoming ore and fuel, and out- going product, for both centers. The chief markets far to the north and west just bal- anced the southern ore supply, making the central location equally efficient with the other. Going still further, he revealed an emergency source he had found for iron and steel, conveniently located for the central location. [10] FINDING THE FACTS On this evidence the plant was purchased. Within three years it was operating at a good profit, having been extended in the form of an H, with one-half devoted to implements and the other half to farm engines. This indicates not only the detail work which must be attended to in selecting a wise location, but also the knowledge of fundamental policies, future opportunities, and dangers which the locator can **buy out of" or "into." One manufacturer puts it this way: *'I locate a plant as I assemble an engine — at what I call the center of total convenience." And, usually, one essential of production or merchandising, as labor or local market, is so fixed that its weight in regard to costs and profits draw everything else to it. ESTABLISHING A CANADIAN BRANCH Some years ago a manufacturer of plows decided to open a pioneer Canadian branch. Being fairly well-informed on the requisites of factory sites he decided not to call in a specialist, but to handle the problem him- self. In] LEHIGH AND NEW ENGLAND RAILROAD CO. He worked out advantages in cost, trans- portation, material and labor in great detail. First he tabulated and studied sales reports and forecasts from the Canadian territory and picked out nine cities ranging in popu- lation from four thousand to ninety thousand, well situated and connected to ship to the heart of the agricultural territory. He then analyzed conditions in his present manufactur- ing plants according to a careful outline. From this he developed a chart including all the additional considerations which seemed important in the present case; such as land offered free, available sites adjacent thereto, bonus, cost of building and probable total cost to manufacture. After correspondence with the authori- ties of the various cities he made appoint- ments to go over the territory personally. Going to the heads of traffic by rail and water he found what transportation and terms he could get on raw material, supplies and the finished product for each site. He noted what towns had already made favor- able records as distributing centers. He figured his trucking costs and the amount of [I2l FINDING THE FACTS freight so that he knew what terms he could make with an individual railroad line which would have no competition for his trade, and of what importance switch tracks, belt lines and traffic alliances offered by certain cities would be towards better freight service and to save teaming with its daily delays at crowded freight depots. He sought quick delivery of equipment in emergencies, accessibility of factory from the Canadian sales office and the advertising value of the site among out-of-town cus- tomers who would wish to go through the plant. In connection with transportation he compared coal, gas, water, electricity for power and even considered the disposal of ashes. Working with street railways, telephone companies and commercial clubs he detected the trend of growth of the most promising towns, got at location values and roughed out cost of delivery by horse and motor truck. He investigated the local labor supply, going to employers, foremen and other officials. He considered the possible surroundings of 13] LEHIGH AND NEW ENGLAND RAILROAD CO. his employees : housing, costof living, schools, parks, ''walking distances" and car service. He put a black mark against sites where the available space was small and a build- ing several stories high would be necessary. Where the ground was cheap he calculated the advantages of a plant not built entirely of concrete and steel, but more flexible for remodeling or sale. He tabulated insurance conditions as regards sound buildings, spec- ified distances between, sprinkler systems and water supply. In two of the most attractive cities he planned for instant action. In a single day the preferred site was taken over and con- tracts closed covering land, shipping facili- ties, water, light and power service, rates, freedom from taxes for a certain period, street car service and various labor and housing arrangements. But for three years this plant showed no profits whatever. Had this manufacturer engaged the serv- ices of a location specialist, one of the first things the specialist would have entered into would have been an extensive analysis of [14I FINDING THE FACTS the market. Although American farmers were flocking into Canada and everyone foretold a tremendous expansion, the analy- sis of the specialist would have disclosed the fact that the new farmers were all bringing their implements with them, and with the knowledge of the time required by the farm- ers of Alberta to bring their total raw land under the plow, this plant might have been built more wisely and showed profits from the start. "Four facts are worth a hundred hunches." — Ernest S. Bradford. [15] ANALYSIS OF A SITE "Initiative, perserverance, courage and all other attributes of business success are only secondary to the attribute of thoroughness, "Whether or not a policy or plan is ^good busi- ness* depends upon certain factors that are funda- mental — upon specific data. "Unless these data are based upon Jact^ the foundation of all enterprise is insecure, and the higher the edifice, the more liable it is to topple. ^^Thoroughness is the most important business principle I have learned." John Hays Hammond Capitalist and engineer, whose technical training and remarkable command of detail has enabled him to obtain as high as $100,- 000.00 for an opinion. A. W. Shaw, Editor of ""^ System^' says that the first step in analyzing an industrial site is to resolve the main problem into its constituent problems. Thus the suitability of any factory site breaks up into a number of unit questions : How near and how access- [i6] FINDING THE FACTS ible is the market for your product? What are the transportation facilities and rates, and the chances of alternative service during car shortages? What sources of materials are at hand? Under what control? What will materials cost, compared with costs at competing points? Is there an adequate sup- ply of labor of the kind required, at the prices you can pay? Are local conditions such as will help or hinder in the securing, retaining and handling of the working force? Will any financial advantages accrue from location at this particular point, either in the saving of capital invested or the securing of outside money needed? What will an adequate and satisfactory site cost? Will the type of construction best suited to the present and future requirements of the business comply with the physical and legal conditions? Will the necessary out- lay for buildings be greater or less than at other available locations? Will the tax rate be lower or higher? Will the situation of the factory add to the fire hazard and the insur- ance rate? Will lighting conditions be satis- factory? The water supply adequate? The [17] LEHIGH AND NEW ENGLAND RAILROAD CO. drainage and other facilities for disposal of wastes sufficient? Are the surroundings likely to affect manu- facturing processes or the comfort or health of employees at work? Will the plant be within walking distance or at least not diffi- cult to reach from the homes of employees? Will the location contribute to selling or advertising value of the product? Will it involve any excessive legal limitations on the activities of the business? Unusual circumstances or local conditions may give special importance to certain fac- tors in these problems. The drastic pro- visions of employers' liability laws in New York State, for instance, have trebled the former cost of casualty insurance. Com- pared with a New Jersey or Connecticut site, the other advantages of which were approximately equal, a New York location at present might be a poor investment. Yet in the long run it might provide a higher type of laboring force. The splitting up of the main problem and the listing of the factors in this way not only prevents the giving of undue weight to [i8 1 FINDING THE FACTS any single factor, but also reduces the analy- sis of competing sites to something like a mathematical operation in which the advan- tages and disadvantages of each are compared with those of the others. ADVANTAGES OF INDUSTRIAL CENTERS Certain general advantages reside in a location where other factories in the same line, or in allied lines are concentrated. Examples of this is the shoe making in Lynn, Brockton and St. Louis; flour milling at Minneapolis and St. Paul; and cotton manu- facturing at Fall River and New Bedford. In such centers, each individual industry, because of the importance of its group, commands resources and service, and profits by various external economies which the isolated estab- lishment is likely to miss. At Detroit, for instance, where the pro- duction of motor cars is carried on exten- sively, subsidiary factories have multiplied and now supply economically and without delay the special machinery and tools, the specialized parts, materials, accessories and supplies which the parent industry requires. [19] LEHIGH AND NEW ENGLAND RAILROAD CO. The magnitude of the market open for these specialized products tempts initiative and ingenuity to undertake detail manufacturing tasks which the maker of motor cars prefers not to assume himself, and thus brings about a co-operative effort profitable to everybody. For like reasons the purchasing conditions are more favorable at the focus of an industry. Prices are closer, quality of deliv- eries themselves are more apt to be on sched- ule. Bankers, too, have studied the under- lying conditions more intensively and the sound enterprise is more easily financed. Public opinion is usually more favorable to the basic community industry in which a large number of citizens are interested. And, finally, where many minds are directed upon the same technical problems and there is interchange of information, advances in production practice are more frequent and more quickly shared. Where the factories gather, also, labor con- gregates. Mechanics of the highest skill or specialized training avoid the isolated plant for definite reasons. If a dull selling season brings about a shut-down or half-time pro- [20] FINDING THE FACTS duction, the chance of employment else- where is small, while a disagreement with a foreman nearly always means removal to some other city. So general is this feeling against the factory at a distance from the greater labor markets that even the most stable of businesses when situated thus, find it hard to induce skilled labor to join their forces. Unskilled labor — no less a necessity of large-scale production — has a similar tend- ency to concentrate in the big communities, particularly since so many of our pick and shovel men have been recruited from south- ern and eastern Europe. As a result of this common drift on the part of both skilled and unskilled, our cities have become huge labor markets from which any number of extra workers of well nigh any class can be drawn when needed. These are all general advantages, how- ever, and should not be emphasized to the exclusion of possible special benefits which, in a particular case, might balance or out- weigh them. Nearness to supplies of raw materials and cheap labor, for instance, have [21] LEHIGH AND NEW ENGLAND RAILROAD CO. made it possible for southern cotton mills to compete favorably with New England estab- lishments, especially on the coarser fabrics. This, despite New England's better trans- portation, lower freight rates, cheaper power, highly organized markets and notable con- centration of the industry with its attendant advantages. It must also be taken into account that in industrial centers, skilled and common labor are both likely to carry organ- ized effort to limit production and enforce relatively high wage scales much further than in communities where class consciousness has not been fostered. LOCATING IN THE MIDDLE WEST A TYPICAL problem of the location special- ist was the analysis of several sites for a drain tile factory in the middle west some years ago. The specialist made nearness to market the first consideration, though the other salient factors were not overlooked. The product would be bulky and of low value relative to weight; the plant with the shortest haul would enjoy a real selling advantage in its lower freight rates. The [22] FINDING THE FACTS plant was located, therefore, near the center of a district where the level lands were low and drain tile in constant demand. The extra cost and added risk in processing the inferior raw materials found there, were accepted for the sake of the advantages in transportation. As the customer paid the freight, the saving appealed directly to his pocket. The new company did not need to cut prices and thus provoke disparagement of its product, while the difference in rates emphasized its character as a *'home'' industry. There was a plentiful supply of native labor, with sufficient intelligence to master quickly all but the most technical processes of manufacture. When the balance was struck, the new location scored on four principal counts — transportation, two points; labor, one point; finance, one point (a free site was offered and additional deposits of raw materials could be purchased cheaply); advertising and selling, one-half point. Against these, three disadvantages appeared, banking facilities were limited, subtracting one-half point; material was [23 LEHIGH AND NEW ENGLAND RAILROAD CO. inferior, one-half point; sources of fuel were distant, increasing the cost and deducting another one-half point. The net result was a count of four and one-half points in favor of the new location against two points disfavorable. The problem of plant location, however, does not stop with the selection of a partic- ular city. The actual placing of the factory to satisfy and make the most of local and internal conditions is a matter which can be settled only by the same process of careful analysis and weighing of the essential factors. Where in the general district, such as the traffic zone surrounding a large city, is the plant to be built ? What section of the chosen town is the most suitable? Here are found many of the factors which are important in determining the main prob- lems: transportation (direct railroad connec- tions), power (no neighborhood restrictions on its production), labor (accessibility from residence districts and freedom from objec- tionable conditions), advertising and selling values, and so on. The physical character- istics of competing sites must also be [24I FINDING THE FACTS examined. Can suitable foundations, for example, be secured at average cost ? What is the slope of the ground? Can this slope be used in planning the layout of the buildings ? How does it affect drainage or the water supply? Will the excavation furnish materi- als for construction, as gravel or sand in a building of reinforced concrete? In the local placing of the drain tile plant, transportation again governed. The shale beds and free site lay some distance from the village, alongside one railroad but a mile and a half from its junction with another road. To build here would require no investment in a site, while the material could be delivered to the machines at mini- mum cost. The drawback would be the lack of connections with the other railroad. Many shipments which might secure com- petitive service and rates if both carriers were accessible would get only routine attention at the maximum rate. Every car shortage might result in a serious delay and possible cancellation of contracts. To insure certainty in deliveries, there- fore, the specialist recommended that the [2Sl LEHIGH AND NEW ENGLAND RAILROAD CO. management pay fifteen hundred dollars for three acres at the junction and erect its plant there, preferring to pay freight on the raw material rather than save at the possible expense of sales. Some weight was also attached to proximity to the village; work- men would have a mile less to walk morn- ings and evenings and could go home to their noonday meals. The decisive factor, however, was trans- portation facilities and service in this in- stance, just as the lower cost of shorter hauls had been the determining cause in locating the plant in its geographical relation to the market. It will be readily seen that the vast amount of research and investigation necessary to properly select a site for any industry involves the extensive collection of data for which the average manufacturer has neither the time nor the facilities to obtain. Here is where the location specialist mate- rially assists the manufacturer in attending to all the detail work and submitting his findings in the form of a report to his principal. [26] FINDING THE FACTS These reports sometimes contain several hundred pages of closely typewritten informa- tion that fully covers every phase of the question. The main question here is to select a specialist of known and reliable ability, whose data and suggestions can be relied upon as accurate and practical. The manufacturer or organizer who tries to attend to this problem himself, without any special and extended experience in this work, is likely to overlook any one of the many hundred points that must be consid- ered, and that one point may be the cause of his ultimate failure. The best results in any line of endeavor are always obtained by retaining a specialist for a special job. Therefore, insurance against costly mistakes and assurance of business success are obtained by the foresight of securing the services of a specialist in location when contemplating the erection of a new plant. [^7] SOURCES OF INFORMATION "It is the spirit of rivalry that sharpens a man's intellect and spurs his energy. And unless a man is possessed of a desire to overcome, to surpass, to stand first in his line, he can never hope to carry the day. "The enterprising business man is eager for the struggle of competition. He likes the excitement of contending for supremacy. He delights to over- come those who oppose him and he finds genuine pleasure in outwitting his rivals." — ^Walter H. Cottingham THE three main sources of informa- tion open for the manufacturer contemplating the erection of a new plant are, (i) Independent or Free Lance Specialists or Industrial Engineers; (2) Boards of Trade or Chambers of Commerce; (3) the Industrial Research Departments of the railroads. Independent industrial engineers usually- work upon a stipulated fee. Their success in the past has been notable in reducing oper- ating costs and increasing production. The [28] FINDING THE FACTS industrial engineer is primarily an efficiency man, his major study being the layout and equipment of the plant, but of late many noted time and motion-study specialists have extended their knowledge to include the organizing, financing, locating, building, man- agement and distributing details of a new enterprise. The selection of a capable indus- trial engineer with a record of past successful performances is considered among industrial leaders as entirely in accord with good business practice, knowing from experience that the cost of retaining them is really an economical expenditure as contrasted to the enormous annual losses incurred by the manufacturers who still persist in deter- mining such vital questions by rule-of-thumb, chance or guess-work. One of the main reasons that the ordinary hard-headed, competent business man who employs experts in many different lines in his business will neglect to profit by the employment of a location specialist, is that the personal equation of convenience and sentiment are hard to overcome. One of the notable large factories of the [29I LEHIGH AND NEW ENGLAND RAILROAD CO. United States supplies a case in point. In plan, arrangement, equipment and working conditions this plant could hardly be improved upon. It employs several thousand men and consumes merchant steel and iron, lumber, coal and many other supplies by the train load. For many years this great bulk of materials had to be trucked nearly two miles from the city freight yards to the factory and the product in turn hauled back to the freight houses for shipment. Recently, after a long campaign for an enabling ordinance, the company secured direct railroad connections which allow deliv- ery of its heavier materials in the factory yards. But it is still obliged to maintain a fleet of nearly forty motor trucks to supple- ment the limited railroad service which its isolated situation permits. Going back to the origin of the plant it was found that the personal equation entered largely into its location. Outgrowing his first small shop, the owner — whose commercial foresight in many other respects has been remarkable — permitted sentiment and con- venience to guide his selection of a new site. I 30] FINDING THE FACTS The second factory was erected on his father's farm, remote from the railroads and because of its topographical surroundings, difficult to reach with a connecting line. Possession of the land was one reason for this choice, but family pride and fondness for the neighborhood were admittedly the com- pelling motives. Thirty years ago, of course, a switch track was not considered essential to a factory, while the most active imagination might have failed to conceive the need, in time, of forty motor trucks as traffic attend- ants on the little new plant in the cornfield. Another similar instance is that of the Dent Hardware Company of Fullerton, Pa., which started in a small way on land fur- nished by one of the partners. The factory gradually grew until now it covers several acres, but all of its freight must be handled by motor truck owing to the fact that no railroad can be built near the plant on account of excessive grades. Convenience and sentiment still control in the placing of countless industries. In starting a business a man ordinarily selects his home town for his headquarters. From [31I LEHIGH AND NEW ENGLAND RAILROAD CO. a viewpoint of finance, his first market and the labor supply, choice of the city in which he is known and commands friendly interest is, perhaps, the part of wisdom. Under certain conditions — limited capital, for in- stance — any other action might be impossi- ble. But here the personal equation would not actually influence the decision. Con- venience and sentiment, indeed, have much to do with the location of plants in partic- ular sections of the city which the owners may prefer because they are easy to reach from their residences or because they want to be associated in the public mind with the district chosen. To indulge such groundless preferences is to handicap the success of the undertaking, just as a mistaken loyalty to his native town or a desire to live in a certain city blinds many a capable business man to the advantages of other more strategetic centers. BOARDS OF TRADE Many towns have Boards of Trade or Chambers of Commerce who appoint com- mittees whose work is to advertise the advan- FINDING THE FACTS tages of their particular localities. The committees keep informed of new projects proposed by various outside concerns and they endeavor to secure the interest of the promoters by presenting to them the advan- tages of their town.. At the same time these Boards of Trade workers endeavor to secure the active co-operation of the citizens by having them contribute money for the pur- pose of investing in factory sites which will be at the disposal of the Board of Trade, to give to companies that are looking for a factory location. Sometimes promoters can interest citi- zens to collect sufficient funds to purchase a site for their enterprise. Of course, the citizens who will be interested in securing a factory site and are willing to contribute will be the ones most likely to form the membership of the local Board of Trade. However, this is not always the case. The difference between the Board of Trade's action and the citizens' action is that one is a systematic endeavor and the other is an occasional one. In some cases the town itself may appropriate money to secure [33 1 LEHIGH AND NEW ENGLAND RAILROAD CO. factory sites. In other instances, a private citizen may give a piece of land for the same purpose. It is far more common, however, for the land to be contributed by the Board of Trade or the citizens acting as a body on some special occasion. Some years back it was not uncommon for the Boards of Trade and other organi- zations to encourage the location of factories by providing buildings. This building might be given outright to the factory owners, but more usually the arrangements were as follows: The townspeople were informed what type of building was desired and they would erect the structure according to the specifications and then lease the building to the promoters of the enterprise for a sum of money which might or might not be nominal. It, at any rate, would be comparatively low. At the termination of the lease the factory managers then had the option of buying the building for a fixed sum provided for in the contract, and usually they willingly paid this amount. Sometimes the citizens in a community are not only anxious to have various kinds of [34] FINDING THE FACTS factories locate within their borders, but are willing and even desire to invest in a pro- posed scheme if the promoters will locate in their vicinity. Frequent instances are on record in which some enterprising individual has enlisted the support of a community and put up a plant with the money supplied either wholly or in part by the residents. The residents may make various other kinds of agreements with the promoters. In some cases the promoter becomes merely the managing employee of the concern, being remunerated by regular salary. In some cases, if the plant is a success, he is given, at the end of a certain time, a percentage of the capital stock by vote of the board of directors. At other times the inhabitants subscribe to the stock and become stock- holders in the firm, but do not have sufficient control of the enterprise to have more than one or two representatives of the citizens on the board of directors. Other inducements are sometimes granted such as free gas or free power for a limited period of time. One town put a fire fighting system into a plant as one of its inducements. [35] LEHIGH AND NEW ENGLAND RAILROAD CO. The citizens of another town built a belt line connecting competing railroads and are offer- ing factory sites at a very moderate cost along the belt line. There are numerous other inducements of a minor nature, all of which are given to secure an industrial population. In some aggressive cities the Boards of Trade have formed the policy of aiding new concerns by means of specially organized fostering corporations which do not aim at private profit, but at a general upbuilding of the neighborhood. In one location, effort may take the form of a Loan Corporation organized by citizens with the object of loaning funds to a new enterprise that is approved by the local commercial organi- zation, sufficient interest being charged to pay expenses and even, perhaps, a small dividend. In another place the enterprise may be a Holding Company which will invest not over a given maximum sum in the bonds or stocks of an approved new concern. Still another form of fostering corporation is a Real Estate Development Company which stands ready to purchase a site and build structures for parties approved by the [36] FINDING THE FACTS commercial association, either renting the properties or selling them on easy payments. Several cities have been helping new con- cerns by means of a credit guarantee fund established by the subscriptions of citizens. Under this plan no money is called for. The subscriptions are simply guarantees. The subscribers appoint trustees or attorneys-in- fact to represent them, empowering them to obligate them to the extent of their subscrip- tions. An applicant deals with an investigating committee of the local commercial associ- ation. If his report is favorable, the com- mittee recommends to the trustees a definite loan of credit. Should the trustees approve, the borrower makes out his notes, receives the endorsement of the trustees upon them and on this collateral secures a loan from a designated bank. Interest is charged, and the rate may even be fixed one or two percent above the current rate to cover costs and provide a contingent fund. The periods of the loans may range from five to ten years. In case the loans are paid, the subscribers to the fund are not called upon. [37] LEHIGH AND NEW ENGLAND RAILROAD CO. But if there is default, the subscribers must pay pro rata according to the amount of their subscription. Subscriptions for this purpose are for a definite period. Copies of the subscription, of the power of attorney, and of the essential contracts must be filed with each bank making the loans. The plan is intended to aid only in the initial financing of young concerns. With various modifications of detail this idea has been used at Worcester, Mass., Williamsport, Pa., Jackson, Mich., and Peoria, 111. Mr. W. S. Milliner, Secretary-Manager of the Williamsport Board of Trade, in 1914 said that after a period of fourteen years that the guarantee plan was in force, it has been abandoned. The management of the fund was very conservative, the attorneys-in-fact taking mortgages upon some property of the borrower whenever endorsing notes. The losses were so small that they were, in each case, met by the directors of the Board of Trade and by prominent men or wealthy citizens, so that a general assessment on the guarantors was never made. In practice, it was found that the credit of a borrowing [38] FINDING THE FACTS concern was materially injured, so much so that it was difficult for that concern to secure further accommodations except with the same kind of security. It is the judgment of those connected with the plan in Williamsport that the chief advantages resulting from it were the atten- tion attracted to the city, and the inquiries brought from industries seeking a new loca- tion, rather than anything which resulted from the actual operation of the plan after the industries had been attracted. "It is doubtful,'' said Mr. Milliner, *'if any plan of this sort, or any modification of it, will secure for a city, industries which are really worth while that could not be secured through established and liberal banking circles together with the aid of public spirited citi- zens able to become investors in a worthy industry." THE RAILROADS Arthur W. Thompson, formerly Vice-presi- dent of the Baltimore and Ohio Railroad Company said that the railways are necessa- rily interested in the development of industry [39 LEHIGH AND NEW ENGLAND RAILROAD CO, and commerce since their prosperity depends largely upon the prosperity of those whom they serve. Years ago the railroads started a campaign for the agricultural development of their territories. Many of the railways had special agricultural departments connected with their development departments. In co-operation with the Federal and State officials, the railways endeavored to encour- age a better quality and a larger quantity of farm products, and to secure improvement of the soil. The success of this department prompted the railways to broaden the scope of their efforts and to include the development of the natural resources and the location of industries. Through a systematic study of its business the railways first determined where all their business came from and where it all went. Through such studies the railroads determined a course of action looking to a fuller use of its equipment, that is, keeping its cars moving under the fullest practicable loads the greatest part of the time. Generally, of the railroads of the [40] FINDING THE FACTS United States, about thirty-five percent of the freight car miles are empty. By a knowledge of the markets and manu- facturing conditions, it was thought business could be developed for the railroads in the empty car direction. The knowledge obtained by one railway system of its territory was exchanged with the other lines and in that way the development departments of the roads obtained the most accurate and concrete data that could be used in comparison of different sections of the country. To assist the manufacturer in making the essential studies of the different sections in which he contemplated locating an industry, the railroads employed a large corps of engineering and industrial experts, the best that could be obtained, and placed them at the manufacturer's service. These men are constantly engaged in making economic, geological, chemical, agricultural, engineering and other surveys relative to the suitability of localities for manufacturing operations of all kinds. Hugo Diemer, Consulting Engineer, said: [41] LEHIGH AND NEW ENGLAND RAILROAD CO. "There are no people in a better position to make a careful study of the conditions governing industrial location than railway officials. The industrial agents of railroads are continually gathering and systematizing data regarding favorable sites for prospective industries. The pursuit of such studies and the exercise of sound judgment consequent upon them requires a knowledge of manu- facturing processes and industrial economies, in addition to ability of a high order. Their opinion, on every inquiry received from manufacturers, is given absolutely unbiased and impartial of the road that employs them. Their report is based upon their specialized knowledge of conditions in every part of the country.'' If the various territories and industrial centers are to be prosperous it is essential that their industries be economically adapted to local conditions. If they are not so adapted, they will be unable to stand the strain of competition when the lean years come. The railways and the communities, by co-operating, can render such service to the country that the economic slack will be [42] FINDING THE FACTS taken up and society made richer in goods and experience. To sum up, the promoter, organizer, manu- facturer or corporation seeking to establish a new industry, or to extend its present business by establishing branch plants, or to remove from the disadvantages of an unprof- itable site, should by all means secure the advantage of these known sources of know- ledge and assistance that are open to them. In selecting the section of the country, and the exact site within that section, decision should be based wpon facts so that that plant will be so situated that the factors of raw material, transportation, labor, power and markets, etc., will be in its favor, thereby enabling the enterprise to benefit by reducing production and distributing costs and enjoy a greater volume of business and larger profits. [43: THE INDUSTRIAL SERVICE OF THE LEHIGH AND NEW ENGLAND RAILROAD A S pointed out in the opening chap- /% ters of this book, the selection of ^ JL a site for a manufacturing or dis- tributing plant need no longer be left to guess-work or unsupported personal opinions. The fundamental principles that must be observed to prevent costly errors have been coded, and skilled specialists are available to apply these principles scientifically to each individual "location" problem. There is no mystery or Black Magic in the method used by these specialists. Just as the chemist predicts reactions and obtains them — as the mining engineer assays a situ- ation and determines the value of the ore — so the ''industrial specialist'' assays a situ- ation and predicts with surprising accuracy the success or failure of any specified site [44I FINDING THE FACTS as a location foi" the plant of a particular manufacturer. He plans with the same certainty of results that the naval engineer plans a Mauretania, the bridge engineer a Brooklyn Bridge, the modern architect a Woolworth building. He does this largely because he knows what facts to look for and where to look for them. And his success rests, in no small measure, on the fact that he weighs all the factors in the case without bias of any sort. Many large corporations have the conclu- sions of their own staff checked by several outside specialists when planning an impor- tant move of this character. Obviously the broadest outside viewpoint is valuable and every help is well worth considering if it shows promise of bringing new facts and figures that bear directly on the problem. Whether you maintain an industrial inves- tigation staff of your own, or are making investigations under the guidance of an outside organization of specialists, you will find the Industrial Service Department of the Lehigh & New England Railroad a valuable aid in checking conclusions. [ 45 ] LEHIGH AND NEW ENGLAND RAILROAD CO. The reports of this department are com- piled with great care and study. The men who co-operate in making them have had wide experience in this specialized work. Their knowledge of the vital factors of transportation and distribution is unusual, while the policy of free exchange of informa- tion and data among railroads enables them to readily procure facts and figures that most independent specialists and local organi- zations would find it almost impossible to gather. The services of this department are given entirely without charge or obligation. Obviously our desire is to draw along the lines of the Lehigh & New England Railroad only manufacturing and distributing plants that will grow and prosper best in that particu- lar locality. Only prosperous concerns provide the steady flow of freight which a railroad seeks. It is clear, therefore, that recom- mendations made by the Lehigh & New England Railroad Industrial Service staff men are free from bias. They provide impar- tial comparisons of the different sections of the country a manufacturer may have in [46I FINDING THE FACTS mind that he can use with assurance and safety in making his final decision. The Lehigh & New England Railroad Company realizes that it would be a short- sighted policy to induce an industry to locate where it would not prosper. Looking into the future requires advice on sound, logical deductions of an impartial nature in order to have industries grouped along the Company's lines that are assured of success. The staff of the Lehigh & New England Railroad Company works either independ- ently or in co-operation with local Boards of Trade, Independent Specialists or the corporation's own industrial location staff. It is believed that the Lehigh & New England Railroad Company's staff, with its sources of information and ramifications through which it can obtain knowledge of different kinds in relation to freight, materials, mar- kets, labor, etc. will be able to furnish help of distinct and definite value under any circumstances. We find, as a great rule, that when the average manufacturer gets in touch with our staff he is much perplexed, as he has tapped [47] LEHIGH AND NEW ENGLAND RAILROAD CX). many sources of information and gathered much information that seems to conflict. In such cases the advice of the Lehigh & New England Railroad staff (given in the form of a clear, typewritten report) does much to clarify the situation. Traffic Department LEHIGH AND NEW ENGLAND RAILROAD COMPANY GENERAL OFFICES BETHLEHEM, PENNSYLVANIA 48 UNIVERSITY OF CALIFORNIA LIBRARY, BERKELEY THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW Books not returned on time are subject to a fine of 50c per volume after the third day overdue, increasing to $1.00 per volume after the sixth day. Books not in demand may be renewed if application is made before expiration of loan period. VR ^ : UNIVERSITY OF CAUFORNIA LIBRARY . •-.%(! ^•r.m