FACTORY OVER-RUNS

Manawatu Standard, Volume LII, Issue 228, 26 August 1932, Page 6

FACTORY OVER-RUNS

dairy industry problem. COMMENT AT WHAKARONGO. With conflicting views being advanced on the question of dairy iaotory over-run, which lias given liso to controversy in the industry in the Manawatu district, some comment on the matter was made by the chan man of directors (Mr M. E. Knudsen) at the annual meeting of suppliers of the Whakarongo Dairy Company last, evening. Mr Knudsen consideied that tho question had been effectively dealt with by Mr D O. W‘mams lecturer in economics at Massey College, in a report some time ago, which he quoted as lollows: “While there are real differences m efficiency of management, and the amounts of over-run derived from butterfat, in some cases the differences are more apparent than real. \\heie factories are equally well equipped and well managed, the costs of production are verv similar, while the retui ns from butter sold are, over a period of years, much tho same It follows that over a period of time, these comparable factories return much the same to their suppliers (although there may be marked differences in any one year). Yet errors are such that some factories may pay more per lb. of butterfat. It can be said that these errors are such that a difference in pay-out that does not exoeed lu per lb. means nothing for certain, it may mean a definite advantage to tho supplier, but, on the other hand it may equally well mean no more than the payment of a higher rate on a smaller amount of butterfat credited to him. . ... “The whole matter is tied up with the very difficult question ot overrun and the method of testing. No factory, can say definitely what real over-run it gets, and consequently the air of precision given to statements of over-run when expressed to decimal places is misleading. Apart from all other considerations, the errors involved in tests based on a J gramme sample are, in the aggregate, too great to permit fine comparisons of the pay-out of various factories. “In this connection, the education of the supplier regarding the real meaning ot over-run and the complicated factors in which pay-out depends would do much to lessen their interest in an extra id per lb. oi butterfat. The present method ot payment is based on wliat is no more than spurious accuracy. It leads to apparent differences in return which are not necessarily real differences. It is bad because it is misleading; and it encourages forms of competition (between factories for suppliers, and between factories for fantastic overruns) which are not in the best inteiests of the industry,” Mr Williams had added. “It occurred to me that this really answered all the criticism and discussion,” stated Mr Knudsen. “Certain factories claim high grading figures, which are based on the amount which goes through the stores. I have in mind one factory with a 1000-ton output of which only 600 tons goes through the stores. If these factories did not throw out challenges of this nature, it would not be necessary to take these matters up,” ho concluded.