[2 
THE MODEL STOCK PLAN 
cent to the intrinsic value of the products. To me, it seems 
clear that distribution cost should be less, much less, than the 
initial production cost.! 
Imagine that we buy at a poultry farm a freshly dressed 
chicken for 75 cents and require that it be sent home for us. 
“Give me another dollar for delivery charges,” the farmer 
says. In this instance, the cost may possibly be justified. 
This proportion of 75 cents for intrinsic value—production 
cost—and $1 for distribution cost is typical of what we have 
in merchandise distribution today. The condition is no less 
real where the consumer, buying something else in ordinary 
channels of distribution, pays the whole $1.75 at one time 
and has no definite facts about what proportions of the total 
price are, respectively, production cost and distribution cost. 
It is in reducing these distribution wastes that we are 
primarily interested. As we reduce them, we increase the 
buying power of our customers. Thereby we increase our 
volume of sales. Thus we increase our total profits and add 
greatly to the security of our business against competitive 
inroads. 
Lower and lower prices, down to the lowest practical limit, 
with all waste eliminated, resulting in greater and greater 
sales; this is our way to greatest total profits. Mass produc- 
tion has accombplished much toward its realization in the 
1 If we set about looking for exceptions, we can easily enough find some. 
[n New England, for example, or in Minnesota and the Dakotas, coal must 
be shipped in from considerable distances. At the mine mouth, coal costs 
comparatively little. The cost of physically moving a ton of coal several 
hundred miles by rail or water is great because of its bulk. The cost of truck- 
ing it from the railside or waterside yard to a householder’s coal bin is neces- 
sarily great. Itis comprehensible, then, that coalin his basement should cost 
1 Boston householder far more than twice its cost at the mine mouth. The 
same thing, due to perishability and unavoidable losses in shipping and 
handling, is true of highly perishable fruits such as, perhaps, winter straw- 
berries grown in Florida and sold in Chicago. But, despite a great number of 
exceptions that might be cited, the general statement is true that distribution 
costs should be less than production costs. I believe that at least 85 per cent 
of the goods on which life and material happiness depend, the articles that 
require the greater share of consumers’ incomes, the things that make pros- 
perity possible and keep our people at work are subject to an enormous drain 
of avoidable waste. And these wastes, by curtailing the average customer’s 
consumption, are a real obstacle to a still greater national prosperity that is 
perfectly attainable and far beyond anything that our, or any other, people 
has ever enjoved.