The Expanded and Annotated My Life and Work

Inventory: “Everything Has to Move In and Move Out.”
Ford reiterates the need to avoid inventories of raw or finished material, 
but adds that a company must be able to deal quickly with supply chain 
interruptions. A shortage of radiator parts, for example, prevented his 
company from shipping cars for more than a week. It was to his com-
pany’s credit that it got the supplier up and running again in less than 
three weeks.
* * *
In order to earn the proper profit on our narrow margin we must have a 
rapid turnover. We make cars to sell, not to store, and a month’s unsold 
production would turn into a sum the interest on which alone would be 
enormous. The production is planned a year ahead and the number of cars 
to be made in each month of the year is scheduled, for of course it is a big 
problem to have the raw materials and such parts as we still buy from the 
outside flowing in consonance with production. We can no more afford to 
carry large stocks of finished than we can of raw material. Everything has to 
move in and move out. And we have had some narrow escapes. Some years 
ago the plant of the Diamond Manufacturing Company burned down. They 
were making radiator parts for us and the brass parts—tubings and cast-
ings. We had to move quickly or take a big loss. We got together the heads 
of all our departments, the pattern-makers and the draughtsmen. They 
worked from twenty-four to forty-eight hours on a stretch. They made new 
patterns; the Diamond Company leased a plant and got some machinery in 
by express. We furnished the other equipment for them and in twenty days 
they were shipping again. We had enough stock on hand to carry us over, 
say, for seven or eight days, but that fire prevented us shipping cars for ten or 
fifteen days. Except for our having stock ahead it would have held us up for 
twenty days—and our expenses would have gone right on.
To repeat. The place in which to finance is the shop. It has never failed us, 
and once, when it was thought that we were hard up for money, it served 
rather conclusively to demonstrate how much better finance can be con-
ducted from the inside than from the outside.

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12
Money: Master or Servant?
The concept that money is the servant (i.e., a medium of exchange with 
which to do business) is vitally important. Ford has already described 
how, if money becomes the master, it then drives extremely dysfunctional 
behavior. Examples include excessive material purchases to get favorable 
price variances, and the manufacture of inventory to “absorb overhead.”
* * *
In December 1920, business the country over was marking time. More auto-
mobile plants were closed than were open and quite a number of those which 
were closed were completely in the charge of bankers. Rumours of bad finan-
cial condition were afloat concerning nearly every industrial company, and I 
became interested when the reports persisted that the Ford Motor Company 
not only needed money but could not get it. I have become accustomed to all 
kinds of rumours about our company—so much so, that nowadays I rarely 
deny any sort of rumour. But these reports differed from all previous ones. 
They were so exact and circumstantial. I learned that I had overcome my 
prejudice against borrowing and that I might be found almost any day down 
in Wall Street, hat in hand, asking for money. And rumour went even further