It is true that the broad results of a half-year's work can be read in unmistakable figures in the balance sheet. But the mischief (The meaning here is the lack of usable information to manage operations - in Johnson and Kaplan terms: Relevance Lost.) is not only done by that time, but in the absence of proper shop accounts, it cannot be ascertained where is the element at fault. To introduce reform one must first know where reform is necessary…A modern system of organization is a high class machine tool. It can be done without, but not economically. That is all there is to it. The wise man will make his own choice.
 
Alexander Church's Production Factors (early 1900's): Direct Costs
 
Church's proposal for creating an information system is developed by establishing "Production Factors," and reviewing his definition of a production factor allows for better understanding his proposal:
 
"A Production Factor may be defined as any expense that has a definite relation to cost of production. It is not pretended that each and every item of expense can be reduced to production factors, but it will be seen that a very large and important number of them can be so reduced. The principle of "Organization by Production Factors" is to keep things in sight that are generally covered up, disguised and lost to view, and to observe the facts and phenomena of product along nature lines, as distinct from arbitrary and artificial lines."
 
Church's opinion of the purpose of costs drove his need to develop his production factors methodology. He devised a way to present in a logical manner how and what resources were consumed by production, or more specifically, by products flowing through the shop floor. He states that "the object of organization (the manufacturing firm) is to determine the ways and means of efficient production," or more specifically, determine the physical techniques in which products will be assembled, machined, fabricated, or whatever method of production must be undertaken, in order to achieve the most effective results.
 
Direct Costs: Production Factors
 
Church observed that:
 
In the method of organization by production factors it is sought to isolate as many as possible of the special functions exercised by the manufacturer, to determine their steady and regular rent-value, by foreseeing their fluctuations, and to charge these rents as regular production factors of perfectly determinable value. Ok, how is this implemented?
 
The answer is "Value Stream Costing." This production factor method isolates direct production costs from the confusing influence of a number of other expenditures, and enables the true facts of production to be much more clearly realized than before.