Definition
Cottage Industry, or the putting out system is a production system of producing goods that relies on producing goods, or parts of goods, by craftsmen at home, or small workshops, instead of large factories.
History
Cottage Industry describes the methodology that was used to produce most goods throughout human history up until the end of the Industrial Revolution. Under this system, if a company or country wanted to produce a large number of a particular item (for example, 1000 military uniforms), instead of building a large factory and hiring a large workforce, they would hire many contractors to produce a small number of items each. For example, a government would hire 100 sewers to make 10 uniforms each.
The contractors would then create the goods at home, or their cottage, and deliver them upon completion. The major advantage of this system is that it allowed farm workers to continue producing food and other agricultural goods, while filling their orders of finished goods during the time between planting and harvesting.
Another major advantage was that until very recently, most of the world’s population did not live in or near towns and cities, but rather in small farming villages. This system allowed the creation of goods across a very large area without requiring the population to travel to central factories every day.
Cottage Industry and the Industrial Revolution
After the Industrial Revolution, many goods that were formally produced using cottage industry were moved to factories, which benefited from a division of labor and a steady workforce.
However, since most products are produced in stages, each stage moved between “cottage production” and “industrial production” in stages as well. In the example of producing a shirt, first the cloth needed to be made from cotton, linen, or wool, then the cloth needed to be cut and sewn into a shirt. If the shirt had buttons, those buttons needed to be produced out of metal, then sewn onto the shirt.
In a classic cottage industry, a farm would sell the cotton, linen, or wool to many cottages, who would then spin them into yarn, using a loom to create fabric out of the yarn. Then they would cut and sew the fabric into a shirt. If they needed buttons, they could buy them from another cottage that produced buttons, then sew them onto the shirt.
When the industrial revolution started, it began with the production of textiles and fabrics. This meant a large factory would buy the cotton, linen, and wool from farmers to turn into fabric, then they would sell the textiles to cottage producers, who would complete the remaining steps.
With the new industrial processes, it allowed the creation of metal goods in factories instead of a blacksmith’s shop. This meant that one factory would produce the fabric and another would create the buttons, and both would send their goods to cottage producers to complete.
When the sewing machine was developed, the entire process was fully industrialized.
One factory would create the fabric, another would create the buttons, then both would send their products to a third factory which would cut and finish the shirts. The centralization of production allowed much more products to be produced much faster, and since the middle products (fabric and buttons in this example) did not need to be shipped in small quantities to dozens of locations, the costs of producing clothing also dropped significantly.
Cottage Industry Today
Even though most goods are now mass-produced, goods made by hand (or done using cottage production) can still be seen as a sign of higher quality. For example, expensive business suits are still generally made by hand by experienced tailors, and expensive shoes are often made by expensive cobblers or shoemakers.
In the last few years, many cottage producers have begun selling their goods on the internet (like Etsy.com, which can be traded on HowTheMarketWorks with the symbol ETSY). ETSY is entirely dedicated to cottage production and has led to a resurgence of cottage industry for custom and hand-crafted goods. However, transitioning away from cottage production to industrial production for most goods is still seen as a very important step for developing countries.
