The youtube video is correct after point X the 'unit cost' increases, the narrator mentions increase in 'staff' ie step function. However, I feel the message is fundamentally flawed if you pass point X the unit cost will increase (step function) but that doesn't necessarily mean that the 'total profit' for the product decreases.Total Profit is a function unit cost; unit profit and volume.
Date: Fri, 11 Nov 2011 12:30:39 +0000
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[log in to unmask]Subject: Re: Economies of scale
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I have been asked by a few people for further info on economies of scale:
Attached are two links that may be of use. The first is a link to a youtube video (7 mins long, but informative).
The second is an essay by John Seddon on "Why do we believe in economy of scale?".
In his essay Seddon makes a single take home message: "Economy of scale is a myth. Economy comes from flow"
Lean = Flow
Taiichi Ohno would say that
in flow the most important attribute of a machine is to be ready when the part arrives. This may mean that at other times it is more efficient for machines to stand idle. Those that say over-capacity is poor practice are usually
people that are not involved in delivering a service.
Also Tom Peters in his book "In Search of Excellence", said ‘Whatever
happened to economies of scale?... The excellent companies understand that beyond a certain surprisingly small size, diseconomies of scale seem to set in with a vengeance’.
"The Truth is out there"
Martin
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