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Unformatted text preview: conomies of scale can be accomplished because as
production increases, the cost of producing each additional
Short term economies of scale are the result of spreading
fixed costs across all throughput;
Intermediate term economies of scale are the result of
having longer production runs;
Long term economies or scale are the result of physics,
which dictate that unit cost as a function of capacity is equal
to a function aC^(b-1), where b lies between 0.6 and 1.
to Three Types of Operations Regimes
Womack et al, “The Machine that Changed the World”, 1991, p. 11
The craft producer uses highly skilled workers and simple but flexible tools
to make exactly what the consumer asks for - one item at a time. Custom
furniture, works of decorative art, and a few exotic sports cars provide
current day examples. We all love the idea of craft production, but the
problem with it is obvious: Goods produced by the craft method – as
automobiles once were exclusively – cost too much for most of us to afford.
So mass production was developed at the beginning of the twentieth
century as an alternative.
Mass production uses narrowly skilled professionals to design products
made by unskilled or semiskilled workers tending expensive, single purpose
machines. These churn out standardized products in very high volume.
Because the machinery costs so much and is so intolerant of disruption, the
mass producer adds many buffers – extra supplies, extra workers, and extra
space – to assure smooth production. Because changing over to a new
product costs even more, the mass producer keeps standard designs in
production for as long as possible. The result: The consumer gets lower
costs but at the expense of variety and by means of work methods that
most employees find boring and dispiriting.
Lean production, by contrast, combines the advantages of craft and mass
production, while avoiding the high cost of the former and the rigidity of the
latter. Towards this end, lean production employs teams of multiskilled
workers at all levels of the organization and use highly flexible, increasingly
automated machines to produce volumes of products in enormous variety.
automated Cost Structures of Craft Production and
Mass Production (from “The Second Industrial
Divide”, Piore & Sabel, 1986)
Piore Differences between Goods and Services
Goods Services Are tangible, they have a physical
form and can be seen, h...
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- Spring '06