Economies of scale

Economies of scale (also called economies of scale or economies of scale), ie companies with increasing market share and increasing size. Economies of scale can be traced back to mass production savings:

Economies of scale are when the cost of production per manufactured unit decreases with increasing production volume.

The lower costs are achieved through efficiency gains, which pay off only by larger quantities. Thus, fully automated production is profitable only after a certain amount, before that the product has to be used, for example. be made by hand, which is less efficient. Furthermore, the manufacturer has more market power over its suppliers when it produces more and can shop at lower prices.

Examples and types of economies of scale

An automaker makes 100,000 cars of the same model, while the competition produces only 10,000 cars of the same model. The development costs are the same in both cases. The larger company can, however, distribute the development costs to 100,000 cars. Hence the cost per manufactured car. In addition, savings can be made in purchasing (quantity discount) and in production.

Advantages of the division of labor, in which complex processes are broken down into simple, easily repeated tasks

Falling average costs: The share of fixed costs in higher quantities. That’s about the cost of developing a product. When a product sells a total of ten, each piece must bear 10% of the development costs. On the other hand, if 1000 pieces are sold, each piece carries only 0.1% of the development costs.

Savings through the use of larger means of production, such. Double pipe diameter costs only twice as much material, but has four times the cross-sectional area and thus four times the capacity.

Larger quantities behave statistically more evenly and are therefore easier to plan

Rationalization through the use of automated means of production (industrial robots)

Use of standardized parts and centralized reserve management

Improved lot size matching at successive scheduling levels

Learning curve effects (assuming this consequence of production technology, while this is due to the learning curve effect)

Consolidation of business locations.

The economies of scale become clear in the right column. There the costs per production unit are without economies of scale (normal).

Leveraging the economies of scale, Arcelor benefits in particular from higher plant utilization and stronger steel prices since April

average cost