One of the ways in which your company can expand — and reduce production costs at the same time — is by implementing a large scale production model.
Large scale production, or mass production, is a vehicle that provides many advantages to a company, as long as it’s done correctly. The primary advantage is that large-scale production provides economies of scale, and that results in the following more specific benefits:
Better use of equipment and other assets
It’s more cost-effective to implement up-to-date and more efficient machinery because the cost is spread over a larger number of units produced. Also, as a big producer you can have machines running 24/7, or at maximum capacity, which lowers the cost per unit even more. Likewise, the cost for ancillary items such as electrical cord, or a higher gauge wire, or a bigger pipe, that could increase production capacity, becomes insignificant over time.
Access to specialized workers
In a mass production scheme, specialized workers are in charge of each specific step of the production process, becoming more efficient as they spend more time doing one specific job. As workers become more specialized, their salary increases. This expense is off-set by the fact that one single machinist, technician, or operator can handle a machine that will produce more units.
More efficient selling systems
Implementing a large scale production model, allows you to streamline order-fulfillment and to increase sales because you won’t be faced with product shortage or pauses in the production process. This allows for clients to create a steady demand that is efficiently filled, and a continuous revenue stream for the company.
Lower rent costs
When a facility is used at full capacity, the cost of rent is lower than if it were used for a smaller quantity, thus lowering cost of production.
Investment in experimenting and researching
Moving your existing line into large-scale production gives you breathing space to invest in experimentation and development of new products, new materials, or more efficient production processes that may lower even more the production costs even more and, also, expand your product line and market share.
There are some other collateral benefits of large-scale production that we don’t often consider. A factory or production company requires good transportation services, reliable internet and other services and, of course, skilled workers. Additional educational opportunities may also result as a side benefit many people. And, as a customer, you have the ability to positively impact working conditions by insisting on only doing business with facilities that have fair and favorable employment practices. These are important factors that favor the workers of large scale production companies and the cities or towns in which they are located.
These are some powerful pros of large scale production. But, at the beginning we mentioned this strategy was favorable “if done correctly”, remember?
The thing is, there’s a delicate balance between the maximum number of units produced, and the minimum cost per unit possible. If the company grows beyond this “ideal point,” costs start to increase. As an example, an industry could exceed the available supplies of raw materials or saturate the local market, which may create higher cost of goods and higher transportation costs.
So, before making such a massive move, it’s always advisable to consult with an experienced business advisor. A good business strategist will be able to analyze your company, and help you create a step-by-step plan, so your company expansion is made at the right moment, the appropriate pace, and to the right level. Ready to bring your company to the next level? Let’s do it!