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Economies of Scale in Everyday Life

EoS4U community is a place where small and medium enterprises come to anonymously exchange information and help each other in a difficult supply chain environment. We don’t work in big factories producing hundreds of thousands of cars or millions of chips a year. Some of us run a workshop, others a small production facility, third ones manage a design studio and there are of course those who enjoy working on their own. Some EoS4Users want to grow, others are happy where they are.

Therefore the question is why are we talking of economies of scale? None of the community members would go to a supplier and sign a multi-year agreement to get an uninterrupted inflow of components. So, many might think that economies of scale are not impacting their business or personal lives.

So, here are a couple of examples showing that this perception is wrong.

It’s a rainy Friday evening, you are at home searching for a binge-worthy TV Show from one of your streaming providers. Finally, you find something exciting that could potentially occupy all your weekend. If you are not familiar with the show, will you buy the whole season or try a couple of episodes first? If you are a bit like us, you would want to try first. But have you noticed, that buying episode by episode might get more expensive than buying the whole season in one go? Why? Simply because if you buy the whole, it brings a sure bunch of money and helps to pay off for the production of the show quicker in comparison to a small amount that you pay for a couple of episodes and you might never come back.

Let’s continue our pleasant weekend and here is another example. Saturday morning and you go to a farmers’ market for fresh veggies. You pick your potatoes and a seller tells you, that if you decide to go for a couple of kilos, you will get a discount. The same forces are at play now: a sure money intake and fresh products are leaving the producer to give way to the next batch without being spoilt. Later you go to a wine boutique and see an offer from your favorite winery saying “Buy two, get one free”. The same principle, even if producers just need to free their shelves for a new harvest, they never offer a discount for a small package. And let’s be honest almost all of us went for such an offer at least once in our lives, if it wasn’t wine, it was something else we like and can imagine accepting in a bigger package.

On Sunday the weather improves and you decide to wash the windows in your house. You are pretty lazy and would prefer to clean just one room and leave the rest for some other day, but then you start and don’t stop till the whole house is fresh and clean. You tell yourself: I have started anyway, prepared all the tools, and have spent quite some time on it, why stop now? But did you know that this is the exact reason, why it is cheaper for any manufacturer to produce bigger batches? They set up the machines and plug in the tools and don’s stop till they reach the needed quantity of the products, in contrast to spending time and resources for setting up the equipment every time somebody needs a small batch.

But why are we talking about weekends? Our last example today is from vacation, it’s the most recent case of economies of scale we experienced and certainly the one that brings back wonderful memories. While on holiday in Venice some members of our team decided to go shopping for beautiful decorations made of Murano glass. On a sunny morning they walked into a small shop and while checking what was on offer found out that one glass piece was costing 25 Euro, but if a purchase would include more than three pieces the price would go down to 22 Euro. The plan was to buy three and two, so what did our guys do? Correct! They combined the pieces they wanted to buy into one order and not only a person who wanted three Murano pieces got a discount, but all of them did. And that’s in a nutshell how EoS4U works: you combine the volumes you need with other EoS4Users and all of you get a discount. The only difference is that you don’t need to know each other, get together and come up with a plan; here it’s much easier - you let our team know what you need and whether you want to wait for a discount at all or need to get your purchase immediately, and we will do the rest.

Don’t forget: economies of scale work everywhere and for everyone, big or small. You just need to learn to use them to your advantage.