What is Economy of Scale
There were these times when life was simple. A craftsman would produce his ware to the best of his ability and physical fitness. Sometimes he would involve members of his family including small kids. Sometimes more fortunate ones would hire a prentice or two. To produce quicker, cheaper, and better was unheard of.
Then came the Industrial Revolution, which transformed economies and brought along large-scale industries and mechanized manufacturing. And ever since theoretics and practitioners, economists, engineers, and planners have been thinking how to improve production and increase productivity. We all know about Adam Smith with his early idea that larger production returns can be achieved through the division of labor. Or heard of Ford Motor Company and their revolutionary assembly line system, which allowed to reduce costs of making cars to the level that Ford workers could afford it, an unbelievable achievement for the beginning of the 20th century. And the manufacturing world has never stopped, production methods keep on evolving and we all reap benefits thereof.
Do you disagree? But take a simple example: you have always wanted a new camera, but it was produced for professional photographers in very small quantities and has always been too expensive, so you gave up. Then a new player came to market and found a way to produce it slightly cheaper, now more people can afford it and the demand grows; this manufacturer increases production and the price drops 3 fold. Finally, you got your camera. How did it happen?
The reason is economies of scale when the average cost of producing something falls as the production volume grows.
To illustrate it better let’s take another simple example from the world of production: it costs a manufacturer 135 Euro to produce one gas spring and 40,5 Euro (70% less) to produce the same gas spring in a batch of 50. The reason is that a big chunk of costs involved in producing springs (like set-up costs) is unrelated to the number of springs produced and is being distributed either over 1 piece making it expensive or 50 pieces which drives the price down.
If you train your eye a bit, you will start seeing the impact of economies of scale in different fields of life, both as a private consumer and as a business.
The question is now, how to use this wonderful development to your advantage? Obviously, if you need one spring you don’t want to lock your money buying 50 and not knowing when you could use them up. Big players on the market can do this, but your production and cash control do not allow you to do it. And that’s where EoS4U can help. You might need only one, some other business might need 49, and if both of you use EoS4U platform you avoid the hassle of finding each other, aligning your needs, and sharing your confidential information. EoS4U will accumulate the demand from different businesses and hand you the needed part at a cheap price on a silver platter.
We strongly encourage you not to be lazy and start benefiting from the economies of scale available on the market. With our help, you can do it even as a small business.