The Low Cost Attraction

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The role of efficiencies in cost leadership and scale economies.

 

Cost leadership may be the most straight forward of the market disciplines (others are best product, best service) that lead to competitive advantage. While straightforward conceptually and appealing to customers, achieving cost leadership is almost never easy.

Efficiency

 

Mass produced items offer the greatest (and maybe the only) opportunity for regular increases in efficiency that drive down costs. Volume, standardization, and automation create a favorable environment for increased throughput and process improvement. In cases where there is more product variety achieving greater efficiencies of course is more difficult. Creating economies of scope targets like steps or sub processes and if effective can lead to efficiency improvement. Poor efficiency can be measured or seen – watch your processes with a critical eye for areas of improvement.

Lean

 

Lean manufacturing concepts focus on reducing waste. Evaluating production processes includes measuring value added versus non value added time. Waiting, over production, transportation or movement, inventory, defects, etc. are all pin pointed when mapping processes.

When processes have more manual elements, concepts like the visual workplace and point of use inventories make workers more productive. Linked concepts also address creating greater efficiencies with low product volumes by applying single piece flow practices. Drive out the waste and drive out the cost.

 

 

 

 

 

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