Impact of scale on performance and technology in process-intensive industry

Abstract

Two surveys are performed to determine production methods, competitive strategies, and scale disadvantages for a group of small manufacturing plants. Detailed comparisons of economic, operational, and development activities are presented to identify differences between industry production standards and small-scale plants. As a group, the small-scale plants had similar production costs to the standard-scale plants. The small-scale plants experienced lower average unit fixed costs as a result of lower capital investment and indirect labor expenses. The small-scale plants operated closer to their theoretical efficiency levels than the standard-scale plants. The procedure used to collect and analyze data is referred to as the direct comparison method. The direct comparison method involves conducting detailed one-to-one comparisons of production systems at the plant-level. A pattern of operational trends are reported that contribute to the economic performance of small-scale plants. The small-scale plants compensated for scale disadvantages by having greater technology independence, conserving capital, conducting internal development, and promoting process competence.