Affect the economies of scale on a supply chain
How does the concept of customization in the automotive arena affect the economies of scale on a supply chain?
The economies of scale refer to the decrease in price with better production. This may commonly be seen in a large business with high early production costs. However, with time and rise in quantity produce, their price keeps dropping and is called economies of scale. On the other, customization refers to the change of product bestowing to the need of the customer. Besides, this increases the supply of the product at a cheap charge. Furthermore, huge consumer preferences and choices are met through customization.
Additionally, in recent times people have seen that customer centrist products are produced, which greatly influences the supply chain. As
The economies of scale realized will help decrease production costs and turn a huge realization of income.
- There is vast knowledge spillover inside the industries, and therefore huge innovation happens.
- The labor pooling and, therefore, cheap available of input. This, however, influences the supply.
Nevertheless, it has a few drawbacks.
- The coordination among the company becomes hard as the company has expanded a lot.
- As a result of large customization, spare parts become actually expensive
- The small players are kicked out from the market, and therefore, the market turns into an oligopoly, which results in inadequacy.