Mass production makes items faster, better, and cheaper. The larger your production volume, the lower your cost and, subsequently, your product prices. This is common knowledge, but what is not well known is the magnitude of this effect. In this post I would like to show you a few comparable products, albeit with vastly different production volumes, and hence different prices.
Relation between Quantity and Cost in Manufacturing
As you surely know, it is more efficient to produce larger quantities. This is the economy of scale. In a recent post I talked about the Power of Six, a rule of thumb for the relation between lead time and cost. In this post I will show you a rule of thumb for the relation between quantity and cost. Credit for this rule goes to Juan Carlos Viela.
The Power of Six: Time and Money for Parts of Your Value Stream
In my last post I presented you Rajan Suri’s Power of Six – the relation between turnaround time and product cost. In this post I extend his work to apply it to not the entire value stream but to segments of the value stream. Enjoy!
The Power of Six: Relation between Time and Money in Manufacturing
Time is money. You know that. But with respect to product cost and lead time, there is a rule of thumb that estimates this relation. Let me present to you the “Power of Six,” discovered by Rajan Suri. This gives you a rough estimate of how the lead time of your products influences the cost and vice versa. This first post looks at the original work, and my next post applies this rule also to segments of the value stream.