LO and Big Layoffs LO5770

Dr. Ivan Blanco (BLANCO@BU4090.BARRY.EDU)
Wed, 21 Feb 1996 16:44:12 -0500 (EST)

Replying to LO5672 --
> From: John Zavacki <jzavacki@epix.net>
>
> Wollfgang wrote:
> > Michael McMaster wrote:
> > He asks, "What about mature industries?" Can the not renew or=20
> > transform?
>
> >>>>>>very big smip>>>>>>>>
>
> > But the more important point is that the belief in 'ecomomies of scale'
> > is part of the paradigm or shared beliefings, and therefore hard to
> > change. But the error was not that for the classical steel mill
> > 'ecomomies of scale' are not important (they still are, I think). The
> > error was that the people who run such a mill could not imagine that
> > mini-mills could be successful, too. All together it is important to
> > learn this new knowledge, and change the existing mind-sets.
>
> The notion of economies of scale is a tough one to kill. It keeps
> customers waiting for enough orders to come in to make things
> "economically." It creates tremendous costs in terms of carrying charges,
> wasted space, tied up resources, and more. In the JIT, or demand flow, or
> focused factory, flexible cell, agile enterprise, the goal is "economic
> order quantity of one", meaning:
>
> reduce waste in all aspects of the business, including purchasing,
> maintenance, etc., so that one part can be run as iinexpensively as
> 1,000,000.

Yes, things have changed some. According to James Thompson's
"Organizations in Action," (1967) organization would tend to protect their
core technology by, among other things, buffering. It was competitive
then to accumulate slack resources to protect the firm from fluctuations
of different kind. Today, those slack resources are seen as wastted
resources. J-I-T inventories, for instance, have changed all that. Now a
firm becomes more competitive if it can achive J-I-T with external
suppliers, and in their internal processes. Likewise, economies of the
scale have become to some extent to be seen as a lost of comeptitiveness.
Achieving economies of scale, at least in the traditional sense, means to
accumulate resources, production capabilities, etc.. In today's business
environment it represents a big loss in flexibility. All the outsourcing
and other forms have changed the notion of economies of scale!

Ivan,

-- 
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