Business efficiency
Efficiency in the manufacturing industry is making the best out of the resource the company has to achieve profitability ( Charlton, 2015) . An efficient firm will maximize the output from the minimal inputs available for production. Additionally, an efficient business will minimize the cost of operation. When the efficiency in the operation of the business will reduce the cost and improve how the business will compete favorably in the market ( Charlton, 2015) . To be able to measure efficiency the business will look at what is currently produced by the company and compare it to the projections of the company using the same resources.
Efficiency puts more focus on quality and making sure there is no wasteful of resources during production. This is the situation where the company utilizes minimum inputs to produce the greatest amount of output that the income could produce ( Charlton, 2015) . In a nutshell, efficiency is the process in which the business maximizes the use of inputs such as energy, money, efforts and time and producing the desired outcome. Efficiency will include maximizing the output from the inputs available and making sure the cost is minimal. When the efficiency of a company increases the cost of operation reduces and increases the competitive advantage for the business ( Charlton, 2015) .
Delegate your assignment to our experts and they will do the rest.
Economies of scale
This is the process of reducing the cost per unit and increase the output of the business. To be able to achieve economies of scale the first step to take is to ensure there is labor specialization and improved in technology to boost productivity ( Baumers, 2016) . The second step is to ensure large-scale production and supply which will lower the cost of capital to produce a single unit of production. This is to mean the operating cost will be spread across a large unit of production and sales, therefore, minimizing the cost of production. To summarize the three steps of achieving economies of scale is that they aim at achieving operational efficiency, synergies, mergers, and acquisitions ( Baumers, 2016) .
The company will know that it has achieved economies of scale if the following cost-saving factors are in place. The technical improvement and expansion that will improve efficiency and production ( Baumers, 2016) takes place when the company has achieved division of production process, therefore, achieving more specialization of labor. Second is the purchasing of raw material for production and other material used by the company in production. If the company has the capacity to buy material in bulk at a lower cost than it has achieved economies of scale. This will also reduce the cost of logistics that is delivery cost. On the financial part, the company will know that it has achieved economies of scale when its credit rating is high due to more collateral assets ( Baumers, 2016) . This means they can access cheap credit that will expand the production of the company. Additionally, if they are listed on the stock market then they can access more capital through sales of shares ( Baumers, 2016) .
Diseconomies of scale
Diseconomies of scale occur when a company grows so large as compared to the production growth. This is most cases happens when economies of scale are not applicable anymore. A business will know it is experiencing diseconomies of scale when the cost of production per unit increases and therefore the marginal cost increases ( Lacy, 2016) . Additionally, if the business experiences difficulty in managing the increased manpower it leads to overcrowding which will later lead to lower operating efficiency. On the other hand, there will be the high level of operational wastage and lack of proper coordination between departments. Another indicator is there will be difficulty in communication due to the lark workforce and departments. This can lead to high turnover and low motivation of employees. Finally, there will be the increased cost of logistics and transport. That is to reach a wide market the company is forced to go to a far market that will increase operational cost ( Lacy, 2016) .
Reference
Baumers, M., Dickens, P., Tuck, C., & Hague, R. (2016). The cost of additive manufacturing: machine productivity, economies of scale and technology-push. Technological forecasting and social change, 102, 193-201.
Charlton, C. (2015). Meeting the production efficiency challenge. AusIMM Bulletin, (Jun 2015), 40.
Lacy, P., & Rutqvist, J. (2016). Waste to wealth: The circular economy advantage. Springer.
