Hackernoon logoAchieving Economies of Scale Means No Longer Waiting For Coffee In A Waiting Line by@Chasyr

Achieving Economies of Scale Means No Longer Waiting For Coffee In A Waiting Line

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It’s late afternoon, you have several projects with looming deadlines, and all you can think about is “what time am I leaving?”.

You have a quick lunch at your desk, before your big meeting at 4 pm, you need a quick hit of caffeine so you decide to go grab a coffee, you see a colleague from your team paying for their drink, on the other queue is your boss talking on their mobile phone whilst finishing an Americano. 

Neither notice you, and as you have only a short time you decide not to interrupt either of them. 

Your colleague walks by, as they leave the shop with their drink and you continue to wait in line.  Then the thought enters your head.  “If three people in the same company in the same team are getting coffee at the same time why doesn’t one person go and pick up all three saving time and effort”

This is a everyday common occurrence in all businesses and, in economic terms, this can be termed as “economies of scale”

This isn’t just applicable to getting coffee, economies of scale are apparent in every action and, in every industry.  In the logistics industry, a company may have only one warehouse where all its delivery vehicles leave from.  This is fine if all your customers are nearby, but say a new customer places an order who is 50 miles away and all your existing customers are within 20 miles. 

Do they turn away that business or require them to make a viable order to make it worthwhile the trip. A driver will need to drive an extra 30 miles to make the delivery and that's only to get there.  Once the company has a significant number of other customers within the area, the economies of scale decrease and that order becomes viable.

This is a major issue facing companies every day especially those that are scaling up and can be majorly affected by these unintended consequences. Do they turn away their business?

Could the customer have the potential to become a major customer or do they accept the business and are saddled with a customer who is making a loss?  These are important decisions and in any business, there are thousands of these cases every day. 

Another example, you are a car builder.  You have orders for 200 cars but the capacity to make 500 cars so you are at 40% capacity.  Your fixed costs (building rent, fixed labour, etc) all remain the same whether you make 200 cars or 500 cars. If you only make 200 cars your overall profit is impacted by these fixed costs being spread over 40%, not 100%.  If you try to get to 500 cars and you get an order for 1000 cars what do you do?   

Examples like these are everywhere, from single business owners, SMEs, large enterprises, right through to government agencies. So why is this important you may ask? 

Let’s go back to the first example in the coffee shop. 

Three people from the same team in the same company were in the coffee shop at the same time.  If you were to multiply these three people by every team in the organisation (hundreds) then by every organisation in the industry (thousands) then by every organisation in the country (hundreds of thousands) very soon you would have some quite big numbers of people getting coffee. 

What if we could batch up these numbers,  what would be the benefits? Say instead of one person going to the coffee shop buying one cup of coffee how about one person buying 10 cups of coffee for their colleagues or university friends.  The economies of scale for the coffee shop of making 10 cups of coffee would be much more beneficial than making 10 cups one by one.

They would probably also receive more business as one person offering to get coffee for his or her community would stir up latent demand as people in that group would not want to miss out even if they didn't want a coffee.  For an organisation 10 people would not need to leave their desks to get a coffee meaning their work would not need to be interrupted and what if the person getting the coffee could get rewarded even in a small way via automated reimbursement. 

From a social perspective, everyone would get their coffee at the same time and they may take some time to stop and talk to their colleagues.  The coffee shop would be able to know how much business is coming from an organisation therefore deals could be offered and services tailored according to the organisation. The benefits are immense for all parties.

If we can do this with such a small task of taking a coffee order then what can we do on a much bigger scale. Communities can be brought together, industries transformed and new ideas can be generated. 

Learn how Chasyr is leading this change.


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