Spurious Correlation between Economies and Scale

Abstract

It is common knowledge that expansion in the scale of production leads to economies of scale. A correlation between economies and scale does exist. However, the reality on the shop floor, in Japanese, "gemba," in actual manufacturing is that productivity increases and that there is expansion of production volumes through "flow creation" for the entire production process. Previous studies demonstrated how flow creation has led to increased productivity and expansion of production volumes even in relation to the production system for the Model T Ford, which is considered as a typical example of a large range cost reduction (i.e., an increase in productivity that was achieved through mass production). For example, expansion of production volumes occurs simultaneously as productivity increases due to a succession of standardizations such as the standardization of components, production processes, and operations. That is, there is highly likely a spurious correlation between productivity and production volumes. Increased production does not guarantee increased productivity. In fact, that was the case with the Model T Ford.

Behind the Shell

“…The Model T is one of the most popular product designs in management studies and has been extensively researched (Abernathy & Wayne, 1974;Takahashi, 2013b;Yamada, 2014).…”

The Integration of Lean and Socio-technical Practices in Sweden

“…The improvement of both the reception side (i.e., process design) and the transmission side (i.e., work design) is seen as a core characteristic of Toyota-style manufacturing. Even though flow-based production was already embodied in the Ford Model T production (Yamada, 2014), the high-mix, low-volume production environment in Japan brought…”