Featured Research

from universities, journals, and other organizations

Building small: In many industries, economies of size is shifting to economies of numbers

Date:
November 2, 2012
Source:
Columbia Business School
Summary:
For decades, "bigger is better" has been the conventional path to efficiency in industries ranging from transportation to power generation. Food once grown on small family plots now comes overwhelmingly from factory farms. Vessels that carried 2,000 tons of cargo have been replaced by modern container ships that routinely move 150,000 tons. But now, new research shows, we are on the cusp of a radical shift from building big to building small -- a change that has profound implications for both established and emerging industries.

For decades, "bigger is better" has been the conventional path to efficiency in industries ranging from transportation to power generation. Food once grown on small family plots now comes overwhelmingly from factory farms. Vessels that carried 2,000 tons of cargo have been replaced by modern container ships that routinely move 150,000 tons. But now, new research shows, we are on the cusp of a radical shift from building big to building small -- a change that has profound implications for both established and emerging industries.

Related Articles


Many industry sectors are nearing or have reached a tipping point in which efficiency of unit size is being replaced by efficiency of numbers, according to a recent study by Garrett van Ryzin, the Paul M. Montrone Professor of Private Enterprise at Columbia Business School, Caner Gφηmen, Ph.D. candidate at Columbia Business School, and Eric Dahlgren and Klaus S. Lackner of Columbia University's School of Engineering and Applied Science. Rather than relying on custom-built, large-scale units of production -- e.g. massive thermal power plants -- industries can benefit from a shift to small, modular, mass-produced units that can be deployed in a single location or distributed across many locations -- e.g. photovoltaic (PV) panels mounted on utility poles.

Conventional wisdom holds that capital cost per unit of capacity decline with increasing unit size. Other efficiencies of unit size arise from manufacturers' ability to spread out the fixed-costs components of production, as well as factors such as operator labor and design costs. This alternative approach to infrastructure design offers new possibilities for reducing costs and improving service, the researchers found.

The authors identify three driving forces underlying this shift. First, new computing, sensor, and communication technologies make high degrees of automation possible at a very low cost, largely eliminating the labor savings from large units. Second, mass production of many small, standardized units can achieve capital cost savings comparable to or even greater than those achievable through large unit scale. And third, small-unit scale technology provides significant flexibility -- a benefit that has been largely ignored in the race toward ever-increasing scale and one which can significantly reduce both investment and operating costs.

This trend -- observable in nascent form in several industries ranging from small, modular nuclear reactors, chlorine plants, and biomass energy systems to data centers -- is resulting in a switch from large to small optimal unit scale, the authors found. The shift mirrors a similar revolution that began thirty years ago in the supercomputer industry. The traditional approach to producing higher capacity and greater speed in computing was to build increasingly powerful, specialized machines with ever-increasing processing power. This came to a halt in the mid-1990s, when it became cheaper to employ mass-produced processors and high-capacity memory from the burgeoning personal computer industry. Soon, the researchers conclude, many more industries will learn to "think small" and thereby reap the benefits of this new paradigm in production.


Story Source:

The above story is based on materials provided by Columbia Business School. Note: Materials may be edited for content and length.


Cite This Page:

Columbia Business School. "Building small: In many industries, economies of size is shifting to economies of numbers." ScienceDaily. ScienceDaily, 2 November 2012. <www.sciencedaily.com/releases/2012/11/121102151958.htm>.
Columbia Business School. (2012, November 2). Building small: In many industries, economies of size is shifting to economies of numbers. ScienceDaily. Retrieved December 21, 2014 from www.sciencedaily.com/releases/2012/11/121102151958.htm
Columbia Business School. "Building small: In many industries, economies of size is shifting to economies of numbers." ScienceDaily. www.sciencedaily.com/releases/2012/11/121102151958.htm (accessed December 21, 2014).

Share This


More From ScienceDaily



More Matter & Energy News

Sunday, December 21, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Touch-Free Smart Phone Empowers Mobility-Impaired

Touch-Free Smart Phone Empowers Mobility-Impaired

Reuters - Innovations Video Online (Dec. 21, 2014) — A touch-free phone developed in Israel enables the mobility-impaired to operate smart phones with just a movement of the head. Suzannah Butcher reports. Video provided by Reuters
Powered by NewsLook.com
Building Google Into Cars

Building Google Into Cars

Reuters - Business Video Online (Dec. 19, 2014) — Google's next Android version could become the standard that'll power your vehicle's entertainment and navigation features, Reuters has learned. Fred Katayama reports. Video provided by Reuters
Powered by NewsLook.com
AP Review: Nikon D750 and GoPro Hero 4

AP Review: Nikon D750 and GoPro Hero 4

AP (Dec. 19, 2014) — What to buy an experienced photographer or video shooter? There is some strong gear on the market from Nikon and GoPro. The AP's Ron Harris takes a closer look. (Dec. 19) Video provided by AP
Powered by NewsLook.com
Obama: Better Ways to Create Jobs Than Keystone Pipeline

Obama: Better Ways to Create Jobs Than Keystone Pipeline

AFP (Dec. 19, 2014) — US President Barack Obama says that construction of the Keystone pipeline would have 'very little impact' on US gas prices and believes there are 'more direct ways' to create construction jobs. Duration: 00:47 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:

Strange & Offbeat Stories

 

Space & Time

Matter & Energy

Computers & Math

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins