However, what appears to be efficient to individual…
““However, what appears to be efficient to individual companies along the stream—for example, purchase of one of the world’s fastest canning machines, operating at fifteen hundred cans per minute, to yield the world’s lowest fill cost per can—may be far from efficient when indirect labor (for technical support), upstream and downstream inventories, handling charges, and storage costs are included. Indeed, this machine may be much more expensive than a smaller, simpler, slower one able to make just what the next firm down the stream needs (Tesco in this case) and to produce it immediately upon receipt of the order rather than shipping from a large inventory.””
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Efficiency measured only by per‑unit cost ignores hidden expenses like labor, inventory, handling, and storage, making a larger, faster machine less optimal overall.
In simple terms: Focusing on unit cost alone can hide total system inefficiency.
Key Takeaway
Consider total system cost, not just per‑unit cost.
Themes
operations
efficiency
systems thinking
cost analysis
Mood
analytical
critical
pragmatic
Type
advice
analytical
practical
When to use this quote
- manufacturing plant design
- procurement decisions
- inventory planning
- logistics optimization
Key Concepts
economics
supply chain management
lean manufacturing
Questions to Reflect On
- What hidden costs might your organization overlook?
- How can you evaluate true efficiency across the supply chain?
A Different Perspective
Larger, faster equipment may increase total cost due to ancillary expenses.