One of the ways in which your company can expand -- and reduce production costs at the same time -- is by implementing a large scale production model.
Large scale production, or mass production, is a vehicle that provides many advantages to a company, as long as it’s done correctly.The primary advantage is that large-scale production provides economies of scale, and that results in the following more specific benefits:
It's more cost-effective to implement up-to-date and more efficient machinery because the cost is spread over a larger number of units produced. Also, as a big producer you can have machines running 24/7, or at maximum capacity, which lowers the cost per unit even more. Likewise, the cost for ancillary items such as electrical cord, or a higher gauge wire, or a bigger pipe, that could increase production capacity, becomes insignificant over time.
In a mass production scheme, specialized workers are in charge of each specific step of the production process, becoming more efficient as they spend more time doing one specific job. As workers become more specialized, their salary increases. This expense is off-set by the fact that one single machinist, technician, or operator can handle a machine that will produce more units.
Implementing a large scale production model, allows you to streamline order-fulfillment and to increase sales because you won’t be faced with product shortage or pauses in the production process. This allows for clients to create a steady demand that is efficiently filled, and a continuous revenue stream for the company.
When a facility is used at full capacity, the cost of rent is lower than if it were used for a smaller quantity, thus lowering cost of production.
Moving your existing line into large-scale production gives you breathing space to invest in experimentation and development of new products, new materials, or more efficient production processes that may lower even more the production costs even more and, also, expand your product line and market share.
There are some other collateral benefits of large-scale production that we don't often consider. A factory or production company requires good transportation services, reliable internet and other services and, of course, skilled workers. Additional educational opportunities may also result as a side benefit many people. And, as a customer, you have the ability to positively impact working conditions by insisting on only doing business with facilities that have fair and favorable employment practices. These are important factors that favor the workers of large scale production companies and the cities or towns in which they are located.
These are some powerful pros of large scale production. But, at the beginning we mentioned this strategy was favorable “if done correctly”, remember?
The thing is, there’s a delicate balance between the maximum number of units produced, and the minimum cost per unit possible. If the company grows beyond this “ideal point,” costs start to increase. As an example, an industry could exceed the available supplies of raw materials or saturate the local market, which may create higher cost of goods and higher transportation costs.
So, before making such a massive move, it’s always advisable to consult with an experienced business advisor . A good business strategist will be able to analyze your company, and help you create a step-by-step plan, so your company expansion is made at the right moment, the appropriate pace, and to the right level.Ready to bring your company to the next level? Let’s do it!
The driverless car industry is hot and super-competitive. That’s a given. Here’s what’s not hot if you are Waymo, the self-driving car business that was spun out of Google’s parent company:
Recently, there was a trademark spat between Adidas and Tesla. The story piqued my interest because the big players make mistakes that are instructive for small businesses (only on a grander scale)—and because it illustrates the importance of brand identity and underscores why it’s smart to register your mark.In a nutshell, here’s what happened: Tesla filed with the US Patent and Trademark Office (USPTO) to register its Model 3, three-bar logo as a trademark. If the registration had been for the purpose of using the mark on a car, there would not have been a problem. BUT, Tesla registered to use its three-bar “E” on clothing. Adidas, a company known for rigorous policing of its brand identity, challenged Tesla’s right to register the mark as confusingly similar to the Adidas three-bar logo. Tesla withdrew its application. Adidas protected its three-bar brand identity.
The Trans-Pacific Partnership (TPP) is the largest regional trade agreement in history, between the United States and 11 other Pacific Rim countries. Following in the footsteps of the North American Free Trade Agreement (NAFTA) between the US, Mexico, and Canada, the TPP expands upon this to establish new rules for global trade by eliminating 18,000 tariffs, promoting an open internet, disciplining state-owned enterprises, and establishing environmental and worker protection. Its aim is to increase Made-In-America exports, grow the US economy, support higher-paying US jobs, and strengthen the middle class.
You've probably heard references to the TPP in recent campaign coverage. It is the result of years of trade negotiations, and has been hailed as a hallmark victory for the Obama administration. However, the agreement is still in limbo, pending ratification by Congress--a delay that hardly comes as a surprise. And, both presidential candidates for the major parties have come out against the TPP. Given this, the future of the TPP is up in the air.
Supporters hope for a vote during the lame-duck session, but the TPP's passage could very likely depend on the next presidential administration. In the meantime, we are left to consider the implications of passage of this agreement, as well as its impact on NAFTA, a pre-existing trade agreement of a similar nature.
The TPP is a piece of legislation I have been closely following, and recently had the opportunity to moderate a panel entitled, "The Impact of TPP on NAFTA: Opportunity for Strengthening Ties -- Or Recipe for Disaster." Panel members included Aristeo Lopez of the Mexican Embassy, Laura Sierra of Alston & Bird, Nicholas Guzman of Drinker, Biddle & Reath, and Greg Kanargelidis of Blake, Cassels & Graydon.
The American Bar Association Section of International sponsored this event with the intention of presenting US, Mexican, and Canadian standpoints on the TPP and the impact of its passage on NAFTA. What followed was a thoughtful and informative discussion, and although the topic is highly complex, I thought I'd share some highlights with you.
Ms. Sierra explained some of the political context surrounding the TPP, including that the US has historically been pro-trade, and this is the first time since 1992 that trade has been a significant issue in presidential election year politics. US FTAs are modeled after NAFTA. The agreement eliminates a significant number of tariffs that would be beneficial to US businesses, but there are dissenting voices. Some of the concerns include employment issues, the manipulation of currencies by various countries, and opposition in specific industries such as auto, segments of agriculture and pharmaceuticals and biologics whose concerns were not addressed in the agreement. For example, intellectual property protection for biologics is not included in the agreement.
Mr. Lopez pointed out the benefits of NAFTA--growth in trade between Mexico and the US, especially--and explained that the TPP is intended to expand upon this growth, with attention to subjects that were treated less comprehensively in NAFTA. Another goal of TPP, in Mr. Lopez' view, is to strengthen Mexico's ties to NAFTA and other FTA partners, allowing Mexican goods to reach new markets.
Mr. Kanargelidis noted that the TPP is not intended to replace or override NAFTA, but that the two agreements can co-exist. He pointed out US, Mexican, and Canadian businesses can operate under the clauses of whichever agreement is most favorable to them in a given transaction. For example, the "de minimis" value threshold is 10% under TPP, and only 7% under NAFTA.
An audience member posed the question of whether TPP shipments will be exempt from US Merchandise Processing Fees (MPF) like NAFTA shipments are. Mr. Guzman explained that even though TPP does away with "ad valorem" fees, US Customs might find another way to collect MPF that is compliant with the agreement. He also described the TPP's "focused value" methodology for determining goods' origin, which might be more stringent than NAFTA methods.
Opponents to the TPP often cite concerns about the Investor-State Dispute Settlement (ISDS) provision, which outlines the mechanism by which agreement disputes can be settled. Mr. Lopez explained that the TPP’s ISDS provisions are more transparent than those found in NAFTA.
At the conclusion of the panel, Ms. Sierra suggested that a full renegotiation of the TPP is unlikely, given that the agreement was difficult to reach in the first place, and that several countries have already ratified it. However, we might see some side letters that result in alterations to the text pertaining to certain issues. Panelists agreed that the TPP will pass. It’s a matter of time and final form.
The TPP has been negotiated between 12 countries who together form about 40% of GDP, and 1/3 of world trade. The agreement is of an unprecedented scope, and the implications of this agreement are huge. We will soon know if it can pass during the lame-duck session before the election, which is fast approaching!
Granville, Kevin. “The Trans-Pacific Partnership, Explained.” The New York Times. 20 August 2016. Web.“The Trans-Pacific Partnership.” Office of the United States Trade Representative. Executive Office of the President. 2016. Web.
In July, we reviewed the Defend Trade Secrets Act (DTSA) that passed in Congress by a sweeping majority, and was signed into law by President Obama on May 11—a rare piece of legislation that was largely agreed upon on both sides of the aisle!
In this post, “Trade Secrets: Part Two,” I want to emphasize the importance of understanding what a trade secret is, regardless of whether it is under the DTSA or state law. Surprisingly, many businesses I work with rely heavily on trade secrets for their economic livelihood, and they don’t know it. Not knowing and not tending to that little gold mine of yours can mean a significant financial hit to your business in many ways, not the least of which is losing your competitive advantage.
So, what are the components of a trade secret, and how do you protect it? Think of it in threes: the three key elements of a trade secret and three steps to protect it.