What is Economies of Scale ??
Economies of scale, in microeconomics, are the cost advantages that a business obtains due to expansion. They are factors that cause a producer’s average cost per unit to fall as scale is increased. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
The effect of Economies of Scale in Container Shipping.
The container shipping trade has been growing substantially over the past decades and this has created a trend of building bigger ships to reduce unit cost of transport. By increasing the size of the ship the building, operating and capital costs do not increase proportional to the size of the ship. For example , the cost of building a 10,000 teu vessel is not the double of 5000 teu vessel .Similarly the operational expenses like bunker (fuel) charges , crew expenses, maintenance cost of the big vessel etc are not the double of small or medium sized vessels. And the increase in container trade helps to fill the bigger vessels ( generally on a space sharing basis by the carriers) without much difficulty and this re-affirm the economies of scale ( lower transport cost / teu) from larger ships.
The new sea giants , CMACGM Christophe Colomb and Emma Maersk are typical examples of economies of scale innovation.
Yes, its time consuming and you should have considerable knowledge/ experience in the area you handle. And your blog spot is your world, be yourself, don't try to copy or imittate.
ReplyDelete