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Part Two
Design
Figure 8.6 Different process technologies are important for different volume–variety
combinations
Capital intensity
Automation of technology
employs is sometimes called the capital intensity of the process technology. Generally
processes that have high variety and low volume will employ process technology with
lower degrees of automation than those with higher volume and lower variety. For example,
investment banks trade in highly complex and sophisticated financial ‘derivatives’, often
customized to the needs of individual clients, and each may be worth millions of dollars.
The back office of the bank has to process these deals to make sure that payments are made
on time, documents are exchanged, and so on. Much of this processing will be done using
relatively general-purpose technology such as spreadsheets. Skilled back-office staff are
making the decisions rather than the technology. Contrast this with higher-volume, lowvariety
products, such as straightforward equity (stock) trades. Most of these products are
simple and straightforward and are processed in very high volume of several thousand per
day by ‘automated’ technology.
The scale or scalability of the technology
There is usually some discretion as to the scale of individual units of technology. For example,
the duplicating department of a large office complex may decide to invest in a single, very
large, fast copier, or alternatively in several smaller, slower copiers distributed around the
operation’s various processes. An airline may purchase one or two wide-bodied aircraft or a
larger number of smaller aircraft. The advantage of large-scale technologies is that they can
usually process items cheaper than small-scale technologies, but usually need high volume
and can cope only with low variety. By contrast, the virtues of smaller-scale technology are
often the nimbleness and flexibility that is suited to high-variety, lower-volume processing.
For example, four small machines can between them produce four different products simultaneously
(albeit slowly), whereas a single large machine with four times the output can
produce only one product at a time (albeit faster). Small-scale technologies are also more robust.
Suppose the choice is between three small machines and one larger one. In the first case, if one
machine breaks down, a third of the capacity is lost, but in the second, capacity is reduced
to zero. The advantages of large-scale technologies are similar to those of large-capacity
increments discussed in Chapter 6.