Technical Economies

Technical Economies: These are economies derived from the use of sub size machines and such scientific processes like those which can be carried out in large production units. A small establishment cannot afford to use such machines and processes, because their use would bring a saving only when they are used intensively. On the other hand, their use will be quite uneconomical if they were to lie idle over a considerable part of the time. For example, a large electroplating plant costs a great deal to keep it in operation. Therefore, the cost per unit will be low only if the output is large. Similarly, a machine that facilitates the pressing out a side of a  motorcar will take a week or more to be put ready for operation to produce a particular design. The greater the output of cars of this particular designs the lower the cost per unit of getting the machine ready for operation. Similarly, if a dye is made to produce a particular model of cars, the cost of dye per unit of cars will depend upon the output of the cars. Very often large firms may find it economical to produce or manufacture parts and components for their products rather than buy them from outside sources. For example, Hind Cycles, unlike small manufacturers, produced parts and components themselves. Moreover, large firms may find it profitable to utilise their by-products and waste products. For example, Tata use the smoke from their furnaces to manufacture coal tar, naphthalene, etc. A small firm’s output of smoke would not be large enough to justify setting up the equipment necessary to do so.