Economies of Scale

What does Economies of Scale mean in printing?
It’s the increase in production efficiency as the number of printed pieces being produced increases. The average cost per unit (through increased production) is reduced since fixed costs are shared over an increased number of goods. What?

We explain this concept often, but let me try another way. Say you’re driving your car to SW Michigan and it’s about a 1000 mile trip. Let’s average 30 miles per gallon at 3.00 per gallon and that’s $100.00 for gas. But, let’s say you had to prepare the car with new tires and a tune up totaling $800.00. If one person makes this trip the fixed traveling cost is $900.00. But, if you add three other people in the car and split the cost, then it’s $225.00 per person. Sharing the fixed costs between four riders now reduces the costs per person. The same thing happens in printing. There are prepress costs and press set up costs to get any job ready for press. How much you pay per piece will then depend on the quantity you order to cover the set up costs. So, if production set up costs are $900.00 and you’re ordering 10 pieces the cost per piece is $90.00, but if you order 500 pieces your costs are 1.80 each.

Oh, but it’s not as simple as just that. (of course not!) Even though the increased quantity covers the initial set up costs (prepress and press set up) your paper, press time, inks and finishing costs all increase as the quantities increase.

Just remember that each piece of equipment has an hourly rate based on the cost to run the equipment and the cost of the equipment itself. Hourly rates, quantity needed, paper and inks all greatly influence the job costs. Sometimes I get work that could have been easily produced on a smaller press with lesser set up costs but were designed and planned like a trip to Michigan in a limo. How do you want to spend your travel, oh, I mean your printing budget?

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One thought on “Economies of Scale

  1. Cathy, what a wonderful blog you’re writing! Excellent – I look forward to following it. Delighted to have you on Girls Who Print. Go join our Facebook page, where I am getting ready to share your blog with the crew over there.

    Also – be sure and post your blog in the news section on the LI group – I really think the members will enjoy it!

    Lunch -absolutely!
    🙂 mb

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