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PRoCEss TECHnology sHould REflECT volumE And vARiETy 203
Similarly, the costs of installing and supporting the technology are likely to be lower
per unit of output. Likewise, operating (as opposed to capital) costs per unit are often
lower on larger machines, the fixed costs of operating the plant being spread over a
higher volume.
● Can the process technology match demand over time? As discussed in Chapter 4, there
is a traditional trade-off between large increments of capacity exploiting economies
of scale but potentially resulting in a mismatch between capacity and demand, and
smaller increments of capacity with a closer match between capacity and demand
but fewer economies of scale. The same argument clearly applies to the units of
process technology that make up that capacity. Also, larger increments of capacity
(and therefore large units of process technology) are difficult to stream on and off if
demand is uncertain or dynamic. Small units of process technology with the same
or similar processing costs as larger pieces of equipment would reduce the poten-
tial risks of investing in the process technology. This is why efficient but smaller-
scale technologies are being developed in many industries. Even in industries where
received wisdom has always been that large scale is economic (i.e. the steel and elec-
tricity generation), smaller, more flexible operations are increasingly amongst the
most profitable.
● How vulnerable is the operation? Building an operation around a single large machine
introduces greater exposure to the risk of failure. Suppose that the choice is between
setting up a mail sorting operation with ten smaller or one very large machine. If
there is a single machine failure, then the operation with ten machines is more
robust, as 90 per cent of the mail can still be sorted. In the large-scale machine opera-
tion, no mail can be sorted.
● What scope exists for exploiting new technological developments? Many forms of process
technology are advancing at a rapid rate. This poses a threat to the useful life of
large units of technology. If an operation commits substantial investment to a few
large pieces of equipment, it changes them only infrequently and the opportuni-
ties for trying out new ideas are somewhat limited. Having a broader range of dif-
ferent technological options (albeit each of a smaller scale) makes it easier to take
advantage of new developments – providing the operation can cope with potential
inconsistencies.

From ‘scale’ to ‘scalability’
Information processing technologies are an important exception to some of the issues
discussed above. Information is transmitted far more easily between units of technol-
ogy than between either materials or customers. Information technology also has the
capability of overcoming traditional links between volume and variety. Both of these
factors mean that information technology processes can be linked relatively easily to
combine their total processing capacity. Because of this, in many new technologies
the dynamic capacity challenges relate less to absolute scale and more to scalability.
By scalability we mean the ability to shift to a different level of useful capacity quickly,
cost-effectively and flexibly. Yet one of the key challenges for information processing
technology is still to judge how much computing capacity is required. This is especially
true if the process technology is customer-facing and in a dynamic marketplace (such
as e-commerce), where demand uncertainty and variability are common. As many
business-to-consumer internet-based businesses have discovered, too little capacity
means that the technology (website server etc.) can quickly become swamped and lead

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