Reducing Construction Costs:

Doubling the size of capacity does not mean that the construction costs are also doubled. The construction costs of the equipment or a facility often increases relative to its surface area. For example, cost of steel to build an oil tanker increases more slowly than tanker's capacity increases. Industries such as oil refineries benefit from strong economies of scale because of this phenomenon.

Cutting Costs of Purchased Materials

Higher volumes can reduce the costs of purchased materials and services. A better bargaining power is with to purchaser to take the advantage of quantity discounts. Some of the retailers reap significant economies of scale because their national and international stores sell huge volumes of each item.

Finding Process Advantages

Massive production of any products provides many opportunities for cost reduction. The process shifts toward a line process at higher output rates. Reasonably, firms may be able to explain the expense of more efficient technologies. The benefits from dedicating resources to individual products or services may include speeding up the lowering inventory, learning effect, developing procedure and job designs, and dropping the number of changeovers. For example, higher volumes allow paper manufacturers, to achieve greater efficiency than manufacturers producing machines for long run of certain grade of paper and have to make as many adjustments for different grades.