4 Responses 02/11
Jacob Work:
Labor intensive and capital-intensive techniques are widely used by many of the organisation based on the need of their requirements of labor, capital and size of the company etc. In labor intensive technique a greater number of labor are involved and less amount of capital is invested. On the other side of capital investment wherein high capital is used and a smaller number of labor forces are required. In capital intensive case more capital is required as majority of the work is digitalised and automated which will replace labor and is practiced in railways, airline etc. whereas labor intensive technique is used by agriculture, mining and food chain sectors etc. Network effect is a situation where with the increase in customers capability to purchase a product or service will result in increased price of the product or services. Network effect is the factor which will largely favour innovation and will allow the business to make new products and services and can work on competing other business. Network effect help the business retain customers and achieve operational excellence(Holmes & France., 2002).
Aerospace manufacturing is a complex and intricate process which demand skilled workers with good experience to deal with complex parts and also aerospace manufacturing has low production volumes. Now-a-days aerospace industry has shifted to automation majorly and are using digitalised equipment in manufacturing their parts and in assembling their counterparts and product. Boeing Dreamline 787 is one of the key projects of Boeing and is fuel efficient and light weight than any other commercial airliners. Boeing Dreamliner made a good network effect for Boeing’s new product Dreamliner 787. Boeing built new facilities for making Dreamliner 787 which is more of automated services with less labor work while dealing with sensitive and intricate parts. So, Boeing is more of capital-intensive technique for producing Dreamliner 787(Elahiet al., 2014).
References:
Heese, J., Srinivasan, S., Lane, D., & Barnett, J. (2017). Accounting Turbulence at Boeing.
Holmes, S., & France, M. (2002). Boeing’s secret, BusinessWeek, accessed 25 September 2019.
Elahi, E., Sheikhzadeh, M., & Lamba, N. (2014). An integrated outsourcing framework: Analysing Boeing's outsourcing program for Dreamliner (B787). Knowledge and Process Management, 21(1), 13-28.
Csereklyei, Z., & Stern, D. I. (2018). Flying more efficiently: joint impacts of fuel prices, capital costs and fleet size on airline fleet fuel economy (No. 1810). Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
Dushyanth Work:
Production Economics
McGuigan, Moyer, & Harris (2017) introduced the concept of production function. The function illustrates the combination of inputs yielding a given level of output. The producers require raw materials and labor to produce their commodities. They can consume both fixed and variable types of input (McGuigan et al., 2017). In the case of fixed inputs, the cost of input does not depend on the units produced.
Chui’s (2018) video shows that Boeing company uses both labor and capital in its operations. For instance, it imports the Dreamlifter OPS’s materials from different regions. The regions include South Carolina, North Charleston, Japan, and Italy. This shows the application of capital. The assembly of the aircraft occurs in eight regions. Thus, there are supervisors and controllers to ensure efficiency in each stage. The employees form part of labor required in the firm (Chui, 2018). They also assist in wiring the aircraft, where the company requires many employees if the aircraft has to be completed fast.
The management also require capital, in the form of machinery to transport the aircraft parts from one assembly point to the other. The machinery also undertakes some automated tasks like joinery and painting (Chui, 2018). Therefore, the company is labor and capital intensive. Production efficiency relies on the joint efforts of machines and humans (Chui, 2018). The management cannot effectively replace one form of input with the other.
Chui (2018) also illustrates that the management benefits from network effects. The assembly plant has eight positions, starting from zero to seven. The tasks undertaken in position zero is utilized by position one up to position seven. Therefore, the management is able to deliver value from the initial operations (Jorgenson, 2015). Alternatively, it imports assembled parts from different regions. The parts become more valuable after being incorporated into the aircraft.
References
Chui, S. (2018, April 6). How a Boeing 787 Dreamliner is Built ? YouTube Video File. Retrieved on 10th February from https://www.youtube.com/watch?v=VRfXyccWUP4
Jorgenson, E. (2015, June 22). The Power of Network Effects: Why they make such Valuable Companies, and how to Harness them. The Medium, np
McGuigan, J., Moyer, R., & Harris, F. (2017). Managerial Economics Applications, Strategies and Tactics, 14e. Cengage Learning