TY - JOUR
T1 - Small modular infrastructure
AU - Dahlgren, Eric
AU - Göçmen, Caner
AU - Lackner, Klaus
AU - Van Ryzin, Garrett
N1 - Funding Information:
GARRETT VAN RYZIN is the Paul M. Montrone Professor of Decision, Risk, and Operations at the Columbia University Graduate School of Business and chair of the Decision, Risk, and Operations Division of the School. His research interests include analytical pricing, stochastic modeling, and operations management. He is coauthor of the book The Theory and Practice of Revenue Management, which won the 2005 Lanchester Prize for best published work in operations research. His research has been supported by grants from the National Science Foundation and major corporations and he has served as a consultant to many leading companies. He was both editor-in-chief of Manufacturing and Service Operations Management Society and area editor for Operations Research and is an INFORMS and MSOM Fellow. He received a B.S.E.E. degree from Columbia University and the degrees of S.M. in electrical engineering and computer science and Ph.D. in operations research from MIT.
Copyright:
Copyright 2013 Elsevier B.V., All rights reserved.
PY - 2013/10/1
Y1 - 2013/10/1
N2 - In this article we argue that advances made in automation, communication, and manufacturing portend a dramatic reversal of the "bigger is better" approach to cost reductions prevalent in many basic infrastructure industries; for example, transportation, electric power generation, and raw material processing. We show that the traditional reductions in capital costs achieved by scaling up in size are generally matched by learning effects in the mass production process when scaling up in numbers instead. In addition, using the U.S. electricity generation sector as a case study, we argue that the primary operating cost advantage of large unit scale is reduced labor, which can be eliminated by employing low-cost automation technologies. Finally, we argue that locational, operational, and financial flexibilities that accompany smaller unit scale can reduce investment and operating costs even further. All of these factors combined imply that with current technology, economies of numbers may well dominate economies of unit scale. Yet realizing the full potential of small unit scale will require technologists and business leaders to develop a new ability to "think small."
AB - In this article we argue that advances made in automation, communication, and manufacturing portend a dramatic reversal of the "bigger is better" approach to cost reductions prevalent in many basic infrastructure industries; for example, transportation, electric power generation, and raw material processing. We show that the traditional reductions in capital costs achieved by scaling up in size are generally matched by learning effects in the mass production process when scaling up in numbers instead. In addition, using the U.S. electricity generation sector as a case study, we argue that the primary operating cost advantage of large unit scale is reduced labor, which can be eliminated by employing low-cost automation technologies. Finally, we argue that locational, operational, and financial flexibilities that accompany smaller unit scale can reduce investment and operating costs even further. All of these factors combined imply that with current technology, economies of numbers may well dominate economies of unit scale. Yet realizing the full potential of small unit scale will require technologists and business leaders to develop a new ability to "think small."
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U2 - 10.1080/0013791X.2013.825038
DO - 10.1080/0013791X.2013.825038
M3 - Article
AN - SCOPUS:84888632517
SN - 0013-791X
VL - 58
SP - 231
EP - 264
JO - Engineering Economist
JF - Engineering Economist
IS - 4
ER -