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Capital intensive production / processes

Uses a high proportion of capital resources (plant, machinery, vehicles and equipment, including IT) relative to labour, which leads to fixed costs being a high proportion of total costs. It is common to large scale production, in particular mass production and flow production systems. See flow production and mass production. The addition of capital equipment increases the productivity of labour (ie output per person per period of time). There are often significant costs involved in setting up capital intensive production systems (see drawbacks below). In the medium to longer-term, however, the benefits arising from using a capital intensive process should outweigh the costs as machines tend to be: quicker than humans at carrying out tasks; more reliable – able to produce consistently, with fewer mistakes than humans. A more capital intensive production process may also enable a business to produce more technically sophisticated products. This would be important in maintaining / gaining a competitive edge, and thus, helping to maintain / increase customer demand for a business’s products and, ultimately, sales. In terms of drawbacks, besides the set up significant set up costs such a move could: temporarily disrupt operations, involve redundancies, lead to some de-skilling of the workforce that remains, lead to potential difficulties in learning how to use the new machinery.

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