Economies of Scale (Push) vs. Economies of Flow (Pull)

Wednesday, May 13, 2009 by Tripp Babbitt

I remember sitting in my economics class at Hanover College my freshman year and the professor explaining to the class about "economies of scale."  Definition: Reduction in cost per unit  resulting from increased production.  We all know this one: the more produced or purchased the lower the cost.  This is the American way, mass produce in batches for less cost or "economies of scale."  With schedules and targets needed to produce batches, overproduction is common place.  This overproduction requires marketing to sell this excess inventory.

Taiichi Ohno (Toyota) looked at production as a supermarket.  Each time product is pulled of the shelf one is made to replace it.  This gives less inventory, less time, less waste and good service.  A wholly different view that (for the most part) has been rejected by Americans that favor the command and control thinking associated with economies of scale.

John Seddon in Freedom from Command and Control) said it best when comparing the PullAmerican view vs. the Ohno view, "So it comes down to a choice: use marketing to stimulate demand for what we have made, or build relationships with customers to deliver what customers want – push vs. pull."

Systems thinking organizations understand the problems of economies of scale (push) and that a better way is to achieve economies of flow (pull).  But making this change in thinking is not easy . . . it will require a different leadership strategy that requires a change in thinking. 

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control thinking and the termination of bad service through application of new thinking . . . systems thinking.  Download free from "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at


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