![]() Thus, in their cost structure, costs for capital (such as machinery) have a higher proportion than labor costs. ![]() Some rely on computer-aided machines to automate processes with less human intervention. Modern large-scale manufacturing is usually more capital intensive. Based on this, the manufacturing process can be divided into two categories:Įach differs in aspects such as capital investment requirements, operating flexibility, economies of scale, and customization. The basic nature tells us whether a manufacturing process relies more on machines or on physical capital such as machines. Likewise, converting cotton into clothing can also be a multi-million dollar business. For example, processing iron ore into steel bars and then various equipment such as vehicles can increase its value many times over. This added value leads to higher prices, making manufacturing a profitable business. By processing raw materials or assembling components into something more valuable, manufacturers add value. Manufacturing increases value-added, enabling firms to sell output at a higher price than the inputs used. Does the manufacturing process create added value? Labor-intensive manufacturing is the opposite. For example, capital-intensive manufacturing relies more on machinery, equipment, and automation than on labor. How significantly other inputs contribute to the process, it depends on the nature of the manufacturing process, whether labor-intensive or capital-intensive. In addition to the raw materials used, the process requires various other inputs such as labor, machinery, equipment, and chemical or biological processing.
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