Economies of Scale

When we talk about community water systems at SIS we often use the phrase “economies of scale.” What does it mean? Consider the following analogy:

Suppose you need to fence your vegetable patch because you have a problem with deer. Let’s say you fence an area of 12 feet by 10 feet, to create 120 square feet of vegetable garden. Three of your neighbours do the same. Altogether you have created 480 square feet of vegetable garden, and built 176 feet of fence.

Instead, let’s say you combine forces with your neighbours and build just one shared vegetable area. This time you use in total the same amount of fence, 176 feet, but now the garden measures 44 feet by 44 feet. You have now created a total area of 1,936 square feet; a vegetable garden over four times larger, with more or less the same cost in materials. Put another way, by cooperating with your neighbours you have reduced your fencing costs per square foot of garden by over 75%! This is an economy of scale!

We believe that economies of scale are available to community water suppliers when they are willing to share resources with other systems (although probably not so dramatic as the example above). Our new programs are designed to help achieve economies of scale. We would like to hear your ideas about how sharing resources can benefit you and your neighboring water systems. Please send an email with your ideas to info@SustainIS.Org.