Question

Ford's success came party from making more cars so that each would cost less.. am i right?

Answer 1

At best that's incomplete. As a rule, if he made more cars it would cost more to run the factory, and each war would cost the same. The weight of 1 orange doesn't change if you pick one from the tree or a hundred.

What is important is that Ford was able to streamline the process of building cars, so that it cost him less to build each car. THAT is what allowed him to sell them for less, and still make money. The important aspect is not really the number of cars he made. Making a lot of cars does not, by itself, cause the cost per car to go down, except in the trivial sense that certain one-time fixed costs (like paying to incorporate the business or hiring an executive secretary). This is a common mistake made by armchair business analysts who have never actually run a business. What's amusing is that they can, often at the same time, say that large corporations are less "nimble" and efficient than small aggressive start-ups. And apparently their heads don't explode from the contradiction!

What is actually the case is that improved efficiency often *allows* a company to grow larger faster, and so there is a *association* between improved production efficiency and becoming larger and making more product. But the cause and effect is the other way around: efficiency causes production increase, not the other way around.

As for what Ford did: first and most important, he had a well-designed product in the Model T: sturdy and simple to build and maintain. So he had some good designers and engineers. Secondly, he built an efficient assembly plant, which introduced the idea of a moving assembly line, still in use today for any situation in which complex things are assembled by a large team of specialists.

Ford's insight is that in such cases even though setting up the assembly line is initially expensive, it is ultimately more efficient and cheaper to bring the work to each team member than to have the worker go to the work. That may seem counterintuitive, but not if you think about human nature: human beings are slow to start working in a new situation, but once they get going they can be much faster. Having each worker come to the work meant each worker had a period of adjustment and start-up before he could do his best work -- and that "cost" was added to each and every thing built. By having the work come to the worker, on an assembly line, the mental "start-up" of the worker could be paid only once, at the beginning of his shift, and after that he could work at full bore