But, for the vendor, tool making is also moving to less fixed and more variable cost. So the high volume of tools purchased no longer gains a big price advantage over lower volume rivals, further diminishing big companies' cost superiority over smaller competitors. Variety and Flexibility. Design costs are declining as a percent of total unit cost. Set up costs are declining as a percent of total unit costs.
Runs are shorter.
As these costs decline, product variety increases. Products are more frequently changed and upgraded. Figure 2 shows how computer controlled manufacturing has flattened the cost curve for variety in a factory where a few engineers program production changeovers in real time. Smaller is better. Not only is the unit cost gap between large and small companies shrinking, overhead costs, like payroll administration, are also falling.