Fisher Investments on Consumer Staples: Mass Production in the Late Nineteenth Century

One of the largest transformations in the consumer products industry happened in the 1800s, when mass production technology emerged during the Industrial Revolution, which gave us mass production and a declining cost curve. Fisher Investments believes by manufacturing a large number of identical items, a firm could spread the fixed cost of their factory operations over many units and also employ low-cost labor. Thus, it became economically feasible, perhaps even imperative, to leverage economies of scale—manufacturing large quantities of a good at increasingly lower costs and of consistent quality.

Economies of Scale
Fisher Investments believes the factory system that facilitated economies of scale was a radical departure from the past. Previously, virtually all work was completed by hand in much the same way it had been done for centuries, if not millennia. Then came inventions like the "spinning jenny," a device allowing one person to spin many threads simultaneously, increasing the amount of finished cotton a single worker could produce. Another innovation was James Watts' modern steam engine, which created a new source of power used to run factories.

As production processes became increasingly automated, creative destruction quickly spread. For example, individual hand weavers were driven out of business and replaced by more efficient factories. Fisher Investments finds as factories grew, factory workers became ever more specialized in their functions, leading to the formation of "assembly-line" production. These events gave rise to explosive productivity growth and promulgated scalable advantages across an array of business types, including consumer products manufacturing.