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Unlocking Manufacturing Efficiency: Lessons from the Law of Diminishing Returns

By: Fero Labs Logo light
• February 2024
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In the realm of manufacturing, efficiency is the golden key that unlocks profitability and sustainability. Every factory aims to optimize their production processes to achieve higher outputs with minimal inputs.

However, the journey towards efficiency is not without its challenges, and one concept that often comes into play is the law of diminishing returns.

The Law of Diminishing Returns

The law of diminishing returns states that as one input variable is increased - while other variables are held constant - the overall output will eventually decrease after a certain point.

By way of example, if a farmer were to add fertilizer to their crops it may significantly boost yields. However, there comes a point where adding more fertilizer becomes counterproductive, leading to nutrient imbalances, environmental damage, and diminishing returns.

Equally, an athlete that increases their training intensity can experience rapid improvements in fitness and sporting performance –initially. But over time, this strategy will push the sportsman beyond their body's capacity for recovery which can result in fatigue, overuse injuries, and diminishing returns in performance gains.

This overuse syndrome is the death-knell for Marketers trying to avoid ad fatigue, which is often the cause of an advertising campaign’s point of diminishing returns.

Imagine a company investing in digital ads to promote its products or services. Initially, increasing the ad budget can lead to a proportional increase in website traffic, brand visibility, and potential customer engagement. This is because the company is tapping into new audiences and expanding its reach.

However, as the advertising budget continues to grow, the law of diminishing returns begins to come into play. The company may reach a point where additional ad spend no longer translates into proportional gains in customer acquisition or revenue.

This happens due to various factors including ad saturation, ad relevance over time, and market saturation as other products and services limit potential for further growth from advertising alone.

Typically, to mitigate the effects of diminishing returns, marketers will diversify their advertising channels and strategies, and will optimize their ad campaigns and creative assets to maintain relevance and effectiveness. This might include A/B testing, audience segmentation, ad frequency capping, creative refreshes, and ongoing performance analysis.

This example is to show that there’s not a singular optimization technique that marketers can employ to avoid reaching this point of fatigue. 

The changes need to be varied and continuous.

This principle of diminishing returns holds profound parallels in the realm of manufacturing process optimization.

Given the risk-averse nature of production operations, it can feel less ‘risky’ to optimize using a singular use case. However, focusing optimization efforts on singular “low-hanging fruit” may lead to diminishing returns sooner than expected.

So, what's the solution?

Manufacturers need to adopt a holistic approach to process optimization, leveraging multiple strategies concurrently. This is where the role of AI (Artificial Intelligence) solutions becomes paramount.


By harnessing the power of AI, manufacturers can:

  • Identify Optimization Opportunities: AI algorithms can analyze vast datasets to pinpoint areas ripe for improvement across the entire production process, not just isolated components. Fero Labs’ Prediction Simulator will make accurate predictions and recommendations in a simulated environment, whilst providing confidence bands and contextual insights behind every prediction.
  • Predict Optimal Conditions: AI models can forecast the impact of various optimization strategies, helping manufacturers avoid the pitfalls of the law of diminishing returns by steering clear of excessive adjustments.


  • Enable Real-Time Adaptation: AI-powered systems like Fero Lab’s Live Optimization can continuously monitor production metrics and dynamically adjust parameters to maintain peak efficiency, mitigating the risk of stagnation or decline in output.


The journey towards manufacturing efficiency is not a linear path but rather a dynamic interplay of various factors. While the law of diminishing returns serves as a cautionary tale against single-minded optimization efforts, it also underscores the importance of embracing comprehensive and adaptive strategies.

By integrating AI solutions like Fero Labs into their operations, manufacturers can navigate the complexities of optimization with confidence, unlocking sustainable gains in efficiency without succumbing to the point of diminishing returns.

Are you curious about how AI can help? Let's Chat!