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Production stability in a supply-chain environment

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  • Bivin, David G.

Abstract

There is evidence that the growth rate of GDP in the United States stabilized in 1984 and improvements in production management are frequently cited as a source. This paper defines the quality of production as the scale of the firm's production shock and assumes that the firm can exercise control over the scale of the shock. The firm is assumed to operate in a supply-chain environment and the question of interest is what, if any, influence the adoption of more reliable production techniques by a single firm has for aggregate volatility. The results indicate that the adoption of more reliable production techniques by a single firm typically have minor effects on aggregate volatility because the benefit dies out rapidly as the product moves downstream. The exceptions are those cases in which the firm adopting the improved technology lies near the end of the chain. There is also some benefit when deliveries of materials to the initial firm in the production chain stabilize.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Production Economics.

Volume (Year): 114 (2008)
Issue (Month): 1 (July)
Pages: 265-275

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Handle: RePEc:eee:proeco:v:114:y:2008:i:1:p:265-275

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Web page: http://www.elsevier.com/locate/ijpe

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  1. Lovell, Michael C., 1993. "Simulating the inventory cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 21(2), pages 147-179, June.
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  7. Aubhik Khan & Julia K. Thomas, 2004. "Modeling Inventories Over the Business Cycle," NBER Working Papers 10652, National Bureau of Economic Research, Inc.
  8. F. Owen Irvine & Scott Schuh, 2005. "The roles of comovement and inventory investment in the reduction of output volatility," Working Papers 05-9, Federal Reserve Bank of Boston.
  9. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
  10. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2002. "Recent U.S. macroeconomic stability: good policies, good practices or good luck?," International Finance Discussion Papers 730, Board of Governors of the Federal Reserve System (U.S.).
  11. Bivin, David G., 2008. "Production management, output volatility, and good luck," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2118-2136, July.
  12. Irvine, F. Owen & Schuh, Scott, 2005. "Inventory investment and output volatility," International Journal of Production Economics, Elsevier, vol. 93(1), pages 75-86, January.
  13. Hirsch, Albert A., 1996. "Has inventory management in the US become more efficient and flexible? A macroeconomic perspective," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 37-46, August.
  14. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
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Cited by:
  1. Bivin, David G., 2008. "Production management, output volatility, and good luck," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2118-2136, July.
  2. Bivin, David, 2013. "Production chains and aggregate output volatility," International Journal of Production Economics, Elsevier, vol. 145(2), pages 807-816.
  3. Hill, Alex & Doran, Des & Stratton, Roy, 2012. "How should you stabilise your supply chains?," International Journal of Production Economics, Elsevier, vol. 135(2), pages 870-881.

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