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The Impact of Product Variety on Automobile Assembly Operations: Empirical Evidence and Simulation Analysis

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Author Info

  • Marshall L. Fisher

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Christopher D. Ittner

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

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    Abstract

    This study examines the impact of product variety on automobile assembly plant performance using data from GM's Wilmington, Delaware plant, together with simulation analyses of a more general auto assembly line. We extend prior product variety studies by providing evidence on the magnitude of variety-related production losses, the mechanisms through which variety impacts performance, and the effects of option bundling and labor staffing policies on the costs of product variety. The empirical analyses indicate that greater day-to-day variability in option content (but not mean option content per car) has a significant adverse impact on total labor hours per car produced, overhead hours per car produced, assembly line downtime, minor repair and major rework, and inventory levels, but does not have a significant short-run impact on total direct labor hours. However, workstations with higher variability in option content have greater slack direct labor resources to buffer against process time variation, introducing an additional cost of product variety. The simulation results support these findings in that once each workstation is optimally buffered against process time variation, product variety has an insignificant impact on direct assembly labor. The simulations also show that bundling options can reduce the amount of buffer capacity required, and that random variation is more pernicious to productivity than product variety, supporting the efforts of some auto makers to aggressively attack the causes of random variation.

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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 45 (1999)
    Issue (Month): 6 (June)
    Pages: 771-786

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    Handle: RePEc:inm:ormnsc:v:45:y:1999:i:6:p:771-786

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    Related research

    Keywords: product variety; assembly lines; auto industry;

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    Cited by:
    1. Carolyn D. Egelman & Dennis Epple & Linda Argote & Erica R.H. Fuchs, 2013. "Learning by Doing in a Multi-Product Manufacturing Environment: Product Variety, Customizations, and Overlapping Product Generations," NBER Working Papers 19674, National Bureau of Economic Research, Inc.
    2. Nadeau, Marie-Claude & Kar, Ashish & Roth, Richard & Kirchain, Randolph, 2010. "A dynamic process-based cost modeling approach to understand learning effects in manufacturing," International Journal of Production Economics, Elsevier, vol. 128(1), pages 223-234, November.
    3. Xiao, Tiaojun & Choi, Tsan-Ming & Cheng, T.C.E., 2014. "Product variety and channel structure strategy for a retailer-Stackelberg supply chain," European Journal of Operational Research, Elsevier, vol. 233(1), pages 114-124.
    4. Aoki, Katsuki & Staeblein, Thomas & Tomino, Takahiro, 2014. "Monozukuri capability to address product variety: A comparison between Japanese and German automotive makers," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 373-384.
    5. Kai-Lung HUI, 2002. "Product Variety under Brand Influence: An Empirical Investigation of Personal Computer Demand," Industrial Organization 0205004, EconWPA, revised 13 Dec 2002.
    6. Blecker, Thorsten & Abdelkafi, Nizar, 2006. "Variety Management in Assemble-to-Order Supply Chains," MPRA Paper 5250, University Library of Munich, Germany.
    7. Robert S. Huckman & Bradley R. Staats, 2008. "Variation in Experience and Team Familiarity: Addressing the Knowledge Acquisition-Application Problem," Harvard Business School Working Papers 09-035, Harvard Business School.
    8. Brun, Alessandro & Capra, Eugenio & Miragliotta, Giovanni, 2009. "VRP revisited: The impact of behavioural costs in balancing standardisation and variety," International Journal of Production Economics, Elsevier, vol. 117(1), pages 16-29, January.
    9. Huang, Shui-Mu & Su, Jack C.P., 2013. "Impact of product proliferation on the reverse supply chain," Omega, Elsevier, vol. 41(3), pages 626-639.
    10. Gabriel Natividad & Olav Sorenson, 2011. "Spread Too Thin: Uncertainty Shocks and Diseconomies of Scope," Working Papers 11-04, NET Institute.
    11. Obermaier, Robert, 2012. "German inventory to sales ratios 1971–2005—An empirical analysis of business practice," International Journal of Production Economics, Elsevier, vol. 135(2), pages 964-976.

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