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Component Sharing in the Management of Product Variety: A Study of Automotive Braking Systems

Listed author(s):
  • Marshall Fisher

    (The Wharton School, 1300 Steinberg-Dietrich Hall, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Kamalini Ramdas

    (Darden Graduate School of Business, University of Virginia, Darden School, Charlottesville, Virginia 22906)

  • Karl Ulrich

    (The Wharton School, 1300 Steinberg-Dietrich Hall, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

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    Product variety in many industries has increased steadily throughout this century. Component sharing---using the same version of a component across multiple products---is increasingly viewed by companies as a way to offer high variety in the marketplace while retaining low variety in their operations. Yet, despite the popularity of component sharing in industry, little is known about how to design an effective component-sharing strategy or about the factors that influence the success of such a strategy. In this paper we critically examine component sharing using automotive front brakes as an example. We consider three basic questions: (1) What are the key drivers and trade-offs of component-sharing decisions? (2) How much variation exists in actual component-sharing practice? and (3) How can this variation be explained? To answer these questions, we develop an analytic model of component sharing and show through empirical testing that this model explains much of the variation in sharing practice for automotive braking systems. We find that the optimal number of brake rotors is a function of the range of vehicle weights, sales volume, fixed component design and tooling costs, variable costs, and the variation in production volume across the models of the product line. We conclude with a discussion of the general managerial implications of our findings.

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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 45 (1999)
    Issue (Month): 3 (March)
    Pages: 297-315

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    Handle: RePEc:inm:ormnsc:v:45:y:1999:i:3:p:297-315
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    1. de Groote, Xavier, 1994. "Flexibility and marketing/manufacturing coordination," International Journal of Production Economics, Elsevier, vol. 36(2), pages 153-167, September.
    2. Cusumano, Michael A. & Nobeoka, Kentaro, 1992. "Strategy, structure and performance in product development: Observations from the auto industry," Research Policy, Elsevier, vol. 21(3), pages 265-293, June.
    3. McNown, Robert F & Hunter, Kenneth R, 1980. "A Test for Autocorrelation in Models with Lagged Dependent Variables," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 313-317, May.
    4. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    5. Sanderson, Susan & Uzumeri, Mustafa, 1995. "Managing product families: The case of the Sony Walkman," Research Policy, Elsevier, vol. 24(5), pages 761-782, September.
    6. Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
    7. Karl Ulrich & David Sartorius & Scott Pearson & Mark Jakiela, 1993. "Including the Value of Time in Design-for-Manufacturing Decision Making," Management Science, INFORMS, vol. 39(4), pages 429-447, April.
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