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

  • 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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    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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    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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    1. Li-Hui Tsai, 1995. "Mixed-Model Sequencing to Minimize Utility Work and the Risk of Conveyor Stoppage," Management Science, INFORMS, vol. 41(3), pages 485-495, March.
    2. John Miltenburg, 1989. "Level Schedules for Mixed-Model Assembly Lines in Just-In-Time Production Systems," Management Science, INFORMS, vol. 35(2), pages 192-207, February.
    3. Kelvin Lancaster, 1990. "The Economics of Product Variety: A Survey," Marketing Science, INFORMS, vol. 9(3), pages 189-206.
    4. Sunder Kekre & Kannan Srinivasan, 1990. "Broader Product Line: A Necessity to Achieve Success?," Management Science, INFORMS, vol. 36(10), pages 1216-1232, October.
    5. Nick T. Thomopoulos, 1967. "Line Balancing-Sequencing for Mixed-Model Assembly," Management Science, INFORMS, vol. 14(2), pages B59-B75, October.
    6. Foster, George & Gupta, Mahendra, 1990. "Manufacturing overhead cost driver analysis," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 309-337, January.
    7. John Paul MacDuffie & Kannan Sethuraman & Marshall L. Fisher, 1996. "Product Variety and Manufacturing Performance: Evidence from the International Automotive Assembly Plant Study," Management Science, INFORMS, vol. 42(3), pages 350-369, March.
    8. Candace Arai Yano & Ram Rachamadugu, 1991. "Sequencing to Minimize Work Overload in Assembly Lines with Product Options," Management Science, INFORMS, vol. 37(5), pages 572-586, May.
    9. Banker, Rajiv D. & Potter, Gordon & Schroeder, Roger G., 1995. "An empirical analysis of manufacturing overhead cost drivers," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 115-137, February.
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