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The Impact of New Product Introduction on Plant Productivity in the North American Automotive Industry

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  • Anandasivam Gopal

    () (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

  • Manu Goyal

    () (David Eccles School of Business, University of Utah, Salt Lake City, Utah 84112)

  • Serguei Netessine

    () (INSEAD, 77305 Fontainebleau, France)

  • Matthew Reindorp

    () (School of Industrial Engineering, Eindhoven University of Technology, 5600 MB Eindhoven, The Netherlands)

Abstract

Product launch---an event when a new product debuts for production in a plant---is an important phase in product development. But launches disrupt manufacturing operations, resulting in productivity losses. Using data from North American automotive plants from years 1999--2007, we estimate that a product launch entails an average productivity loss of 12%--15% at the plant level. This translates to a monetary loss of $42--$53 million per launch in lost productivity. We identify several ways to mitigate the decrease in productivity. Product (or mix ) flexibility in the body shop is critical for reducing the productivity loss. A plant's past experiences with product launches as well as with manufacturing similar products (specifically, on the same platform as the launch product) temper the productivity losses even further. Nevertheless, there are subtle differences in the accrued learning with these two types of experiences: whereas the positive impact of platform experience persists over time, the learning accrued with launching other products in the same plant decays more quickly. Altogether, our results suggest that launching products at a flexible plant with appropriate platform experience could recover approximately $31 million per launch in lost productivity. This paper was accepted by Kamalini Ramdas, entepreneurship and innovation.

Suggested Citation

  • Anandasivam Gopal & Manu Goyal & Serguei Netessine & Matthew Reindorp, 2013. "The Impact of New Product Introduction on Plant Productivity in the North American Automotive Industry," Management Science, INFORMS, vol. 59(10), pages 2217-2236, October.
  • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:10:p:2217-2236
    DOI: 10.1287/mnsc.2013.1709
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    File URL: http://dx.doi.org/10.1287/mnsc.2013.1709
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    References listed on IDEAS

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    Cited by:

    1. Chuang, Chia-Hung & Zhao, Yabing, 2019. "Demand stimulation in finished-goods inventory management: Empirical evidence from General Motors dealerships," International Journal of Production Economics, Elsevier, vol. 208(C), pages 208-220.
    2. Kevin B. Hendricks & Manpreet Hora & Vinod R. Singhal, 2015. "An Empirical Investigation on the Appointments of Supply Chain and Operations Management Executives," Management Science, INFORMS, vol. 61(7), pages 1562-1583, July.
    3. John V. Gray & Enno Siemsen & Gurneeta Vasudeva, 2015. "Colocation Still Matters: Conformance Quality and the Interdependence of R&D and Manufacturing in the Pharmaceutical Industry," Management Science, INFORMS, vol. 61(11), pages 2760-2781, November.
    4. Antonio Moreno & Christian Terwiesch, 2015. "Pricing and Production Flexibility: An Empirical Analysis of the U.S. Automotive Industry," Manufacturing & Service Operations Management, INFORMS, vol. 17(4), pages 428-444, October.
    5. Abolhassani, Amir & James Harner, E. & Jaridi, Majid, 2019. "Empirical analysis of productivity enhancement strategies in the North American automotive industry," International Journal of Production Economics, Elsevier, vol. 208(C), pages 140-159.
    6. Ding, Li & Lam, Hugo K.S. & Cheng, T.C.E. & Zhou, Honggeng, 2018. "A review of short-term event studies in operations and supply chain management," International Journal of Production Economics, Elsevier, vol. 200(C), pages 329-342.
    7. Carolyn D. Egelman & Dennis Epple & Linda Argote & Erica R. H. Fuchs, 2017. "Learning by Doing in Multiproduct Manufacturing: Variety, Customizations, and Overlapping Product Generations," Management Science, INFORMS, vol. 63(2), pages 405-423, February.
    8. Sharon Belenzon & Victor Manuel Bennett & Andrea Patacconi, 2019. "Flexible Production and Entry: Institutional, Technological, and Organizational Determinants," NBER Working Papers 25659, National Bureau of Economic Research, Inc.
    9. Robert L. Bray & Haim Mendelson, 2015. "Production Smoothing and the Bullwhip Effect," Manufacturing & Service Operations Management, INFORMS, vol. 17(2), pages 208-220, May.
    10. Wochner, Sina & Grunow, Martin & Staeblein, Thomas & Stolletz, Raik, 2016. "Planning for ramp-ups and new product introductions in the automotive industry: Extending sales and operations planning," International Journal of Production Economics, Elsevier, vol. 182(C), pages 372-383.
    11. Onur Boyabatlı & Tiecheng Leng & L. Beril Toktay, 2016. "The Impact of Budget Constraints on Flexible vs. Dedicated Technology Choice," Management Science, INFORMS, vol. 62(1), pages 225-244, January.
    12. Cristian BUSU & Mihail BUSU, 2017. "How Does Renewable Energy Impact Carbon Emissions? An Eu Level Analysis," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 11(1), pages 502-510, November.
    13. Markus Plewa, 2017. "Long-Run Dynamics Between Product Life Cycle Length And Innovation Performance In Manufacturing," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 1-20, January.

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