Thursday, December 20, 2012

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

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Management Science 59, 10 (2013) 2217-2236

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.