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

Posted: 31 Jan 2011 Last revised: 20 Dec 2012

See all articles by Anand Gopal

Anand Gopal

University of California, Berkeley

Manu Goyal

Tata Motors Ltd.

Serguei Netessine

The Wharton School, University of Pennsylvania

Matthew Reindorp

Drexel University - Department of Decision Sciences

Date Written: September 4, 2012

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.

Suggested Citation

Gopal, Anand and Goyal, Manu and Netessine, Serguei and Reindorp, Matthew, The Impact of New Product Introduction on Plant Productivity in the North American Automotive Industry (September 4, 2012). INSEAD Working Paper No. 2012/80/TOM. Available at SSRN: https://ssrn.com/abstract=1750123 or http://dx.doi.org/10.2139/ssrn.1750123

Anand Gopal

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Manu Goyal

Tata Motors Ltd. ( email )

India

Serguei Netessine (Contact Author)

The Wharton School, University of Pennsylvania ( email )

3730 Walnut Street
Philadelphia, PA 19104-6367
United States
(215) 573 3571 (Phone)

HOME PAGE: http://www.netessine.com

Matthew Reindorp

Drexel University - Department of Decision Sciences ( email )

United States

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