Download this Paper Open PDF in Browser

Severe Weather and Automobile Assembly Productivity

31 Pages Posted: 4 Jul 2012 Last revised: 22 Dec 2012

Gerard P Cachon

The Wharton School - Operations, Information and Decisions Department

Santiago Gallino

Dartmouth College - Tuck School of Business

Marcelo Olivares

Columbia University - Columbia Business School - Decision Risk and Operations; University of Chile - Engineering Department

Date Written: December 14, 2012

Abstract

It is apparent that severe weather should hamper the productivity of work that occurs outside. But what is the effect of extreme rain, snow, heat and wind on work that occurs indoors, such as the production of automobiles? Using weekly production data from 64 automobile plants in the United States over a ten-year period, we find that adverse weather conditions lead to a significant reduction in production. For example, a week with six or more days of heat exceeding 90F reduces production in that week by 8% on average. The location impacted the least by weather (Princeton, IN) loses on average 0.5% of its production due to severe weather and the location with the most adverse weather (Montgomery, AL) suffers a production loss of 3.0%. Across our sample of plants, severe weather reduces production on average by 1.5%. While it is possible that plants are able to recover these losses at some later date, we do not find evidence that recovery occurs in the week after the event. Furthermore, even if recovery does occur at some point, at the very least, these shocks are costly as they increase the volatility of production. Our findings are useful both for assessing the potential productivity shock associated with inclement weather as well as guiding managers on where to locate a new production facility - in addition to the traditional factors considered in plant location (e.g., labor costs, local regulations, proximity to customers, access to suppliers), we add the prevalence of bad weather. These results can be expected to become more relevant as climate change may increase the severity and frequency of severe weather.

Keywords: operations management, productivity, econometrics, automobile industry, weather, climate change

Suggested Citation

Cachon, Gerard P and Gallino, Santiago and Olivares, Marcelo, Severe Weather and Automobile Assembly Productivity (December 14, 2012). Columbia Business School Research Paper No. 12/37. Available at SSRN: https://ssrn.com/abstract=2099798 or http://dx.doi.org/10.2139/ssrn.2099798

Gerard P Cachon

The Wharton School - Operations, Information and Decisions Department ( email )

Philadelphia, PA 19104
United States

Santiago Gallino

Dartmouth College - Tuck School of Business ( email )

100 Tuck Dr
Hanover, NH 03755
United States

Marcelo Olivares (Contact Author)

Columbia University - Columbia Business School - Decision Risk and Operations ( email )

3022 Broadway
Uris Hall, #417
New York, NY 10027
United States

HOME PAGE: http://www.columbia.edu/~mo2338/index.htm

University of Chile - Engineering Department ( email )

Republica 701 Santiago
Chile

Paper statistics

Downloads
287
Rank
88,837
Abstract Views
1,820