The Hidden Cost of Worker Turnover: Attributing Product Reliability to the Turnover of Factory Workers

Abstract

Product reliability is a key concern for manufacturers. We examine worker turnover as a significant but under-recognized determinant of product reliability. Our study collects and integrates (1) data reporting factory worker staffing and turnover from within a major consumer electronics producer's supply chain and (2) traceable data reporting the component quality and field failures---i.e., replacements and repairs---of nearly 50M consumer mobile devices over four years of customer usage. Devices are individually traced back to the factory conditions and staffing, down to the assembly line-week, under which they were produced. Despite the manufacturer's extensive quality-control efforts including stringent testing, each percentage-point increase in the weekly rate of workers quitting from an assembly line (its weekly worker turnover) is found to increase field failures by 0.74-0.79%. In the high-turnover weeks following paydays, eventual field failures are strikingly 10.2% more common than for devices produced during the lowest-turnover weeks immediately before paydays. In other weeks, the assembly lines experiencing higher turnover produce an estimated 2-3% more field failures on average. The associated costs amount to hundreds of millions USD. We demonstrate that staffing and retaining a stable factory workforce critically underlies product reliability and showcase the value of traceability coupled with connected workplace and product data in supply chain operations.

Keywords: Data-driven workforce planning, Empirical operations management, Employee turnover, People operations, Product quality, Productivity, Quality management, Supply chain management

JEL Classification: D22, J63, M11, M12