Question

Over the last few years, Japanese automakers have built a significant number of assembly plants in North America. Most of these plants produce 2 or 3 models of cars as opposed to a single model or many different models.

1. Explain briefly operational consequences of making a single product versus a large variety of products within a facility
2. Give arguments that would support the “intermediate variety” strategy when a firm has a network of many plants. Use the flexibility example from class.

Answer 1

Solution:

a)

From the bird's eye view, Supply Chain Network for Japanese Automakers seems to be responsive type than efficient. They have set up multiple facilities near customer markets to become more responsive. So, certainly when the strategic goal is.being responsive then it is always preferred to produce variety of of products than single product production.

It has some operational consequences as follows

1. It gives flexibility in production

2. It helps to minimize dedicated factory for each type of product hence saves on capital cost

3. It helps to operate plant even though few products face loss and others are growing in sales

4. Multiskilled operators can manage variety of products and hence labor productivity can be higher

5. Common resources like people, equipment and materials can be used at highest possible utilization

6. Because of more variety, more set-up losses and challenge to meet customer demand in time

Overall, it is preferred, in Industry like Automobiles, to have responsive Supply chain with flexible production facilities rather than efficient plant which produces only one type of product.

b)

There are some order winners and some order qualifier parameter in any business. In Auto industry, variants are neither very large more very few. It has moderate variety. When firm have network of plants then it is preferred to have medium variety- medium volume fit for the factory. It can give trade off between flexibility and response time in the specific market. In Auto industry, vehicle models are equally important as delivery lead time ( response time) for all models in the same market. Hence,.having medium variety production strategy can help to achieve business goals in Auto industry.