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Plant Operations and Product Recalls in the Automotive Industry: An Empirical Investigation

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Abstract

While there is overwhelming support for the negative consequences of product recalls, empirical evidence of operational drivers of recalls is almost nonexistent. In this study, we identify product variety (measured as the number of factory installed options), plant variety (measured as the number of models per assembly line in a plant), and capacity utilization as drivers of subsequent manufacturing-related recalls. We examine their individual and joint effects using a unique data set compiled for a seven-year period by linking assembly line production data for North American automotive manufacturers with recall data from the National Highway Traffic and Safety Administration. We show that manufacturing-related recalls are positively associated with product variety and plant utilization, but not with plant variety. We also find that the joint effect of plant variety and utilization is positively associated with increased recalls. In quantitative terms, a one-standard-deviation increase in the number of options (four additional options) is associated with two additional recalls and costs $46.2 million to automakers over the sample duration. We observe similar results with plant utilization, and find that a car built in a plant that is being utilized above 100% capacity is associated with more than eight additional recalls corresponding to an incremental cost of $167 million. This paper was accepted by Yossi Aviv, operations management.

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... The main motivation behind product proliferation lies in its positive impact on market share and sales (Kekre and Srinivasan, 1990;Moreno and Terwiesch, 2016;Wan and Sanders, 2017). However, product proliferation is also associated with higher production and operation costs due to loss of economies of scale that results in higher inventory costs (Bayus and Putsis, 1999;Moreno and Terwiesch, 2016), lower productivity due to setup times (MacDuffie et al., 1996), and higher defect rate (Fisher and Ittner, 1999;Shah et al., 2017). In fact, many companies have realized the negative impacts of product proliferation and have reacted to it accordingly. ...
... For example, Procter & Gamble used to produce Phebo soap bars in its Brazilian plant in common and repeating cycles, using the same production line. Auto manufacturers often produce different models on a single assembly line (Shah et al., 2017). Winands et al. (2011) mention several real-world applications of the ELSP in laminate, glass container, and car bumper industries, among others. ...
... One common metric is capacity utilization. Due to high fixed costs in many production plants, "managers are incentivized to operate production plants at high utilization rates" (Shah et al., 2017). Thus they are inclined to proliferate the product offer as long as they have excess capacity (utilization <1) (Mariotti, 2007). ...
Article
Managers are often inclined to maximize the utilization of production plants to compensate for the high fixed costs. Therefore, when marketing conditions justify higher variety and manufacturers have excess capacity, they tend to introduce new variants. By studying product proliferation in the context of the economic lot sizing problem, we show that the mindset of adding new products as long as the utilization is “low” can cause unbearable cash flow issues and profit losses. Instead of capacity utilization, we propose manufacturers to pay attention to the idle fraction of non-productive time (IFNPT); when IFNPT drops to zero (i.e., absence of idleness), managers should first increase capacity and then consider introducing new products. Since managers cannot observe the net profit contribution of a product, IFNPT constitutes a pragmatic indicator for deciding when to stop product proliferation. We also show that firms can afford a larger product portfolio with lower setup times and higher sale heterogeneity across the products. We gain additional insights by proving useful properties of the profit function that allow the study of product portfolio growth through time. We provide analytical justifications to support our main insights.
... The quality of goods and services, or product quality in general, is an important research topic in Operations Management (OM). OM researchers have investigated various factors related to internal operations (e.g., plant utilization) and supply chain management (e.g., buyer-supplier proximity) that explain the variation in product quality across firms (Steven et al., 2014;Bray et al., 2019;Gray et al., 2011;Shah et al., 2017). However, the extant OM literature has largely F o r R e v i e w O n l y 2 overlooked the possible product quality impact of competition from companies located in other countries (i.e., foreign competition). ...
... OM researchers have also examined various factors that explain the variation in product quality across firms (e.g., Pil and Rothenberg, 2003;Gray et al., 2011;Bray et al., 2019;Steven et al., 2014;Steven and Britto, 2016;Shah et al., 2017;Phillips and Sertsios, 2013). Earlier studies on the antecedents of product quality focus on firm-level characteristics, such as firms' financial conditions (Phillips and Sertsios, 2013), environmental performance (Pil and Rothenberg, 2003), and plant-level variety and utilization (Shah et al., 2017). ...
... OM researchers have also examined various factors that explain the variation in product quality across firms (e.g., Pil and Rothenberg, 2003;Gray et al., 2011;Bray et al., 2019;Steven et al., 2014;Steven and Britto, 2016;Shah et al., 2017;Phillips and Sertsios, 2013). Earlier studies on the antecedents of product quality focus on firm-level characteristics, such as firms' financial conditions (Phillips and Sertsios, 2013), environmental performance (Pil and Rothenberg, 2003), and plant-level variety and utilization (Shah et al., 2017). For instance, Pil and Rothenberg (2003) show how firms' efforts to enhance environmental performance can drive superior product quality, while Shah et al. (2017) identify several plant-level operational characteristics (e.g., plant variety and utilization) as the causes of product quality issues. ...
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Researchers have investigated various factors that explain the variation in product quality across firms, but little is known about how competition from companies located in other countries may affect domestic firms’ product quality. Although such foreign competition has received much attention from news media and the public, especially during the recent US-China trade war, its impact on product quality is still unclear. Our research answers this important question by conducting a quasi-natural experiment in the US, in which significant reductions in import tariff rates represent an exogenous increase in foreign competition for US firms. Performing a difference-in-differences estimation of the difference in product quality changes between treatment and control firms, our research shows that increased foreign competition has a negative impact on the product quality of the US firms concerned. However, such a negative impact is less significant for firms with high levels of operational slack and R&D intensity. Firms pursuing product differentiation rather than cost leadership strategies are also less affected by foreign competition. Overall, our research demonstrates foreign competition’s negative impact on product quality and highlights the crucial role that firms’ operational resources and strategies play in mitigating the negative impact.
... The preponderance of recall studies explores either the causes of recalls (Ball et al. 2018a;Bray et al. 2019;Haunschild and Rhee 2004;Shah et al. 2017;Steven and Britto 2016;Thirumalai and Sinha 2011;Wowak et al. 2021) or their consequences (Archer and Wesolowsky 1996;Mukherjee et al. 2021;Thirumalai and Sinha 2011). Few examine the recall decision, as we do herein. ...
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Problem Definition. There is a concerted effort across multiple academic disciplines to understand the recall decision-making process. Specifically, what steps does a manufacturer take following a product defect discovery and resulting in the product recall decision? This effort has often been limited to case studies within a particular manufacturer largely due to the absence of consistent and comparable data across firms. Methodology/Results. This data paper provides a foundation for future research on recall decisions by processing and coding textual disclosures on 2,120 recalls initiated in the United States by 27 automobile manufacturers from 2009-2018. For each recall, the data set provides the time the firm took to make the recall decision by comparing the defect awareness date to the recall decision date, whether the recall is associated with a supplier, the number of events in the recall decision-making process, and the date and description of each event. Managerial Implications. Not only can this data enhance product recall research by providing key recall decision-making variables unavailable in related research, an additional indication of the value of our data set also comes from National Highway Traffic Safety Administration (NHTSA), the automobile regulator in the United States. We held discussions with a senior leader at the NHTSA’s Recall Management Division related to this data set. This discussion revealed that the NHTSA does not have these data in an analyzable form and that they would be interested in using our data set for its reports, such as the NHTSA’s biennial reports to the U.S. Congress. This signal suggests that regulators, as well as researchers, practitioners, and other safety advocates may find our data set useful.
... While research on product-harm crisis and product recalls has increased, majority of the scholarship has focused on empirically examining the negative consequences of recalls, such as effect of recalls on stock price, consumer reactions, and product sales (Davidson and Worrel, 1992;Liu and Shankar, 2015;Rhee and Hanuschild, 2006;Rubel et al. 2011;Thirumalai and Sinha, 2011;Zhao et al., 2011). A few articles have also examined the antecedents of recalls, such as top management characteristics, governance, and plant operational parameters (Kashmiri and Brower, 2016;Shah et al., 2016). While these studies have greatly advanced our understanding of the causes and consequences of product recalls, prior research has not adequately examined product recall processes, i.e., actual recall behavior of a company during a recall crisis (Eilert et al., 2017;Ni and Huang, 2017). ...
Article
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Purpose This study aims to investigate the effects of firm characteristics and crisis characteristics on remedies offered to consumers by firms in the event of a product recall crisis. Design/methodology/approach Published data on 868 product recalls in the US toy industry from 1988 to 2011 have been used to investigate the effects of firm experience in product recalls, type of firm (company versus intermediary) and product recall severity in predicting remedies offered to consumers in the event of a product recall. Findings The findings show that firm recall experience, firm type and recall severity are negatively associated with recall remedies offered. Specifically, firms offer lower remedies if they have higher recall experience, if they are upstream firms in the supply chain (farther from consumers) and if the recall is more severe. Research limitations/implications This study focuses on the toy industry and does not consider product complexity, firm reputation and the role of external regulatory agencies in the prediction of remedies offered by firms. Future research may extend this study to include the above factors. Practical implications Offering a high remedy to consumers of a recalled product may be a responsible decision by a firm, but it may also attract shareholder wrath. The study has implications for managing multiple goals in product recall crisis management. Originality/value Studies focused on issues of interest to consumers during a recall crisis, such as swift recalls and appropriate remedies, are limited. This study contributes to the understanding of the antecedents of recall remedies.
... This study can be interpreted as the overall effect of mine type, geographic location, mine size, and coal seam thickness on RCMD and RCS concentration, which has significant relation with lung diseases among coal miners. GEE is widely used for panel estimation (Pang 2017;Shah et al. 2017;Shekarian and Mellat Parast, 2020). The GEE is used to investigate the variation in RCMD and RCS concentrations per mine-year across 30-years unbalanced panel data. ...
Thesis
Dust is an inherent byproduct of mining activities that raises notable health and safety concerns. Cumulative inhalation of respirable coal mine dust (RCMD) and respirable crystalline silica (RCS) can lead to destructive lung diseases. There have been tremendous efforts to reduce dust exposures by decreasing the permissible exposure limits (PEL) and improving monitoring techniques. During the last decades, respirable dust concentrations in surface and underground mines have been significantly reduced. However, the rate of mine workers with respiratory diseases is still high. The root causes of the high prevalence of respiratory diseases are unknown. This study aimed to investigate contributing factors in RCMD and RCS dust concentrations in both surface and underground mines. To this end, the literature on sampling approach and instrument development were reviewed to discover any gaps in current dust exposure monitoring. The respirable dust sample data sets including RCMD and RCS, accident/injury/illnesses, and employment/production were used from MSHA’s Laboratory Information Management System database between 1989 and 2018. There has been no comprehensive research on the MSHA datasets to track any trivial changes in dust properties, sampling approach, monitoring techniques, and any factor that potentially contribute to the level of dust exposure. In this study, the data management approach was performed on available data sets using SQL data management. This process included clean the datasets, merge by mines I.D., define categories of interests, and provide a summary report to use in statistical analysis. Finally, the Generalized Estimating Equation (GEE) model was used to conduct a statistical analysis of the total number of 12,537 and 9,050 observations for respirable dust concentration in the U.S. underground and surface mines, respectively. Several variables were defined in four categories including mine type, geographic location, mine size, and coal seam height. Hypotheses were developed for each category based on the research model and were tested using a multiple linear regression analysis. The results of the analysis indicate higher RCMD concentrations in underground coal mines. The RCS concentrations were found to be relatively higher in surface coal mines. Based on the geographical location, RCMD concentrations were higher in underground Interior mines while RCS concentration is higher in the Appalachia region both in underground and surface mines. Moreover, small size mines show lower RCMD concentrations both in underground and surface operations. However, RCS concentrations were considerably higher in small surface and underground mines. Finally, thin-seam coal mines have greater RCMD and RCS concentrations compared to thicker seam mines in both underground and surface mines. In the end, it was demonstrated that the RCMD and RCS concentrations in both surface and underground mines have been decreased. Therefore, further research is needed to investigate the efficacy of the current mass-concentration-based monitoring system.
... In this study, it can be interpreted as the overall effect of mining type, mine size, geographic location, coal rank, and coal seam thickness on CWP disease among coal miners in the United States coal mines during 1986-2018. GEE is widely used for panel estimation (Pang, 2017;Shah et al., 2017). GEE is used to investigate the variation in the CWP disease rate per mine-year across 33-year unbalanced panel data. ...
Thesis
Surface and underground coal miners are exposed to different health and safety hazards. Among these hazards, cumulative inhalation of respirable coal mine dust (RCMD) can lead to severe lung diseases, including coal worker's pneumoconiosis (CWP), silicosis, mixed dust pneumoconiosis, dust-related diffuse fibrosis (DDF), and progressive massive fibrosis (PMF). In the United States, an unexpected and severe increase in coal miners’ lung diseases in the late 1990s prompted researchers to investigate the causes of the disease resurgence. To date, there is no comprehensive systematic study to assess all contributing factors to the resurgence of CWP cases. This study aims to investigate the effects of various mining parameters, including coal rank, mine size, mining method, coal seam height, and geographical location on the prevalence of CWP in surface and underground mines. A systematic review using the preferred reporting items for systematic reviews and meta-analysis (PRISMA) method was conducted to investigate the health effects of RCMD exposure and identify those factors that may contribute to the recent resurgence of CWP cases. The systematic review provided a total number of 401 papers, which were added to the database. The total number of 148 and 208 papers was excluded from the database in the process of screening and eligibility, respectively. Then, 18 papers were considered for data selection and full-text assessment. A comprehensive dataset was created using the Mine Safety and Health Administration (MSHA) Employment and Accident/Injury databases. The incidences were categorized based on hours worked, production, mine employee, coal rank, geographic location, coal seam thickness, mining experience of workers, age, gender, underground methods, underground location, and the number of occupational CWP in each mine I.D. The information from different sources was then merged based on the mine ID by utilizing SQL data management software. A total number of 123,643 mine-year observations were included in the statistical analysis. Generalized Estimating Equation (GEE) model was used to conduct a statistical analysis on a total of 29,707, and 32,643 mine-year observations for underground coal mines and surface coal mines, respectively. The results of the econometrics approach reveal that coal workers in underground coal mines are at a greater risk of CWP comparing to surface. Moreover, underground coal mines in the Appalachia and Interior regions are at a higher risk of CWP prevalence than the Western region. Surface coal mines in the Appalachia region are more susceptible to CWP than miners in the Western region. It is also indicated that coal workers working in smaller mines are more susceptible to CWP than large mine size. Furthermore, underground coal workers in the thin-seams are at greater risk of CWP than thick-seams. Keywords: Respirable Coal Mine Dust; Systematic Review; Respiratory Diseases; Coal Worker's Pneumoconiosis (CWP); Occupational Exposure; Statistical Analysis
... Additionally, product age (i.e. PRODUCT_AGE) was also controlled by using the difference between the "end date" of manufacturing and the "beginning date" of manufacturing (Shah et al., 2016). All control variables were centered. ...
Product recalls have the potential to damage firm and consumer quality reputation. While globalization has brought about various economic benefits, expanding supply chain networks have also made it more difficult for downstream organizations to manage product recall strategy. This study aims to examine the role of culture on a manufacturer's initiation of a recall and the severity of the remedy chosen for the product recall. Utilizing the culture-specific argument, this study uses an exploratory approach to assess how cultural variables impact recall strategy utilizing a large-scale data analysis with a cross-sectional time-series panel of 898 firms. The results provide support for the expected utility hypothesis that the more severe the consequence, the more likely a manufacturer will decide to recall the product. Moreover, the more likely the manufacturer will provide greater returns to the consumer. However, these relationships are impacted to differing degrees by the manufacturer's cultural origin. Originality/value These results provide evidence to researchers about how culture impacts the expected utility hypothesis in the decision theory. The study examines how deeply embedded cultural variables impact the relationship between the foreseeable consequence of the product recall and the recall facilitator and remedy.
... GEE model: We used negative binomial regression with fixed-effect estimators for our main analyses. However, GEE models have also been used to evaluate negative binomially distributed count data, such as ours (Hofer et al. 2012, Shah et al. 2016. They are attractive because they can accommodate serial correlation, allow for robust standard errors, and address potential unobserved cross-sectional heterogeneity concerns, a source of latent heterogeneity (Greene 2012, Wowak et al. 2015. ...
Article
Spill and pollution (SP) accidents cause significant damage to the natural environment. They also result in financial costs and reputational losses for the offending firm. As such, understanding how firms respond to such crises is of significant interest to firm stakeholders, such as investors, customers, regulators, NGOs, employees, and local communities. In this study, we examine whether publicly disclosed SP accidents cause firms to alter their approach to environmental management, as expressed by the adoption of environmental management practices (EMPs). Using a unique panel data from 2002 to 2013, representing over 400 publicly‐traded US manufacturing firms, we find that in the absence of a SP accident, firms adopt more EMPs each year. However, when firms experience a SP accident they respond in surprising ways: while sustainability leading firms do not alter their existing approach to EMP adoption, regardless of the severity of the accident, all other firms do. Firms which are not sustainability leaders escalate the number of EMPs they adopt after low severity accidents and de‐escalate the number of EMPs they adopt after high severity accidents. We also find that de‐escalation can last for up to three years and firms do not seem to recover from de‐escalation in future years. Finally, incurring more accidents or more severe accidents leads to greater de‐escalation. Given that the number of EMPs firms adopt determines a firm’s environmental performance, de‐escalation can have significant negative consequences for both the natural environment and firms themselves.
... It would be equally interesting to investigate how experiencing various types of product defects and/or product recalls altering customers' quality perceptions over time and which factors could moderate these relationships (Archer and Wesolowsky, 1996;Dawar and Pillutla, 2000). Research directions in operations management could be to examine relationships between operational levers, such as product variety and capacity utilization, and average quality performance as measured through CEPQ (Shah et al., 2016) or how supply chain characteristics could impact average CEPQ. ...
Article
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Purpose Product quality is a central construct in several management domains. Theoretical conceptualizations of product quality unanimously stress its multidimensional nature. Yet, no generalizable, multidimensional product quality scale exists. This study develops and validates a multidimensional Customers’ experienced product quality (CEPQ) scale, across four diverse product categories. Design/methodology/approach Based on the exploratory studies, CEPQ is conceptualized as a second-order reflective-formative construct and validated in quantitative studies with survey data collected in the USA. Findings Results reveal that the CEPQ scale and its underlying quality dimensions possess sound psychometric properties. In addition, CEPQ has a substantial impact on customer behavior over and above customer satisfaction. The strength of this impact is positively moderated by expertise and quality consciousness. CEPQ predicts objective quality scores from consumer reports substantially better than the existing measures of product quality. Research limitations/implications The cross-sectional nature of the main study, as well as samples from only one country, restricts the generalizability of the findings. Practical implications Operations managers and marketers should start to measure CEPQ as an additional key metric. The formative weights of the first-order quality dimensions explain how customers define product quality in a specific product category. Originality/value A generalizable, multidimensional scale of product quality, CEPQ, is developed and validated. Materials as a new product quality dimension is identified. Once correctly measured, product quality ceases to be a mere input to satisfaction. Boundary conditions for CEPQ’s relevance were hypothesized and confirmed.
... Here, this can be interpreted as the overall effect of mining operation, mine size, geographic location, coal rank, and coal seam thickness on CWP disease among coal miners in the U. S. coal mines during 1986-2018. GEE has been widely used for panel estimation [26, 27,33]. This method provided the best t for our data. ...
Preprint
Full-text available
In the United States, an unexpected and severe increase in coal miners’ lung diseases in the late 1990s prompted researchers to investigate the causes of the disease resurgence. This study aims to scrutinize the effects of various mining parameters, including coal rank, mine size, mining method, coal seam height, and geographical location on the prevalence of CWP in surface and underground coal mines. A comprehensive dataset was created using the U.S. Mine Safety and Health Administration (MSHA) Employment and Accident/Injury databases. The information was merged based on the mine ID by utilizing SQL data management software. A total number of 123,643 mine-year observations were included in the statistical analysis. Generalized Estimating Equation (GEE) model was used to conduct a statistical analysis on a total of 29,707, and 32,643 mine-year observations for underground and surface coal mines, respectively. The results of the econometrics approach revealed that coal workers in underground coal mines are at a greater risk of CWP comparing to those of surface coal operations. Furthermore, underground coal mines in the Appalachia and Interior regions are at a higher risk of CWP prevalence than the Western region. Surface coal mines in the Appalachian coal region are more susceptible to CWP than miners in the Western region. The analysis also indicated that coal workers working in smaller mines are more vulnerable to CWP than those in large mine sizes. Furthermore, coal workers in thin-seam underground mine operations are more likely to develop CWP.
... This is one of the main lessons from our experiment as well. In a more recent study, Shah et al. (2017) present evidence that product variety per assembly facility contributes to an increased number of product recalls, which ultimately increases costs. Barnett and Freeman (2001) argue that, while some product proliferation can be beneficial, too much can be harmful. ...
Article
We study how increased complexity in terms of increased stock-keeping units and/or markets can affect operational performance, with an emphasis on managerial decision-making. Specifically, when given the option to increase profits by increasing the number of markets served, we ask whether managers can increase profits by exercising this option or does increased complexity become a burden? We conduct a human-subjects experiment in which subjects manage a simulated supply chain across different levels of complexity, either as individuals or as part of a team. Subjects receive initial training in supply chain management and participate twice in the simulation—once as an individual and once as a team, while also varying complexity across trials. We show that as complexity increases, revenues also increase. However, average performance often deteriorates and many subjects destroy value, despite the increased opportunities for profit. We argue that managers are tempted to chase new revenue sources without understanding the costs or risks to future profits. In a follow-up experiment, we show that when subjects are reminded about the importance of opportunity costs, revenue declines but earnings are the same or higher. Lastly, our experiments show that both teamwork and experience increase performance and reduce the variance of earnings. Experienced teams make better investment decisions. Less experienced individuals focus on revenue rather than earnings.
... In early work on the auto assembly operations, Fisher and Ittner (1999) find that greater product variety has a significant adverse impact on minor repair and major rework. More recently, Shah et al. (2017) study the impact of product variety, plant variety, and capacity utilization on product recalls in the auto industry. Neither study explores the impact of task-level worker specialization on product returns. ...
... Here, this can be interpreted as the overall effect of mining operation, mine size, geographic location, coal rank, and coal seam thickness on CWP disease among coal miners in the U. S. coal mines during 1986-2018. GEE has been widely used for panel estimation (Pang 2017;Shah et al. 2017;Shekarian et al. 2021b). This method provided the best fit for our data. ...
Article
Full-text available
In the United States, an unexpected and severe increase in coal miners’ lung diseases in the late 1990s prompted researchers to investigate the causes of the disease resurgence. This study aims to scrutinize the effects of various mining parameters, including coal rank, mine size, mine operation type, coal seam height, and geographical location on the prevalence of coal worker's pneumoconiosis (CWP) in surface and underground coal mines. A comprehensive dataset was created using the U.S. Mine Safety and Health Administration (MSHA) Employment and Accident/Injury databases. The information was merged based on the mine ID by utilizing SQL data management software. A total number of 123,589 mine-year observations were included in the statistical analysis. Generalized Estimating Equation (GEE) model was used to conduct a statistical analysis on a total of 29,707, and 32,643 mine-year observations for underground and surface coal mines, respectively. The results of the econometrics approach revealed that coal workers in underground coal mines are at a greater risk of CWP comparing to those of surface coal operations. Furthermore, underground coal mines in the Appalachia and Interior regions are at a higher risk of CWP prevalence than the Western region. Surface coal mines in the Appalachian coal region are more likely to CWP development than miners in the Western region. The analysis also indicated that coal workers working in smaller mines are more vulnerable to CWP than those in large mine sizes. Furthermore, coal workers in thin-seam underground mine operations are more likely to develop CWP.
... The results of the Hausman test are only suggestive. To be consistent, to accommodate the structure of the data, and to mitigate unobserved heterogeneity in the present model, fixed effects negative binomial models are shown first (Graham et al., 2012;Shah et al., 2017;Wadhwa et al., 2016). The results using random-effects models are also shown and they are consistent with those of a fixed-effects model in terms of significance and signs (cf. ...
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This article investigates the role of chief operating officers’ (COOs’) characteristics and their relation to the exploration modes of patenting and venturing. It relies on the upper echelons view to explain how COOs’ demographic and professional background features – represented by their career horizon, gender, and functional experience – may influence the path those COOs choose to conduct exploration. Based on a ten-year cross-industry panel of U.S. firms, the results provide support for the notion that distinct COO profiles relate to organizational exploration efforts. While COOs with long career horizons are associated negatively with patenting activity, they positively relate to corporate venturing activity. Female COOs are positively related to venturing, though no relation can be observed for patenting. COOs with backgrounds in development are positively associated with patenting activity and insignificantly related to venturing. This research adds to the debate on how functional top executives matter for firm exploration.
... The evidence also reflects the significant cost increase that accompanies product recalls. Recent empirical studies in the operations management literature discuss the operational drivers of product recalls, such as outsourcing (Steven et al. 2014) and product variety (Shah et al. 2016). In our study, we develop an analytical model that captures the impacts of potential product recalls and analyze the role of product distribution strategy both quantitatively and qualitatively. ...
Article
When product recalls happen, firms not only have to incur additional logistics costs but also suffer from a damaged reputation. Besides, they may also supply disruption risk, under which a supplier could fail to deliver the quantity ordered at all. In this paper, we discuss how to mitigate supply disruption and recall risks in the perspective of (outbound) product distribution strategy in joint with (inbound) sourcing decision. Specifically, we compare the dedicated and uniform distribution strategies as follows: in the dedicated strategy, the firm divides its market into several regions, and ships products from different suppliers based on the regions; whereas, in the uniform strategy, the firm serves the entire market by randomly shipping the products from several suppliers without distinguishing their sources. Through the comparison of both strategies, we show that the role of recall risk is different from that of supply disruption on the sourcing and distribution decision. In particular, single sourcing is optimal when both recall risk and disruption probability are low; dual sourcing with the dedicated strategy is optimal when the disruption probability is moderate and the recall risk is high; dual sourcing with the uniform strategy is optimal when the disruption probability is high. We also find that the positive correlation in recalls improves (undermines) the performance of the uniform (dedicated) strategy. In contrast, the positive correlation in supply disruptions only undermines the performance of the uniform strategy. This article is protected by copyright. All rights reserved.
... We test Hypotheses 1 to 3 using generalized estimation equations (GEE). This approach extends generalized linear models by applying quasi-likelihood estimation to panel data (Shah et al., 2017). It allows researchers to control for serial correlation within firms' manager appointments and can account for the distribution of our binary dependent variable (Ballinger, 2004;Liang and Zeger, 1986). ...
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Building on the concept of dynamic managerial capabilities, we set out to advance scholarly understanding of the antecedents of the presence of technology leadership in the form of the chief information officer (CIO) in the top management team. We derive a holistic framework from the literature of dynamic capabilities and introduce into that literature the concept of adaptation pressures. We suggest that external and internal dimensions that pertain to information technology, comprising an environmental, structural, and strategic dimension, intensify the pressure on a firm to adapt. The pressure to adapt increases the likelihood that the firm will add a CIO to its top management team. In turn, the presence of a CIO can direct a firm toward exploration as a way to relieve the adaptation pressure. Results from regression analyses of a longitudinal data set covering 503 large U.S. firms from 2006 to 2017 confirm our hypotheses. This study contributes to the literature of both information systems and strategy by clarifying the antecedents of technology leadership in the C-suite and explicating how environmental, structural, and strategic factors can act as such antecedents. Moreover, this study reinforces the notion that IT leadership can induce strategic change.
... The event study method is often used to study stock market changes during the crisis window, which is measured by the abnormal rate of return (hereinafter referred to as AR). During the crisis, AR is the difference between the expected rate of return and the actual rate of return, which reflects the positive or negative direction of the spillover effect (2)(3)(4). A positive AR shows that the event is satisfactory and the future rate of return of the firm is also positive. While a negative AR means that the event is not welcomed and the firm's earnings will be negatively affected in the future. ...
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Taking the perspective of corporate social responsibility and institutional theory, this research establishes an innovative relationship between variables such as charitable donation, political connection and crisis spillover effect of firms through quantitative analysis using the event study method, regression analysis and the Heckman two-stage model. Taking 8 food safety incidents from 2011 to 2016 as research samples, this paper studies the impact of food safety incidents on the market value of both firms under crisis and their competitive firms, as well as the influence of political connection and charitable donation. Based on the current situation that the product crisis or reputation crisis of a firm will, inevitably, affect the market performance and value of its competitive firms in the same industry, this paper attempts to answer questions such as “what kind of firms are capable of minimizing this negative influence?” “will the political connection of competitive firms exert a positive or negative impact?” and “can actions taken before the crisis, such as charitable donation of competitive firms, help these firms in reducing the harm?” The conclusions are as follows: first, the occurrence of food safety incidents not only has a negative impact on the market value of the crisis firm, but also has a negative spillover effect on the competitive firm; second, charitable donations made by the competitive firm before the crisis demonstrates a positive competitive effect on the competitive firm, and the intensity of such charitable donations is positively correlated with this positive competitive effect; third, the political connection of the competitive firm has no significant impact on the crisis spillover effect. These findings provide enlightenment for the operation and management of firms in the food industry.
... 반면, 본 연구는 글로벌 자동차 제조사들이 소비자들이 인식하기에 지 역 차등적 리콜로 보이는 행위에 이르게 되는 복잡한 맥락을 보다 정밀히 규명하고자 한 시도 이다. 그런 면에서, 리콜의 결정요인을 단일 지역 을 대상으로 제품 수준, 조직 수준, 경영자 수준에 서만 탐색한 연구와는 다른 관점을 제공한다(Dean, 2004;Hammond, 2013, Shah, Ball, & Netessine, 2017Steven, Dong, & Corsi, 2014;Wowak, Mannor, & Wowak, 2015). 또한, 리콜 행위를 제품 결함과 관련한 정보 공개 전략으로 만 개념화하거나, 조직 학습의 관점에서 위기나 조직 실패가 가시화된 결과로만 본 연구와도 다른 관점을 제공한다(Haunschild & Rhee, 2004). ...
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... According to previous studies, queueing theory has been studied from the following aspects: (1) solving problems related to statistical inference and establishing models based on data; (2) investigating the distribution of the probabilities of queueingrelated quantitative indices; and (3) studying topics regarding the optimisation of queueing systems (i.e., how to correctly design and effectively implement various service systems and to optimise their effectiveness). Relevant research results can be widely applied to various random service systems, such as telecommunications, traffic engineering, production, transportation, and inventory systems (Dowdy, Almeida, & Menasce, 2004) as well as service designs for factories, stores, offices, and hospitals (Chen & Chung, 1990;Kesavan, Staats, & Gilland, 2014;Mayhew & Smith, 2008;Shah, Ball, & Netessine, 2017;Song, Tucker, & Murrell, 2015;Tan & Netessine, 2014;Tarny & Chen, 1988;Whitt, 2006). Analysis of labor productivity or service time (service level) is a critical component of business operations. ...
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... The current study makes the following contributions. First, given that the number of PHCs is growing in recent years, it is important to understand their causes as well as their consequences (e.g., Jarrell and Peltzman 1985;Chen et al. 2009;Thirumalai and Sinha 2011;Shah et al. 2016). In this context, how firms react to PHCs is a critical issue (Haunschild and Rhee 2004). ...
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A product harm crisis (PHC) undermines a firm’s reputation as well as its managers’ career outlook. To shake off the stigmatization resulting from the PHC and regain a firm’s legitimacy among stakeholders, managers usually face an ethical dilemma as they choose to be transparent about the crisis’ financial implications or to obfuscate them to neutralize the negative impact of the PHC. We find evidence that managers engage in income-increasing earnings management when their firms experience PHCs. Moreover, while income-increasing earnings management in PHCs reduces the likelihood of customer loss and CEO forced turnover in the short run, such behavior can be deemed opportunistic and unethical as it carries long-run negative consequences in terms of a higher likelihood of accounting restatement and weaker future operating performance. Finally, managers in firms that are subject to stricter external monitoring and managers in firms with proactive ethical policies are less likely to engage in upward earnings management in PHCs.
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Purpose: The purpose of this paper is to examine the automotive product recall risk in terms of social sustainability performance and evaluate the role of buyer-supplier relationships in improving social sustainability during product recall crises. Design/methodology/approach: A multi-methodology approach is used to empirically analyse the interrelationship between the proposed constructs and enablers of the buyer-supplier relationship. Structural equation modelling and interpretive structural modelling are followed to analyse the data gathered thorough a questionnaire survey of 204 executives and interviews with 15 managers from the automotive industry. Findings: The results of the study provide evidence regarding the impact of the responsible buyer-supplier relationship on customer recall concerns and the social sustainability performance of supply chains. This study also leads to the development of a conceptual model providing a relationship between the three key concepts used in this study. Research implications: Following social sustainability principles, this study addresses the importance of developing strong, responsible, relational ties with suppliers to reduce vehicle recalls or successfully recover from a product recall crisis. Originality/value: This study contributes to the literature by providing theoretical and empirical insights for developing socially responsible supply chains and confirming the role of the buyer-supplier governance mechanism during product recalls in the context of the automotive industry.
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Problem definition : The influence of female directors on firm decision-making and performance is a frequently studied research topic but has received limited attention in operations management. We investigate if adding female directors to a firm’s board of directors changes whether and how quickly the firm recalls defective products. Academic/practical relevance : By demonstrating a relationship between an increase in female directors and more rule-conscious, customer-focused recall decisions, we highlight that adding female directors may enable more societally beneficial operational decisions. Methodology : We analyze 4,271 medical product recalls from 2002 to 2013 across 92 publicly traded firms regulated by the Food and Drug Administration using negative binomial and ordinary least squares fixed effect regression models. In robustness checks, we include an instrumental variable analysis, propensity score matching models, and reverse causality regression models. Results : As boards add female directors, recall decisions change. Firms initiate more medical product recalls that are low in severity and hence easier for firms to avoid initiating, highlighting the increased rule-following brought to bear by adding female directors. Firms also make faster recall decisions for the most serious defects that are high in severity and dangerous for customers, highlighting the increased stakeholder responsiveness resulting from adding female directors. Managerial implications : Firms may more closely align recall decisions with regulatory rules and become more sensitized to customer health and safety by adding female directors. Further, at least two female directors may be required to speed up recall decisions for the most serious, life-threatening defects.
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Purpose This paper aims to make a systematic study on the factors that hinder the development of China’s intelligent automobile manufacturing industry; based on comprehensive understanding of these obstacles and by optimization means, ultimately, the healthy and sustainable development of intelligent automobile manufacturing industry in China can be promoted. Design/methodology/approach Based on a questionnaire survey of intelligent automobile manufacturing listed companies in China, first, fuzzy semantic scale was adopted to collect respondents’ choices, the fuzzy score function is used to calculate the fuzzy score value and these data are used as the basis for subsequent model analysis. Then, structural equation modeling (SEM) was adopted to analyze the causal relationship between influencing factors to explore the main hinder factors. Findings It is found that, in the short term, the backwardness of technological industrialization is the main reason leading to low permeability of intelligent automobile; in the medium term, the imperfect industrial R&D ability and the insufficiency of infrastructure are major causes for high manufacturing cost and low competitiveness of intelligent automobile manufacturing industry; in the long term, the lack of national policy and industrial strategic planning is the main factors affect intelligent automobile manufacturing cost and the industry competitiveness. Practical implications The research conclusion has important policy implications for promoting intelligent automobile manufacturing sustainable development. In recent years, China’s intelligent automobile manufacturing industry has gradually stepped out of breeding period; therefore, the role of government should be gradually transformed from participants to managers and regulators. Considering the fact that intelligent automobile cost is very high, and still higher than the cost of fuel vehicle, government should focus on the issues such as improving R&D capabilities, infrastructure construction, policy framework system, legal system and technological industrialization. Specifically, in short-term planning, improving technological industrialization level is the key to development; in medium-term planning, policymakers should focus on the improvement of R&D capabilities and infrastructure; considering the long-term development, establishing appropriate national policies and dealing with the adverse impact of imperfect strategic planning are the most sensible choice. Originality/value This paper analyzes the factors that hinder the development of China’s intelligent automobile manufacturing industry for the first time, and provides the basic logic of integration factors at different levels with the development of intelligent automobile to reveal the uniqueness and facts of China’s economic development.
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The increase in the frequency and impact of automotive recalls has had broad reaching economic and social consequences. Recent examples of automotive recalls suggest that some are due to deliberate actions of firms to subvert processes designed to ensure quality. Such controls are dependent on partners acting in good faith in the relationship and abiding by relational norms and so do not recognize the risks of firms lying, falsifying data, or intentionally circumventing process‐based controls. Data on automotive recalls shows that recalls exhibit a statistically significant oscillatory pattern with an estimated period of around 3.6 years. We argue that the cyclical pattern in automotive recalls is due, in part, to opportunistic behavior within a network, which is likely to spread and be reciprocated. To test whether opportunism can lead to similar network effects, we develop an agent‐based simulation to model opportunism within a network of connected firms. The simulation is based on an extension of the prisoner's dilemma where the cooperate/defect decision is based on a dyadic relational model driven by trust, knowledge, and dependence levels within each relationship. The results from the simulation suggest that cyclical patterns, similar to those in automotive recalls, emerge as well as “behavioral clustering” within the network, where connected firms exhibit highly similar behaviors that tend to cycle within small clusters. Therefore, opportunistic behavior in supply networks might be an important, relational determinant of product recalls. Our dynamic modeling approach differs from current perspectives on understanding product recalls, contributing to the current literature.
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We first theoretically identify the factors that may impact individuals’ routing decisions before empirically examining a large operational dataset in a casual restaurant setting. Analytical models have identified various routing algorithms for service operations management. Although each model may offer advantages over others, they all make a key assumption ‐ decision makers will actually follow the algorithms, if implemented. However, in many settings routing is not done by a computer that is programmed, but instead by a human. People make routing decisions at their own discretion which may hurt or help system performance. We analyze granular transaction data to examine how hosts revise a given routing rule when seating customers. After that, we empirically analyze the effect of the dispersion of table assignments on restaurant performance, and estimate the counter‐factual sales impact of adopting an alternative routing priority. Our setting instructs its hosts to follow a round‐robin rule to assign tasks because it ensures fairness and smooths work flow. We find that hosts assign more incoming parties than the round‐robin rule suggests to those waiters who have low contemporaneous workload or high speed skills. The prioritization of high speed skill waiters increases with higher levels of demand. In addition, we show an inverted‐U‐shaped relationship between the inequality of table assignments (measured in terms of the Gini Coefficient of the numbers of tables assigned to each waiter during the same hour) and total sales. Our results suggest that properly adjusting the round‐robin rule is productive; however, too much deviation lowers performance. Our paper empirically highlights the value of routing decisions and front‐line personnel, such as the hosts in our context.
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Product-safety incidents and recalls such as automobile recalls by Toyota and a recall of sausages by Shuanghui have raised many quality management challenges and attracted increasing attention from practitioners and academics researchers in recent years. Traditional quality management and quality function development can no longer effectively address these problems, with competition moving from the firm level to the supply chain level. In this study, a holistic supply chain quality management framework on the relationship between supply chain quality system integration, supply chain relationship quality, and quality performance is proposed to improve quality management and mitigate the risk of product recalls. Then a structural equation model is used to analyze these relationships. To test this model empirically, we use survey data from manufacturers in consumer electronics, food, automobiles, pharmaceuticals, and toys in China. Our results show that supply chain quality management can help companies achieve high quality. Further, quality system integration and relationship quality have significant impacts on the quality of design and of conformance and are positively related to supply chain quality performance.
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Problem definition: Product recalls have serious consequences for firms and consumers. Little is known, however, about how firms manage the timing of recalls and how this timing influences the financial consequences of recalls. In this study, we provide evidence for a previously unknown phenomenon: recall clustering, a collection of recalls within close temporal proximity in which a leading recall (the first recall in a cluster) excites following recalls (subsequent recalls in a cluster). We also investigate how the stock market penalizes firms differently depending upon their position within the recall cluster. Academic/practical relevance: By demonstrating that auto firms cluster their recalls and that the market penalizes firms differently based on the position of a recall within a cluster, we contribute to the literature that investigates recall timing and stock market event studies and provide guidance for regulators who oversee auto recalls and managers who make recall decisions. Methodology: We first develop analytical predictions using a dynamic game theoretic model to motivate our hypotheses. We then examine empirical support for our hypotheses by analyzing 3,117 auto recalls across 48 years using a Hawkes process model. Hawkes process models are designed to examine self-excitation of events across time and can be used to investigate recall clustering, while categorizing recalls as leading or following within a cluster. Finally, we use the leading and following recall designations obtained from the Hawkes process model in an event study to examine how the stock market effects of a recall vary depending on its position within a cluster. Results: We find that 73% of recalls occur in clusters, and they form after a 16-day gap in recall announcements. On average, clusters last for 34 days and are comprised of 7.6 following recalls announced after the leading recall. Leading recalls are associated with as high as a 67% larger stock market penalty than following recalls. Further, we find that the stock market benefit realized by a following recall weakens as the time since the leading recall increases and that the stock market penalty faced by a leading recall grows as the time since the end of the last cluster increases. Managerial Implications: Our findings lead to a key implication for regulators who oversee auto recalls by demonstrating evidence of recall clustering and the underlying stock market effects that are attributable to it. We provide a cost-neutral policy recommendation for the National Highway Traffic and Safety Administration that should limit recall clustering.
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Automakers, including Toyota and General Motors, were recently caught by the U.S. regulator for deliberately hiding product defects in an attempt to avoid massive recalls. Interestingly, regulators in the United States and United Kingdom employ different policies in informing consumers about potential defects: the U.S. regulator publicly announces all ongoing investigations of potential defects to provide consumers with early information, whereas the UK regulator does not. To understand how these different announcement policies may affect cover-up decisions of automakers, we model the strategic interaction between a manufacturer and a regulator. We find that, under both countries’ policies, the manufacturer has an incentive to cover up a potential defect when there is a high chance that the defect indeed exists and it may inflict only moderate harm. However, if there is only a moderate chance that the defect exists, only under the U.S. policy does the manufacturer have an incentive to cover up a potential defect with significant harm. We show that the U.S. policy generates higher social welfare only for very serious issues for which both the expected harm and recall cost are very high and the defect is likely to exist. We make four policy recommendations that could help mitigate manufacturers’ cover-ups, including a hybrid policy in which the regulator conducts a confidential investigation of a potential defect only when it may inflict significant harm. This paper was accepted by Vishal Gaur, operations management.
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Product reliability is a key concern for manufacturers. We examine worker turnover as a significant but underrecognized 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—that is, replacements and repairs—of nearly 50 million 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 of U.S. dollars. 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. This paper was accepted by Charles Corbett, operations management.
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Research on product recalls has recently witnessed a sharp increase; however, this stream of research is dispersed within and outside the discipline of management. In the current article, we review this research stream by adopting a stakeholder-stage framework that draws on stakeholder theory and crisis management literature. Specifically, we summarize and integrate the product recall research along two dimensions: the stakeholders involved (e.g., managers, employees, shareholders, consumers, suppliers, competitors, media, and regulators) and the key issues at different stages of a recall (before-recall, during-recall, and after-recall). We find that current research has focused on managers, shareholders, and consumers, but has paid limited attention to other equally important stakeholders such as suppliers, employees, competitors, media, and regulators. Also, researchers have predominantly examined the issues associated with the after-recall stage to minimize the consequences of recalls, while the before- and during-recall stages that prevent recalls and make them more effective are relatively underexamined. To address these gaps and extend the current research, we develop a range of future research opportunities that can make nuanced theoretical contributions and generate implications for practice and policy. By emphasizing the need to adopt a stakeholder management approach and consider recalls as a process, rather than an event, this review paves the way for enriching future research on product recalls.
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Social media has become a vital platform for voicing product-related experiences that may not only reveal product defects, but also impose pressure on firms to act more promptly than before. This study scrutinizes the rarely studied relationship between these voices and the speed of product recalls in the context of the pharmaceutical industry in which social media pharmacovigilance is becoming increasingly important for the detection of drug safety signals. Using Federal Drug Administration drug enforcement reports and social media data crawled from online forums and Twitter, we investigate whether social media can accelerate the product recall process in the context of drug recalls. Results based on discrete-time survival analyses suggest that more adverse drug reaction discussions on social media lead to a higher hazard rate of the drug being recalled and, thus, a shorter time to recall. To better understand the underlying mechanism, we propose the information effect, which captures how extracting information from social media helps detect more signals and mine signals faster to accelerate product recalls, and the publicity effect, which captures how firms and government agencies are pressured by public concerns to initiate speedy recalls. Estimation results from two mechanism tests support the existence of these conceptualized channels underlying the acceleration hypothesis of social media. This study offers new insights for firms and policymakers concerning the power of social media and its influence on product recalls.
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This study centers on the roles of marketing and operations capabilities in preventing future recalls. Whereas prior literature identifies operations capability as critical for recall prevention, the current research highlights the equivalent importance of marketing capability. Furthermore, rather than limiting marketing’s role to damage control efforts after a recall, this study identifies its potential for preventing future recall incidents. With research conducted in the consumer packaged goods industry, the authors determine that firms that improve their marketing and operations capabilities after a recall lower their likelihood of future recalls. A proposed motivation‐based model for post‐recall marketing and operations capability improvement predicts that recalling public firms, by default, do not invest in capability improvements. The test of the propositions, with a sample of 276 product recalls using joint estimation, reveals that stock market penalties for recalls, combined with analyst following and independent boards, push recalling firms to make capability improvements. However, well‐reputed firms and those whose competitors recently engaged in recalls push back against investors’ demands.
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The time a firm takes to recall products that pose severe hazards has serious implications for the firm and its stakeholders. We examine the role of hazard severity and investigate how it influences the impact of recall experience, type of product defect, and product price on time to recall. Operationalizing time-to-recall as the number of days that elapsed from the time a product was first sold in the market to the date it was recalled, we test our hypotheses using data on 833 toy recalls issued by 445 firms in the U.S. during 1988–2018. We find that, under conditions of high hazard severity, time to recall is longer for (i) firms with past recall experience, (ii) recalls of products involving design defects, and (iii) recalls of high-priced products. We discuss the implications of our findings for research and practice.
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Despite the abundance of articles on product recalls, surprisingly there have been few empirical studies. This paper investigates empirically the linkage between product recalls and the four types of product variety seen on the assembly shops of Indian automobile firms. A negative binomial fixed effects model was fitted on the panel data comprising product recalls by 12 firms in India over a period of 23 years (1997–2020). The results indicate that different types of product variety impact the product recalls differently. While product variety due to limited/special edition cars and petrol cars was found not to have a significant impact on recalls, product variety due to diesel cars was found to have a significant and positive impact. Further, different fuel types were found to have a significant and negative impact on recalls. The findings serve as a useful reference to practicing managers for understanding the trade-off between product variety and recalls.
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Firms dread product recalls. Consequently, firm leaders may take steps to avoid recalls when possible, or to avoid the blame for them when there is someone else to blame. We analyze how the appointment of a new chief executive officer (CEO) for a firm in the consumer product industry influences the hazard of subsequent recalls initiated by that firm. Using 25 years of consumer product industry data, including 125 publicly traded firms that experienced 307 new CEOs and 584 voluntary recalls from 1992 to 2016, we find a unique recall pattern following new CEO appointments. The hazard of a recall is high immediately following a new CEO appointment, and then decreases significantly until the next CEO is appointed. We contend that the high hazard of a recall early in CEO tenure may be due to attribution of blame to the prior CEO. We find evidence to support this contention by showing that the increase in recalls is even higher when the prior CEO was forced out. We also propose that the low hazard of a recall later in CEO tenure may be explained by recalls that can be more easily hidden, allowing them to go unannounced. We find evidence supporting this contention by showing that the decrease in recalls late in a CEO’s tenure is stronger when recalls are more discretionary. We conclude with one firm governance recommendation and four regulatory policy recommendations for the Consumer Product Safety Commission.
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Operational risk has been among the three most significant types of risks in the financial services industry, and its management is mandated by Basel II regulations. To inform better labor decisions, this paper studies how workload affects banks’ operational risk event occurrence. To achieve this goal, we use a unique data set from a commercial bank in China that contains 1,441 operational risk events over 16 months. We find that workload has a U-shaped impact on operational risk error rate. More specifically, the error rate of operational risk events decreases first, as workload increases, and then increases. Furthermore, when workload is low, employees tend to make performance-seeking risks; however, when workload is high, employees tend to exhibit quality degradation due to cognitive multitasking. Based on the causal relationship between workload and operational risk events from the empirical analysis, we discuss staffing policies among branches aimed at reducing operational risk losses. We find that employing a flexible staffing rule can significantly reduce the number of operational risk events by 3.2%–10% under different scenarios. In addition, this significant performance improvement can be achieved by adding even a little bit of flexibility to the process by allowing employees to either switch their business lines in the same branch or switch branches within the same business lines on a quarterly basis. This paper was accepted by Vishal Gaur, operations management.
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Little is known about the underlying product recall process that food companies go through to identify and remove tainted products from the supply chain or why this process varies. To help fill this void in the literature and close the gap between what we know and what we need to know about product recalls, we use a grounded theory approach to develop mid‐range theorizing about food recalls. In doing so, our findings reveal that two manifestations of complexity—upstream and downstream—introduce recall uncertainty, which is the driving force behind why the recall process varies. Our study is also the first to propose that managers use recall options when trying to manage recall uncertainty. Furthermore, our study reveals that product recalls may not cleanly fall into recall categories as previously thought, but rather take the form of recall layering—that is, nested recalls or a recall within a larger recall. Overall, our mid‐range theorizing (a) offers key insights about why the recall process varies within a massive industry that affects every person; (b) provides a detailed agenda to guide subsequent research; and (c) suggests practical steps managers can take to better manage future recalls.
Chapter
Do you remember the slogans regarding the 3 Rs; well, there is actually 12. Each R can provide opportunity, but can also create peril if a management team is unacquainted with it at an inopportune time. Hence, we revisit the urgent need for companies—and society in general—to rethink supply chain strategy with respect to Rs. The expansion of the 3 Rs to 12 is inherent with the view that consumers and markets are focusing on product life extension—not product obsolescence. In an obsolescence economy, there are only three Rs and the R most revered and reported is Recycling. However, if the focus is on product life extension—getting all the value possible from a product and the by-products that result from the production, use and disposal of the product—recycling is considered the least attractive of the Rs. This is increasingly important as we face millennial challenges associated to greater glocal sustainability. The pandemic of 2020 shows us that even with tremendous shuttering of the world economy, greenhouse gas emissions and other measures of pollution are still substantial. In fact, the level of economic activity during the height of global lockdowns is described as being consistent with what is needed to keep the global average temperature to the target of 1.5 °C above baseline. Consequently, marshalling and extending our technical knowledge and related managerial skills is needed to meet the challenges of reduced greenhouse gas emissions and ensuring sustainability more broadly. Firms that are unaware of their position and that of their supply chains in relation to the 12 Rs, will have difficulties at multiple points in the future. Supply chains that engage the 12 Rs in an appropriate manner not only can avoid future difficulties but reduce their cost basis at a time when the growth in many markets is flat at best.
Article
Purpose This study aims to investigate the extent to which the presence of chief supply chain officers (CSCOs) in top management teams (TMTs) helps firms to reduce the incidence of product recalls. Design/methodology/approach The authors identified all recalls for the period 2010–2017 issued by publicly held firms regulated by the US Consumer Product Safety Commission. These data were subsequently combined with information on TMT composition from BoardEx and financial performance data from Compustat to create a unique data set. Findings The study identified a significant and negative association between CSCO presence and incidence of product recalls. The evidence also supports the conjecture that this association is stronger in larger firms, indicating that CSCOs are especially effective when operating within more complex supply chains. Practical implications The findings provide important insights into quality management in contemporary supply chains and indicate that assigning specific responsibility for supply chain management to a TMT member improves product reliability. Originality/value These findings contribute to the growing literature on the underlying causes of a product recall by identifying corporate governance antecedents of external quality failures of this kind.
Article
An increasing emphasis on social responsibility from consumers, media, and government agencies has expanded the discourse around product recalls from what can be done to prevent a product recall to also include what can be done to make a product recall more effective to reduce harm to consumers. Surprisingly, little research has addressed the latter, leaving a gap in our understanding, while a substantive body of research has investigated the former. As a result of this gap, managers face a dilemma regarding what recall strategy to adopt in order to conduct an effective recall and reduce harm to consumers. To address this dilemma, we empirically examine how recall strategy affects two measures of recall effectiveness, recall completion time and recalled product recovered, using secondary data from recalls regulated by the United States Department of Agriculture from 2005 to 2015. We further investigate how the difficulty or complexity associated with the recall task may moderate the relationship between recall strategies and recall effectiveness. Our results provide managers with actionable guidance regarding the influence of different recall strategies, and indicate that the effect of recall strategy on performance may depend on the complexity of the recall recovery task.
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Initiatives in managing manufacturing companies have been streaming in from all parts of the world. A new set of customerfocused principles helps managers to make sense of them and move confidently into the future.
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Although the goal of a product recall program is to enhance safety, there is little known about whether firms learn from product recalls. This study tests the direct effect of product recalls on future accidents and future recall frequency and indirect effect through future product reliability in the automobile industry. The hypotheses are tested on 459 make-year observations involving 27 automobile makers between the period 1995 and 2011. The findings suggest that increases in recall magnitude lead to decreases in future number of injuries and recalls. This effect, in turn, is partially mediated by future changes in product reliability. The results also suggest that the positive relationship between changes in recall magnitude and changes in future product reliability is 1) stronger for firms with higher shared product assets and 2) weaker for brands of higher prior quality. The findings are robust across alternate measures and alternate model specifications and offer valuable insights for managerial practice and public policy.
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In response to findings of abnormal stock market reactions following such dubious corporate behaviors as bribery, fraud, and the production of hazardous products, some researchers have argued that the stock market reaction is a sufficient deterrent to these behaviors so that additional regulation is not necessary. In this paper we examine stock market returns as a deterrent to dubious behavior in the production of defective automobiles. Relying on a broader range of assumptions about managerial behavior than are used in previous studies, we question the efficacy of the market as an instrument of social control.
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Product-harm crises often result in product recalls, which can have a significant impact on a firm's reputation, sales, and financial value. In managing the recall process, some firms adopt a proactive strategy in responding to consumer complaints, while others are more passive. In this study, the authors examine the impact of these strategic alternatives on firm value using Consumer Product Safety Commission recalls during a 12-year period from 1996 to 2007. Using the event study method, the authors show that regardless of firm and product characteristics, proactive strategies have a more negative effect on firm value than more passive strategies. An explanation for this surprising result is that the stock market interprets proactive strategies as a signal of substantial financial losses to the firm. When a firm proactively manages a product recall, the stock market infers that the consequence of the product-harm crisis is sufficiently severe that the firm had no choice but to act swiftly to reduce potential financial losses. Therefore, firms dealing with product recalls must be sensitive to how investors might interpret a proactive strategy and be aware of its potential drawbacks.
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The relationship between flexibility and efficiency is re-conceptualized. Much organization theory argues that efficiency requires bureaucracy, that bureaucracy impedes flexibility, and that organizations therefore confront a tradeoff between efficiency and flexibility. Others have pointed out numerous obstacles to successfully shifting the tradeoff. Seeking to advance understanding of these obstacles and how they might be overcome, an auto assembly plant that appears to be far above average industry performance in both efficiency and flexibility is analyzed. NUMMI, a Toyota subsidiary located in Fremont, California, relied on a highly bureaucratic organization to achieve its high efficiency. Analyzing 2 recent major model changes, it is fond that NUMMI used 4 mechanisms to support its exceptional flexibility/efficiency combination. These mechanisms are discussed.
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This research studies how changes in manufacturing requirements affect production line performance in a focused factory. Specifically, we examine whether production line labor productivity and conformance quality decline as the range of models produced and the heterogeneity of production volume increase in a factory designed for high volume production of a narrow range of models. We use the organizational nature of production lines to argue that the performance of focused production lines will decline when the lines adopt new manufacturing tasks that are outside the scope of the absorptive capacity developed through the execution of their prior focused manufacturing task, but not otherwise. The study examines four years of data from 16 production lines of a compressor manufacturing factory of the Copeland Corporation. Our statistical analysis identifies limits to change, suggests paths to successfully changing the manufacturing requirements of a focused factory, and places the operations strategy discussion of focused factories in a dynamic environment.
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Design management and process management are two important elements of total quality management (TQM) implementation. They are drastically different in their targets of improvement, visibility, and techniques. In this paper, we establish a framework for identifying the synergistic linkages of design and process management to the operational quality outcomes during the manufacturing process (internal quality) and upon the field usage of the products (external quality). Through a study of quality practices in 418 manufacturing plants from multiple industries, we empirically demonstrate that both design and process management efforts have an equal positive impact on internal quality outcomes such as scrap, rework, defects, performance, and external quality outcomes such as complaints, warranty, litigation, market share. A detailed contingency analysis shows that the proposed model of synergies between design and process management holds true for large and small firms; for firms with different levels of TQM experience; and in different industries with varying levels of competition, logistical complexity of production, or production process characteristics. Finally, the results also suggest that organizational learning enables mature TQM firms to implement both design and process efforts more rigorously and their synergy helps these firms to attain better quality outcomes. These findings indicate that, to attain superior quality outcomes, firms need to balance their design and process management efforts and persevere with long‐term implementation of these efforts. Because the study spans all of the manufacturing sectors (SIC 20 through 39), these conclusions should help firms in any industry revisit their priorities in terms of the relative efforts in design management and process management.
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Book
This is the second book from A. Dashchenko focussing on "XXI Century Technologies". In this book the problems of theory and practice of development in Reconfigurable Manufacturing Systems and Transformable Factories for various machine-building branches and above all automotive industry are discussed. Problems are studied concerning the development of a new class of production systems which in comparison to the Flexible Manufacturing systems are composed of a far less quantity of machine-tools. In comparison to the conventional automated lines they make it possible to rapidly transform the equipment for new products manufacturing. In 37 chapters more then 50 authors from all over the world discuss the main aspects of the mentioned above problem using their latest scientific and practical achievements.
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Stock options are thought to align the interests of CEOs and shareholders, but scholars have shown that options sometimes lead to outcomes that run counter to what they are meant to achieve. Building on this research, we argue that options promote a lack of caution in CEOs that manifests in a higher incidence of product safety problems. We also posit that this relationship varies across CEOs, and that the effect of options will depend upon CEO characteristics such as tenure and founder status. Analyzing product recall data for a large sample of FDA-regulated companies, we find support for our theory.
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Using a detailed dataset from the U.S. automotive industry, we empirically study the benefits and costs of maintaining a broader product line. Consistently with theoretical predictions, we find a positive association between product line breadth and both market share and unit production costs. We enrich the existing literature with new results that highlight previously unexplored operational aspects of the benefits and costs of product line breadth. Besides the effects on production costs through economies of scale, we find that product line breadth has a significant effect on mismatch costs arising from increased demand uncertainty, which are manifested through additional discounts and inventories. The effect of product line breadth on mismatch costs is comparable in magnitude to the effect on production costs: an additional product in the line is associated with an average increase of around $100 in discounts per vehicle and with carrying three additional days of supply in the average inventory of all the models of the line. This suggests that the operational benefits of inventory pooling that can be achieved by reducing product lines can be economically very substantial. Furthermore, we quantify the benefit of using a platform strategy to mitigate the effects of a broad product line on production costs - on average, for every 100,000 vehicles produced for other models based on the same platform, unit production costs are reduced by $55. Finally, we propose an additional, attribute-based measure of product line breadth and find that product line breadth can work as a hedge against changes in demand conditions. For example, automakers that offer a broader range of fuel economy levels increase their market share and reduce their average discounts as gas prices become more volatile.
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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.
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We analyze a large, detailed operational data set from a restaurant chain to shed new light on how workload (defined as the hourly average number of diners assigned to a server) affects servers' performance (measured as hourly sales). We use an exogenous shock - implementation of a labor scheduling software - to disentangle the endogeneity between demand and supply in this setting. We find that when the overall workload is low, an increase in workload leads to higher server performance. However, there is a saturation point after which any further increase in the workload leads to a decline in performance. In the focal restaurant chain we find that this saturation point is generally not reached and, counter-intuitively, the chain can reduce the staffing level and achieve both signi cantly higher sales (an estimated 35% increase) and lower labor costs (an estimated 20% decrease).
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The ability to manufacture several products on the same production line and switch seamlessly among them allows a firm to both hedge against demand uncertainty and respond to competition. In this paper, we empirically analyze the deployment of manufacturing flexibility in the North American automotive industry. In particular, we track demonstrated ability to manufacture automobiles with different platforms at 75 assembly plants over a period of eight years. We find that, consistent with extant theory, flexible capacity is used to manufacture products with high demand uncertainty and low demand correlation. We find evidence of product life-cycle effects: flexible capacity is used to manufacture models that are early in their life-cycle as well as aging models. Moreover, we find strong evidence that automotive manufacturers use flexibility as a “competitive weapon”; flexibility is deployed in market segments in which there are a larger number of flexible competitors. However, this use of flexibility as a competitive weapon may not be optimal, as suggested by lower plant productivity.
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Are lean production jobs intrinsically motivating? More than 20 years after the arrival of lean production, this question remains unresolved. Generally accepted models of job design such as the Job Characteristics Model (JCM, (Hackman, J.R., Oldham, G.R. 1976. Motivation through the design of work: test of a theory. Organizational Behavior and Human Performance 16, 250–279.)) cannot explain the occurrence of worker intrinsic motivation in the context of lean production. In this paper, we extend the JCM to the lean production context to explain the theoretical relationship between job characteristics and motivational outcomes in lean production. We suggest that a configuration of lean production practices is more important for worker intrinsic motivation than are independent main effects, and that motivation may be limited by excessive leanness. We conclude that lean production job design may engender worker intrinsic motivation; however, there are likely to be substantial differences in intrinsic motivation under differing lean production configurations.
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Five footnotes to change in organizations are suggested. They emphasize the relation between change and adaptive behavior more generally, the prosaic nature of change, the way in which ordinary processes combine with a confusing world to produce some surprises, and the implicit altruism of organizational foolishness.
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This research identifies and tests key factors that can be associated with time to recall a product. Product recalls due to safety hazards entail societal costs, such as property damage, injury, and sometimes death. For firms, the related external failure costs are many, including the costs of recalling the product, providing a remedy, meeting the legal liability, and repairing damage to the firm's reputation. The recent spate of product recalls has shifted attention from why products are recalled to why it takes so long to recall a defective product that poses a safety hazard. To address this, our research subjects to empirical scrutiny the time to recall and its relationship with recall strategies, source of the defect and supply chain position of the recalling firm. We develop and verify our conceptual arguments in the U.S. toy industry by analyzing over 500 product recalls during a 15-year period (1993–2008). The empirical results indicate that the time to recall, as measured by difference between product recall announcement date and product first sold date, is associated with (1) the recall strategy (preventive vs. reactive) adopted by the firm, (2) the type of product defect (manufacturing defect vs. design flaw), and (3) the supply chain entity that issues the recall (toy company vs. distributor vs. retailer). Our results provide cues that could trigger a firm's recognition of factors that increase the time to recall.
Article
There is currently much interest in the idea of integrated quality management for durable products, extending from the product design, development and manufacturing process and through the ownership cycle of the product. We have carried out a logit analysis of events pertaining to a critical incident model which demonstrates how quality in both the product and its supporting services, as well as the interactions between these factors, can affect owner intentions regarding future purchases. The model was evaluated through a study of 659 motor vehicle owners. Two of our specific conclusions are: (1) our data suggests that owners tend to have a tolerance towards negative vehicle incidents, but negative service incidents can harm owner perceptions of both the dealer and the manufacturer, and (2) positive critical incidents can counteract negative critical incidents. Proactively creating positive service incidents and avoiding negative service incidents can help improve customer loyalty to the service agent and counteract negative vehicle incidents which affect loyalty to the manufacturer. We also suggest that the results from this study may be generalizable to service and product quality management for other types of equipment.
Article
Much of the early literature in the area of quality management literature is anecdotal, prescriptive, and methodologically suspect. As such, theory construction and rigorous empirical testing is a relatively recent development with the emphasis very much on quality practices. However, the various dimensions of quality performance and the relationship between them have received less attention from the research community. More specifically, the role of design quality has not been fully addressed in empirical studies. To address this gap we developed a path model incorporating quality practices, design quality, conformance quality, external quality-in-use, product cost, time-to-market, customer satisfaction and business performance. The model was tested with data collected from 200 suppliers in the electronics sector in the Republic of Ireland. Data analysis of the data indicated considerable support for the conceptual model.
Article
Previous research Has found that product recall announcements in the automobile industry are associated with negative abnormal returns. We extend this research by examining announcements of product recalls and products taken off the market outside the automobile industry. We find negative abnormal returns for these announcements and that the returns are significantly more negative when products are replaced (or the purchase price is returned) than when the products are checked and repaired. We find only limited evidence that government-ordered recalls produce more negative returns than voluntary recalls.
Article
Rapidly evolving technologies, global competition, and sophisticated customers have contributed to an increase in product variety in many industries. However, simply increasing variety does not guarantee an increase in long run profits, and can in fact worsen a firm's competitiveness. This makes variety management a crucial dimension of successful business practice. In this paper, I first provide a framework for managerial decisions about variety. Variety decisions can be viewed as variety-creation decisions that determine the amount, type, and timing of end-product variety, and variety-implementation decisions, which focus on the design and operation of internal processes and a supply chain to support a firm's variety-creation strategy. I sort the gamut of variety-related decisions into four key decision themes in variety creation: 1) dimensions of variety, 2) product architecture, 3) degree of customization, and 4) timing, and three key decision themes in variety implementation: 1) process capabilities, 2) points of variegation, and 3) day-to-day decisions. I describe each theme, and then review the relevant literature on each theme, with a focus on research that adds insight on problems faced in practice. Finally, I identify untapped avenues for future research that would be of value to the practicing manager, paying special attention to interdependencies among decision themes.
Article
Sustaining operational productivity in the completion of repetitive tasks is critical to many organizations’ success. Yet research points to two different work-design related strategies for accomplishing this goal: specialization to capture the benefits of repetition or variety to keep workers motivated and allow them to learn. In this paper, we investigate how these two strategies may bring different benefits within the same day and across days. Additionally, we examine the impact of these strategies on both worker productivity and workers’ likelihood of staying at a firm. For our empirical analyses, we use two and a half years of transaction data from a Japanese bank’s home loan application processing line. We find that over the course of a single day, specialization, as compared to variety, is related to improved worker productivity. However, when we examine workers’ experience across days we find that variety, or working on different tasks, helps improve worker productivity. We also find that workers with higher variety are more likely to stay at the firm. Our results identify new ways to improve operational performance through the effective allocation of work.
Article
For over three decades, the benefits of focus have been touted under the guiding principle that dedicated attention to a small set of linked tasks improves operating performance. Numerous studies have suggested that the performance of a division, plant, or business unit is improved to the extent that it remains focused on a narrow range of activities. Others have found similar benefits associated with focus at the level of the entire firm. A question that has received less attention, however, is whether focus at the divisional level is complementary with, or a substitute for, focus at the firm level. We explore this question by considering the performance of investigative sites in biopharmaceutical clinical trials. First, we establish that firms focusing on a particular task—at either a divisional or firm level—experience higher output and productivity with respect to that task than unfocused firms. After controlling for selection, scale, and learning effects, we find that sites that focus on conducting clinical trials significantly outperform those that mix trial activity with the provision of traditional patient care. Second, we find evidence that focus at the divisional level and firm level are substitutes. That is, organizations characterized by divisional focus alone achieve statistically similar performance to sites that are characterized by both divisional and firm focus. Copyright © 2007 John Wiley & Sons, Ltd.
Article
This research demonstrates that operations agility---defined as the ability to excel simultaneously on operations capabilities of quality, delivery, flexibility, and cost in a coordinated fashion---is a viable option for retail banks encountering increasing environmental change. The question of whether there is empirical evidence that services, specifically retail banks, display the characteristics of agility like their manufacturing counterparts is open to debate. Conventional wisdom in operations management posits that most successful services trade off one capability for another. Drawing from the resource-based view of the firm, combinative capabilities view, and the cybernetics work of Ashby (1958), theoretical arguments suggest the contrary. The agility paradigm is viable in environments calling for a mix of strategic responses. Applying cluster analytic techniques to a sample of retail banks, using capabilities as taxons, we identify four strategic service groups: agile, traditionalists, niche, and straddlers. Our empirical results provide thematic explanations consistent with theory that account for how the agile strategic group offers a unique configuration of service concept, resource competencies, strategic choices, and business orientation. Profiles of the operations strategies of each strategic service group suggest that each group has found a fit between what certain segments of the market may want and what they have to offer. In particular, we found that the agile group exhibited greater resource competencies than its counterparts, requiring greater investments in infrastructure and technology. Consistent with theory, agile banks performed better over time on an absolute measure of return on assets.
Article
This study examines the impact of product variety on automobile assembly plant performance using data from GM's Wilmington, Delaware plant, together with simulation analyses of a more general auto assembly line. We extend prior product variety studies by providing evidence on the magnitude of variety-related production losses, the mechanisms through which variety impacts performance, and the effects of option bundling and labor staffing policies on the costs of product variety. The empirical analyses indicate that greater day-to-day variability in option content (but not mean option content per car) has a significant adverse impact on total labor hours per car produced, overhead hours per car produced, assembly line downtime, minor repair and major rework, and inventory levels, but does not have a significant short-run impact on total direct labor hours. However, workstations with higher variability in option content have greater slack direct labor resources to buffer against process time variation, introducing an additional cost of product variety. The simulation results support these findings in that once each workstation is optimally buffered against process time variation, product variety has an insignificant impact on direct assembly labor. The simulations also show that bundling options can reduce the amount of buffer capacity required, and that random variation is more pernicious to productivity than product variety, supporting the efforts of some auto makers to aggressively attack the causes of random variation.
Article
To help meet competitive realities operations managers need to know more about the strategic aspects of manufacturing flexibility. This paper takes steps toward meeting that need by critically reviewing the literature and establishing a research agenda for the area. A conceptual model, which places flexibility within a broad context, helps to identify certain assumptions of theoretical studies which need to be challenged. The model also provides a basis for identifying specific flexibility dimensions. The manner in which these dimensions may limit the effectiveness of a manufacturing process, and the problems in operationalizing them are discussed. Focusing next on the neglected area of applied work, concepts are presented for analyzing whether desired amounts of flexibility are being achieved and whether the potential for flexibility built into a manufacturing process is being tapped. Once more, a procedure is outlined for altering a plant's types and amounts of flexibility over time. The research agenda, which grows out of the appraisal of theoretical and applied work, indicates the value in studying generic flexibility strategies, the flexibility dimensions, methods of delivery, ways of evaluating and changing a process's flexibility, and above all measurement problems. The conclusions indicate principles for strategic research, some of which have relevance for the development of mathematical models.
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The pressure on companies to practice corporate social responsibility (CSR) has gained momentum in recent times as a means of sustaining competitive advantage in business. The pharmaceutical industry has been acutely affected by this trend. While pharmaceutical product recalls have become rampant and increased dramatically in recent years, no comprehensive study has been conducted to study the effects of announcements of recalls on the shareholder returns of pharmaceutical companies. As product recalls could significantly damage a company’s reputation, profitability and brand integrity, this paper investigates the effect on shareholder wealth and the extent to which the adoption of CSR practices by pharmaceutical companies in the United Kingdom (U.K.) and the United States (U.S.), the two largest markets for pharmaceutical products in the world, affected market reactions surrounding product recall announcements. The analysis of product recall announcements from 1998 to 2004 compiled from The Pharmaceutical Journal and U.S. Food and Drug Administration enforcement reports revealed marked differences in the way market participants in the two countries responded to news of product recalls. U.S. investors penalised firms according to the severity of product defects while U.K. investors were indifferent. While U.K. investors rewarded product recalls by firms which were not usually CSR-active, U.S. investors punished non-CSR active firms that performed recalls. These observations could pose strategic challenges to pharmaceutical firms operating in both countries.
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This study examines the relationship between market requirements focus, manufacturing characteristics focus, and manufacturing performance. Results from a sample of plants serving the automotive industry support the general argument that market requirements focus and manufacturing characteristics focus have an impact on manufacturing performance, and provide partial support for a mediation model of focus proposed by Bozarth (1993). The results also show that focused work cells or plants-within-a-plant might not be entirely successful at buffering plants from the negative impact of diverse market requirements.
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Design management and process management are two important elements of total quality management (TQM) implementation. They are drastically different in their targets of improvement, visibility, and techniques. In this paper, we establish a framework for identifying the synergistic linkages of design and process management to the operational quality outcomes during the manufacturing process (internal quality) and upon the field usage of the products (external quality). Through a study of quality practices in 418 manufacturing plants from multiple industries, we empirically demonstrate that both design and process management efforts have an equal positive impact on internal quality outcomes such as scrap, rework, defects, performance, and external quality outcomes such as complaints, warranty, litigation, market share. A detailed contingency analysis shows that the proposed model of synergies between design and process management holds true for large and small firms; for firms with different levels of TQM experience; and in different industries with varying levels of competition, logistical complexity of production, or production process characteristics. Finally, the results also suggest that organizational learning enables mature TQM firms to implement both design and process efforts more rigorously and their synergy helps these firms to attain better quality outcomes. These findings indicate that, to attain superior quality outcomes, firms need to balance their design and process management efforts and persevere with long-term implementation of these efforts. Because the study spans all of the manufacturing sectors (SIC 20 through 39), these conclusions should help firms in any industry revisit their priorities in terms of the relative efforts in design management and process management.
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Flexible work assignment has great potential to increase productivity. When bottlenecks develop, for example, downstream operations may halt for lack of materials. A flexible worker can prevent this by moving in and increasing capacity temporarily, thereby avoiding work stoppages. In practice, it is not that simple. This paper identifies several “negative side effects” that occur in systems that rely on worker flexibility, effects that may partially or totally offset the advantages. Research has shown that performance feedback and work interruptions are factors that may explain some of these effects. Behavioral theories about those two factors lead to a series of hypotheses and two experiments. The results show that productivity loss due to these behavioral effects can be significant, in both the statistical and managerial sense of the word. Implications for the design and operation of flexible work environments are discussed, including methods for mitigating or eliminating the negative side effects, resulting in a meaningful productivity gain.