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Plant Operations and Product Recalls in the Automotive Industry: An Empirical Investigation
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.
... Thirumalai and Sinha (2011) found that firms with broader product portfolios have an increased likelihood of recalls. Similarly, greater product variety (Shah et al., 2017) and product competition (Ball et al., 2018) drive product recalls. Considering external cooperation, Steven et al. (2014) observed that outsourcing can increase recalls. ...
... We need to include these observations in our regression as they contain relevant venturing information. GEEs account for these observations and, in contrast to fixed-effects models, do not exclude all firms where the observation is zero for all years from the analysis (Shah et al., 2017). Third, we have heteroscedasticity in our data that GEEs also control for (Shah et al., 2017). ...
... GEEs account for these observations and, in contrast to fixed-effects models, do not exclude all firms where the observation is zero for all years from the analysis (Shah et al., 2017). Third, we have heteroscedasticity in our data that GEEs also control for (Shah et al., 2017). Because our dependent variable is binary, we follow A. J. and use a binomial family with a logit link specification, an exchangeable correlation structure, and robust standard errors. ...
Despite growing numbers of corporate venture capital (CVC) deals and alliances, their effectiveness is not guaranteed. This paper investigates the positive and negative impacts of CVC and alliance activity on product safety under different levels of market turbulence. Using a resource-based learning perspective and panel data from large U.S. firms, we find that both CVC and alliance activity have inverted U-shaped relationships with product recall likelihood. Market turbulence moderates both relationships, but differently. We discuss how learning theory complements the resource-based view to understand why no or rather bold external venturing are less harmful than small-scale “stuck-in-the-middle” initiatives.
... First, by studying how news coverage of safety in a firm's products affects its voluntary product recalls, we take multidisciplinary product recall research into new but consequential territory (Hora, Bapuji, and Roth 2011;Wowak et al. 2021). Specifically, we demonstrate that recalls are as much a response to external pressure as they are to internal characteristics Shah, Ball, and Netessine 2017) or managerial values (Mayo, Ball, and Mills 2021;Wowak et al. 2021). ...
... These factors include the firm's decisions in the domains of production (Shah, Ball, and Netessine 2017;Thirumalai and Sinha 2011), supply chain (Kalaignanam, Kushwaha, and Nair 2017;Kini, Shenoy, and Subramaniam 2017), corporate management and governance (Byun and Shammari 2021;Wowak et al. 2021), labor (Kini, Shen, Shenoy, and Subramaniam 2021), financing (Kini, Shenoy, and Subramaniam 2017), the stock market (Bendig et al. 2018), and prior experience Thirumalai and Sinha 2011). Decisions by firm stakeholdersspecifically, safety regulators (Ball, Siemsen, and Shah 2017), rivals (Ball, Shah, and Wowak 2018), investors , and consumers Mukherjee and Sinha 2018)-also impact a firm's recalls). ...
... Consequently, the media may report less about any particular product line. Further, Shah, Ball, and Netessine (2017) have reported that greater variety among products increases the number of recalls. Liu, Y., & Shankar, V. (2015). ...
Does the news media's reporting of the safety (or the lack thereof) in a firm's products impact managers' voluntary recalls of the products? The current article empirically answers this question in the context of safety defects in vehicles of 22 manufacturers from June 2009 to December 2020 in the United States. Results show that the volume of news reports about safety in a manufacturer's products increases voluntary recalls by managers. Further, the negativity in these news reports strengthens the main effect of news volume, whereas news positivity does not moderate the main effect. Lastly, the media's rating of the manufacturer's products weakens the news volume effect, thus acting as a buffer. The supplementary analysis demonstrates that none of the main or moderation effects exist for involuntary recalls, confirming the theory that news affects managers' voluntary behavior. Lastly, the effects exist for high (and not low) severity voluntary recalls only. The findings unearth the news media's role in enhancing public safety by affecting managerial decisions about recalls.
... 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. ...
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 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). ...
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.
... Another important relationship that has been underexplored is the effect of variations in the reasons for the failure, and thus of experiences, on the likelihood of a future failure (Haunschild and Sullivam, 2002;Shah, Ball and Netessine, 2017). An examination of the broader learning from experience literature reveals a theoretical puzzle. ...
... Therefore, we hypothesize that failure response times negatively moderate the positive effect of variations in the reasons for past failures on subsequent failures. In doing so, we follow calls to further examine the extent to which organizational learning from variations in failures depends on the temporal dimension of experience (Shah, Ball and Netessine, 2017). ...
Using drug recalls during 2006-2016, we examine the effect of response time and variation in the causes of past failures on subsequent failure. Longer response time reduces the likelihood of subsequent failure. Variation in failure experiences increases the potential for subsequent failure. However, a longer response time helps overcome the challenges associated with this variation. By focusing on the temporal dimension of learning from failure we provide unique theoretical insights into when and how organizations can learn from failure.
... To test the hypothesis, we analyze our data using the method Generalized Estimating Equations (GEE) (Ballinger 2004;Shah, Ball, and Netessine 2017). We use GEE because our observations are not independent, as several managers 12 In seven divisions, there is a tie for lowest performance (in five cases between two employees and in two cases between three employees). ...
We investigate managers’ propensity to engage in strategic promotion behavior. Strategic promotion behavior occurs when managers pursue personal economic interests when contributing to employee promotion decisions, such that the probability that relatively lower performing employees are selected for a promotion is increased. We develop theory about how two important organizational characteristics—transparency about individual performance levels and the presence of group incentives—jointly affect managers’ tendency to strategically influence promotion decisions. Using a stylized lab experiment, we find that transparency about individual performance levels decreases strategic promotion behavior when group incentives are absent but not when group incentives are present. We discuss how our findings contribute to our understanding of management accounting and control systems.
... 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 49,50 . The GEE is used to investigate the variation in RCMD and RCS concentrations per mine-year across 30-years unbalanced panel data. ...
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 obstructive lung diseases. Despite considerable efforts to reduce dust exposure by decreasing the permissible exposure limits (PEL) and improving the monitoring techniques, the rate of mine workers with respiratory diseases is still high. The root causes of the high prevalence of respiratory diseases remain unknown. This study aimed to investigate contributing factors in RCMD and RCS dust concentrations in both surface and underground mines. To this end, a data management approach is performed on MSHA’s database between 1989 and 2018 using SQL data management. In this process, all data were grouped by mine ID, and then, categories of interests were defined to conduct statistical analysis using the generalized estimating equation (GEE) model. The total number of 12,537 and 9050 observations for respirable dust concentration are included, respectively, in the U.S. underground and surface mines. Several variables were defined in four categories of interest 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 multiple linear regression analysis. The results of the analysis indicate higher RCMD concentration in underground compared to RCS concentration which is found to be relatively higher in surface coal mines. In addition, RCMD concentration is seen to be higher in the Interior region while RCS is higher in the Appalachia region. Moreover, mines of small sizes show lower RCMD and higher RCS concentrations. Finally, thin-seam coal has greater RCMD and RCS concentrations compared to thicker seams in both underground and surface mines. In the end, it is demonstrated that RCMD and RCS concentrations in both surface and underground mines have decreased. Therefore, further research is needed to investigate the efficacy of the current mass-concentration-based monitoring system.
... TQM aims at eliminating defects and reworking to increase quality (Brown and Mitchell, 1991). For quality performance, we distinguished between an internal and external quality performance dimension as per Shah et al. (2017) and used the metrics rejected batches and customer complaint rate as respective internal and external performance indicators. JIT aims at reducing waste in production flow to achieve low inventory levels (Shah and Ward, 2003). ...
Purpose
The purpose of this study is to investigate how soft lean practices moderate the performance effects of hard lean practices. The authors provide new evidence from the pharmaceutical industry, which is characterized by a highly regulated and technical environment and has been largely uncharted in the lean literature.
Design/methodology/approach
Based on a review of the literature, the authors define a set of soft and hard lean practices. The authors test the hypotheses using factor analysis and moderated hierarchical linear regression on a unique dataset containing survey data and real performance measures of 351 pharmaceutical plants.
Findings
The results show that soft lean practices can be both enabling and constraining. When management engages in performance measurement, visualisation and employee empowerment the relationship between hard lean practices and performance is positively moderated. On the other hand, when managers emphasise goal setting and work standardisation the performance outcomes are reduced.
Practical implications
Effective lean managers build organisational commitment by motivating other employees to implement lean. They use performance measurement, visualisation and employee empowerment to focus on the “why”. Less effective managers engage in commanding and micro-management. Such managers focus on the “what” by using practices like goal setting and work standardisation.
Originality/value
This article contributes to the literature on lean management by empirically testing the moderator-variable interaction effects between soft and hard lean practices. In addition, it adds new evidence from the important pharmaceutical industry.
... 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. ...
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.
... 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). ...
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. ...
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.
... 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. ...
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.
... 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. ...
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.
... 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. ...
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.
... 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. ...
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 development explicitly also applies to Class 1 recalls, which categorizes violative drugs with the most severe health consequences (O'Connor, Yu and Lee, 2016). In addition to the risk to patients, such recalls also have come with notable negative economic effect on the affected companies (Shah, Ball and Netessine, 2017). In conclusion, the pharmaceutical industry, regulators and patients suffer from quality deficiencies. ...
Goal: The goal of this paper is to test the possible connection between pharmaceutical manufacturing plants’ Operational Excellence implementation and regulatory inspection outcomes.
Methodology: This paper uses logistic regression models on a unique dataset compiled from proprietary operations datasets and published FDA inspection outcomes.
Results: The findings show that sites with advanced Operational Excellence implementation are more likely to receive favorable inspection outcomes and more so when specifically focusing on Total Quality Management implementation as a subset. A similar trend exists for the Quality Control laboratories and their compliance deficiencies when analyzed separately.
Limitations of the investigation: The limitations of this research mainly lie in the limited size and composition of the available dataset. European manufacturing sites and quality control labs are overrepresented and the sample size for quality control labs is rather small.
Practical Implication: This paper can help industrial managers and regulatory officials to better direct their resources to manufacturing sites and QC laboratories that are at a higher risk of quality non-compliance.
Originality/value: It is a long-standing maxim in literature and practice that manufacturing sites shall build improvement capabilities to reach Operational Excellence which includes superior product quality. Quality Management is particularly important in the pharmaceutical industry and often evolves on its own in the organizations. Pharmaceutical production plants are inspected regarding their quality processes and systems by regulatory authorities. However, there is lacking published evidence of the interplay of Operational Excellence practices and regulatory inspection outcomes.
... 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. ...
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.
Problem definition: Suppliers are increasingly involved in innovation activities that contribute to a firm’s product quality and introduce risks to firms’ quality control, leading to quality failures and recalls. This quality trade-off suggests the possibility of a nonlinear relationship between supplier innovation and product recalls, which is the focus of this research. Recall literature focuses on firms’ internal drivers of recalls, whereas anecdotal evidence increasingly points to the role of external drivers, such as suppliers. We contribute to the literature by examining supplier innovation as an external driver leading to recalls via quality and risk spillovers. Methodology/results: We collect and assemble a unique panel data set of consumer product recalls from firms and their supply bases (i.e., first tier suppliers). We estimate econometric models to examine the nonlinear relationship between supply base innovation, measured by research and development (R&D) intensity of the supply bases, and the likelihood of product recalls. We find a quadratic (i.e., U-shaped) relationship between the probability of recalls and supply base R&D intensity. We also find that this nonlinear relationship is critically related to three specific sources of risk: radicalness of supplier innovation, technological distance between firms and their suppliers, and complexity of supply base. Managerial implications: Our findings suggest that firms should be mindful of the quality trade-offs in encouraging supplier innovation to reduce product recalls. Further, to minimize recall risks, firms should better evaluate and manage the risks associated with external supplier knowledge that is novel and different and closely work with global suppliers to reduce coordination challenges in knowledge transfer and integration.
Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.1213 .
Building on capital structure and product market interactions, and the role of debt enforcement in leveraged firms' investments, we examine whether cross‐country debt enforcement can produce different associations between financial leverage and product failures. Results show that different debt enforcement systems can generate opposite leverage effects. In countries with weak/nearly ineffective debt enforcement, financial leverage shows an incentive investment effect due to low default costs, and thus highly leveraged firms tend to invest more and are less likely to have product failures. Conversely, in countries with strict/effective debt enforcement, distressed companies tend to have an underinvestment effect and more product failures.
Inadequate nurse staffing continues to challenge healthcare delivery in the United States. In this research, we undertake a fine‐grained, unit‐level analysis to understand the relationships between nurse staffing, nurse turnover, and pressure ulcers, the latter of which is a key nursing‐sensitive care quality indicator. We examine these relationships within two types of hospital units: intensive care units (ICUs) and medical‐surgical (MedSurg) units, which have unique patient mixes and needs. Using hospital unit‐level data between 2008 and 2017, we show that nurse staffing primarily affects nurse turnover in ICUs, and that the adverse effects of nurse turnover on care quality tend to be stronger in ICUs than in MedSurg units. These findings provide important theoretical insights into the varying roles of staffing, turnover, and quality across organizational units. The findings suggest that hospital administrators may prioritize staffing needs for ICUs over MedSurg units to maintain strong quality performance on measures such as pressure ulcers. Further, our study reveals that staffing requirements for ICUs may be inadequate compared with MedSurg units. Thus, there is a need to evaluate existing guidelines on ICU staffing.
This paper aims to seek the innovative development strategy for a leading firm in a competitive market when considering product unreliability and risk behavior. A higher innovation level may bring about better product performance. Nevertheless, it may cause some unreliability events which might incur serious negative outcomes (e.g., products recall). Facing uncertain outcomes, the innovative firm may care more about the risk of innovation when making decisions, especially in a competitive market. We build a Stackelberg game model for a competitive market consisting of a leading firm and a competitor. The Conditional Value-at-Risk (CVaR) is used to measure the firm’s risk attitude. The optimal innovation strategy of the leading firm and the response strategy of the competitor is obtained. We find that the optimal innovation strategy takes three different forms depending on the risk attitude and the development cost of innovation. i.e., no innovation, complete innovation and partial innovation. In addition, different from most existing literature on risk-averse players’ pricing decisions, we find that a risk-averse innovative firm may set a higher price to focus on only tech-savvy consumers. Moreover, the effects of innovation are also investigated. We find that the two competing firms can achieve a win–win result by adopting an appropriate innovation strategy.
O elo de Pós-Venda envolve além dos processos de fluxo físico e lógico dos bens e de scrviços, os dcscartcs c discrcpâncias no ponto dc consumo. Estcs itens podcm ter dcstinos de reciclagem, recondicionamento, reparos ou refugo, podendo retornar ao estoque diretamente ou ser direcionado para algum outro processo intermediário ou definitivo. O presente estudo busca identificar os processos da logística reversa como fator diferencial na melhoria do produto e/ou processo, através do estudo de caso de um “rcc’n//” de grande proporção de “nn ôog.s ” com o propósito de realizar o relato de experiência mediante estudo de caso único. O resultado conduz a importantes reflexões em que o fator custo possui implicações nos resultados da empresa no curto prazo. No entanto, ao longo dos tempos a questão qualitativa constitui-se no elemento que assegura a imagem e a continuidade institucional fundamental que pode diferenciar no longo prazo.
In this chapter we review the body of operations management (OM) literature that studies compliance issues. Researchers in OM focus on how operational-level decisions (such as process improvement, capacity, quality, and risk mitigation) impact performance outcomes in business and society. In recent years there has been growing interest among OM scholars in compliance issues, mostly in the context of environmental regulation and corporate social responsibility (CSR). The focus on operations casts new light and brings novel insights to compliance issues, and in some cases provides guidance for implementable solutions.
Problem definition: Expansions in product assortment by online retailers often engender operational challenges. In undertaking such expansions, retailers exercise a strategic choice between expanding assortment width or depth. Our understanding of how this choice affects the order fulfillment process is limited. Thus, we examine the impact of these dimensions of assortment strategy on order delivery timeliness. Academic/practical relevance: Order delivery timeliness is a critical measure of operational success in online retail. We contribute to theory and practice by adopting a multidimensional perspective of retailer assortment strategy and studying the relative impact of assortment width and depth on order delivery timeliness. Methodology: Employing a data set comprising more than 200 million orders, we study the effects of assortment strategy on delivery timeliness using an instrumental variable approach. We then utilize a two-stage model to estimate the impact of delivery performance on sales. Further, we employ a matched difference-in-differences and a novel Bayesian structural time-series model to confirm this relationship. Results: We find that assortment width has a greater negative impact on order delivery timeliness compared with assortment depth. A one-standard-deviation increase in assortment width increases average delivery times by 0.55 days. Further, we find this effect to be positively moderated (i.e., worsened) by the average size of orders and to be negatively moderated (i.e., improved) by the logistic service provider’s (LSP) experience. Finally, a one-day increase in delivery times for 10% of the orders results in a 2.7% reduction in sales. Managerial implications: Our findings suggest that online retailers focused on ensuring timely deliveries should be wary of widening product assortments, especially when facing larger average order sizes. We also find that experienced logistic service providers can help mitigate the dilatory effects of assortment width expansions. However, the benefits of experienced LSPs are limited for retailers deepening their assortments.
History: This paper has been accepted as part of the 2018 MSOM Data Driven Research Challenge.
Supplemental Material: The online appendices are available at https://doi.org/10.1287/msom.2022.1156 .
Government supervision on vehicle recall has become a social focus in recent years with the rapid development of the automobile industry and the growing impact of public opinion in the recall process. Motivated by this, we apply the evolutionary game approach to study the interaction between the automakers and the governments in their vehicle recall and supervision behaviors under the impact of public opinion. The equilibrium outcomes when public opinion exists or not are analyzed. We find that the governments may choose weak or strong supervision under no supervision of public opinion, but the automakers always choose hiding vehicle defects in stable states; and the players’ optimal strategies may exhibit periodic fluctuations over time. Under public opinion supervision, the automakers may choose voluntary recall regardless of whether the governments choose strong or weak supervision. With a high public opinion supervision and low penalty for hiding defects, the governments may choose strong supervision even with sufficiently high supervision cost. Furthermore, although the players’ behaviors may also exhibit periodic fluctuations given a certain level of public opinion, the system will converge to the desired stable states under which voluntary recall is optimal for the automakers as public opinion increases. Our study highlights the role of public opinion in the players’ product recall and supervision behaviors.
Paper-based microfluidics is a promising field and currently expanding its borders in fields of food quality, chemical testing, medical diagnostic devices and clinical testing. However, controlling the fluid flow mechanism especially valving functionality is one of the challenges that remain to be addressed. Herein, a mechanically actuated valve is designed to control the flow rate in downstream delivery channel. Detailed experimental study was performed by averaging results of wicking distance and velocity at contact widths of 2 mm, 4 mm, 6 mm and 8 mm. The experiments were conducted with the valve in the turned ‘ON’ state. Experimental study of sequential delivery and intermixing of reagents was also performed which shows diffusion based mixing of liquid dyes that
can be used as a mechanism for multiple chemical reactions at the same site. The developed paper-based
mechanically actuated valve will prove to be a promising addition in volumetric flow control and on/off
functionality for sequential delivery of reagents enabling paper-based microfluidics to reach one step closer to
a true point-of-care diagnostic platform.
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 to 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 was 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 these data enhance product recall research by providing key recall decision-making variables unavailable in related research, but 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 might be interested in using our data set for their 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
The product recall is becoming a challenging issue in supply chain management, and both suppliers and manufacturers are motivated to exert recall efforts to improve supply chain performance. Considering a supply chain composed of one supplier and one manufacturer with product recalls and demand uncertainty, we investigate the contract design by integrating the revenue sharing contract with three cost sharing policies, namely, fixed-rate cost sharing (Contract F), linear cost sharing (Contract L), and threshold-based cost sharing (Contract T), to coordinate the production quantity and recall efforts. Results show that cost sharing could improve the product recall probability and supply chain profits, but only Contract T can coordinate the supply chain in both production quantity and recall efforts. Moreover, the cost sharing rate in Contract T first decreases and then increases as the recall cost increases. When the recall cost is small (large), Contract T (Contract F) is optimal for the manufacturer. In contrast to our intuition, we find Contract L could overmotivate supply chain members to exert a recall effort that is greater than the first-best when the cost coefficient of recall efforts is large enough. However, demand uncertainty will mitigate the impact of product recalls on motivating recall efforts.
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.
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.
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.
Service organizations face a trade-off between high utilization and responsiveness. High utilization can improve financial performance, but causes congestion, which increases throughput time. Employees may manage this trade-off by reducing processing times during periods of high workload, resulting in an inverted U-shaped relationship between utilization and throughput time. Using two years of inpatient data from 203 California hospitals, we find evidence that patient length of stay (LOS) increases as occupancy increases, until a tipping point, after which patients are discharged early to alleviate congestion. More interestingly, we find a second tipping point—at 93% occupancy—beyond which additional occupancy leads to a longer LOS. These results are indicative of a workload-related “saturation effect” where employees can no longer overcome high workload by speeding up. Our data suggest that the saturation effect is due to an increase in the workload requirements of the remaining patients. Collectively, we find that the underlying relationship between occupancy and LOS is N-shaped. Consequently, managers who seek cost efficiencies via a strategy of high utilization in tandem with speeding up may find that their strategy backfires because there is a point at which employees are no longer able to compensate for a high workload by working harder, and throughput time counterproductively increases. We perform a counterfactual analysis and find that an alternate strategy of employing flexible labor when faced with high occupancy levels might be a more productive approach, and could save the hospitals in our sample up to $138 million over 23 months.
This paper was accepted by Serguei Netessine, operations management.
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.
In this article we describe and illustrate the mixed-model sequencing approach used by Hyundai Motor Company. Although several mixed-model sequencing procedures have been developed and presented in the literature, there are few studies describing the actual use of these procedures by organizations. While the detail of the situation described in this article may be specific to the studied company, Hyundai's experience can provide some general insights into the mixed-model sequencing problem for other organizations.
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.
Purpose
The objectives of this paper are: to identify the key defining elements of a subcontractor plant from an operations management perspective and examine whether there are differences between the operational contexts of such plants and original equipment manufacturer (OEM) plants; and to examine whether these differences should translate into different operational practices, addressing the specific case of process quality management practices.
Design/methodology/approach
The paper uses a multiple case study involving five plants in the electronics industry representative of the OEM and different subcontractor contexts.
Findings
Results suggest that the operational contexts of subcontractor and OEM plants are different and that, as a result, these types of plants should emphasize different sets of process quality management practices.
Research limitations/implications
Results are considered to be generalizable to most discrete goods industries. However, future research should ascertain whether these results replicate in industries other than electronics.
Practical implications
OEMs, who have a critical role in disseminating best practice within the supply chain, must recognize the differences between OEM and subcontractor environments and avoid pushing one‐size‐fits‐all best practice programs along the chain.
Originality/value
Research in outsourcing to date has focused on the outsourcing decision per se and has mainly taken the perspective of the outsourcer firm. This study contributes to a better understanding of the operational implications of outsourcing decisions for subcontractor plants. It also responds to calls for more research linking quality management and supply chain management.
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.
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.
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.
Since the early 1980s, the diffusion of Just-In-Time (JIT) manufacturing from Japanese manufacturers to U.S. manufacturers has progressed at an accelerated rate. At this stage of the diffusion process, JIT implementations are more common and more advanced in large U.S. manufacturers than in small; consequently, U.S. businessmen’s understanding of issues associated with JIT implementations in large manufacturers is more developed than that of small manufacturers. When small manufacturers represent about 96 percent of all U.S. manufacturers, investigation of JIT implementations in small, as well as large, manufacturers is warranted.
This survey study investigates JIT implementation differences between small and large U.S. manufacturers. Ten management practices that constitute the JIT concept are used to examine implementation of JIT manufacturing systems. Odds ratio were constructed to determine if an association exists between implemented versus not implemented and manufacturer size for each JIT practice. Ten changes in performance attributed to JIT implementation are also assessed and examined in the study. Logistic regression models are used to examine the relationships between implementation status of each of the JIT practices and of each of the changes in performance in small and large manufacturers. The results of the study show that the frequencies of the 10 JIT management practices implemented differ between the two groups of manufacturer size, and an association exists between the JIT practices implemented and manufacturer size. Moreover, the changes in performance attributed to JIT implementation vary, depending on implementation status of specific JIT management practices and manufacturer size.
This paper examines the effect of product variety on manufacturing performance, defined here as total labor productivity and consumer-perceived product quality. Using data from the International Motor Vehicle Program (M.I.T.) study of 70 assembly plants worldwide, the paper examines three dimensions of product variety, at fundamental, peripheral, and intermediate levels. The international sample reveals great variation in the distribution of each type of product variety in different regions, reflecting in part different strategies for variety. Furthermore, the impact of different kinds of product variety on performance varies, and is generally much less than the conventional manufacturing wisdom would predict. However, an intermediate type of product variety, here called parts complexity, was found to have a persistent negative impact on productivity. Finally, the study provides partial support for the hypothesis that management policies, in both operations and human resource areas, can facilitate the absorption of higher levels of product variety, i.e. that "lean production" plants are capable of handling higher levels of product variety with less adverse effect on total labor productivity than traditional "mass production" plants.
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.
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.
The article explores the ways in which organizational reputation responds to the revelation of product defects or quality problems, as evidenced by formal product recalls in the U.S. automobile industry. Firm reputation helps create expectations about the firm's products among potential buyers. A good reputation conferred on a firm enhances a buyer's expectation that the firm's products will be of high quality. As long as consumers share expectations about product quality across reputations, therefore, the order of reputation naturally translates into the ordering of quality expectation. Quality expectations can be viewed as an implicit promise from producers to their potential customers to produce goods with a quality level commensurate with reputation and expectations of the products. Given this, the better a producer's reputation, the higher the extent to which the producer's product defects are perceived as a breach of this implicit promise. Consequently, the negative repercussions from the disclosure of product defects will be stronger for high reputation products than for low reputation products. This reputational disadvantage in absorbing the social penalty of the disclosure of product defects can be formally modeled using Bayesian learning models of beliefs. The Bayesian updating process of quality beliefs is also consistent with the idea that the product defects of high reputation firms are likely to receive more attention from the mass media than those of low reputation firms. This disproportional media coverage for high reputation firm product recalls suggest that product defects of high reputation firms draw a larger reaction than those of low reputation firms, which translates to more market penalty.
Using 7 years of plant-level data for the North-American automotive industry, we empirically study productivity losses during new product launches. Using propensity scoring, we estimate an average productivity drop of 20% during the year of a new product launch, and we find that this reduction in productivity remains relatively unchanged over the 7-year horizon, i.e., the manufacturers do not seem to improve. We do not find statistically significant differences among manufacturers with respect to the decrease in productivity. After controlling for the endogenous choice of launch plants, we identify several possible ways to mitigate this productivity decrease. Product flexibility in the body shop is found to mitigate more than a third of the productivity loss. Furthermore, a plant’s previous experience with product launches and a plant’s experience with the product platform are found to mitigate productivity losses even further. But while the positive impact of platform experience persists over time, the experience with launching other products in the same plant fades quickly. Our results suggest that launching products in flexible plants with appropriate platform experience can each save approximately $40 million per year per launch plant.
Using a detailed data set from the U.S. automotive industry, we enrich the existing literature on product line breadth with new results that highlight previously unexplored operational aspects of its benefits and costs. We find that expanding product line breadth has a significant effect on increasing mismatch costs arising from the increased demand uncertainty associated with product proliferation. These mismatch costs 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, suggesting that the operational benefits of inventory pooling achievable by rationalizing product lines can be very substantial. Furthermore, we quantify the benefit of using a platform strategy to mitigate the effects of a broad product line on production costs. 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.
Does variety increase happiness? Eight studies examine how the variety among the activities that fill people's day-to-day lives affects subsequent happiness. The studies demonstrate that whether variety increases or decreases happiness depends on the perceived duration of the time within which the activities occur. For longer time periods (like a day), variety does increase happiness. However, for shorter time periods (like an hour), variety instead decreases happiness. This reversal stems from people's sense of stimulation and productivity during that time. Whereas filling longer time periods with more varied activities makes the time feel more stimulating (which increases happiness), filling shorter time periods with more varied activities makes the time feel less productive (which decreases happiness). These effects are robust across actual and perceived variety, actual and perceived time duration, and multiple types of activities (work and leisure, self-selected and imposed, social and solo). Together the findings confirm that “variety is the spice of life”—but not of an hour.
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.
Organizations can create volume flexibility—the ability to increase capacity up or down to meet demand for a single service—through the use of flexible labor resources (e.g., part-time and temporary workers, as compared to full-time workers). Although organizations are increasingly using these resources, the relationship between flexible labor resources and financial performance has not been examined empirically in the service setting. We use two years of archival data from 445 stores of a large retailer to study this relationship. We hypothesize and find that increasing the labor mix of temporary or part-time workers shows an inverted U-shaped relationship with sales and profit while temporary labor mix has a U-shaped relationship with expenses. Thus, although flexible labor resources can create volume flexibility for a firm along multiple dimensions, it is possible to have too much of a good thing.
This paper was accepted by Serguei Netessine, operations management.
Do hospitals experience safety tipping points as utilization increases, and if so, what are the implications for hospital operations management? We argue that safety tipping points occur when managerial escalation policies are exhausted and workload variability buffers are depleted. Front-line clinical staff is forced to ration resources and, at the same time, becomes more error prone as a result of elevated stress hormone levels. We confirm the existence of safety tipping points for in-hospital mortality using the discharge records of 82,280 patients across six high-mortality-risk conditions from 256 clinical departments of 83 German hospitals. Focusing on survival during the first seven days following admission, we estimate a mortality tipping point at an occupancy level of 92.5%. Among the 17% of patients in our sample who experienced occupancy above the tipping point during the first seven days of their hospital stay, high occupancy accounted for one in seven deaths. The existence of a safety tipping point has important implications for hospital management. First, flexible capacity expansion is more cost-effective for safety improvement than rigid capacity, because it will only be used when occupancy reaches the tipping point. In the context of our sample, flexible staffing saves more than 40% of the cost of a fully staffed capacity expansion, while achieving the same reduction in mortality. Second, reducing the variability of demand by pooling capacity in hospital clusters can greatly increase safety in a hospital system, because it reduces the likelihood that a patient will experience occupancy levels beyond the tipping point. Pooling the capacity of nearby hospitals in our sample reduces the number of deaths due to high occupancy by 34%.
This paper was accepted by Serguei Netessine, operations management.
In this paper, we explore opposing theoretical claims about how organizational reputation affects market reactions to product defects. On the one hand, good reputation could be a disadvantage because expectations about product quality are more likely to be violated by defects in highly reputed products. On the other hand, a good reputation could be an advantage because of strong inertial effects on reputation orderings. We empirically test these competing hypotheses using data on product recalls in the U.S. automobile industry from 1975 to 1999. Our results support for the idea that reputation can be an organizational liability in that highly reputed firms suffer more market penalty as a result of their product recalls. We also propose that the reputational effects are moderated by two important factors: substitutability and generalism/specialism. Our results show that having few substitutes with an equivalent level of reputation, or a focused product identity stemming from specialism, buffers the negative market reactions to product recalls. We conclude with a discussion on the implications of these results for institutional, reputation, and status theories.
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.
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.
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.
We analyze a large, detailed operational data set from a restaurant chain to shed new light on how workload (defined as the number of tables or diners that a server simultaneously handles) affects servers' performance (measured as sales and meal duration). We use an exogenous shock—the implementation of labor scheduling software—and time-lagged instrumental variables to disentangle the endogeneity between demand and supply in this setting. We show that servers strive to maximize sales and speed efforts simultaneously, depending on the relative values of sales and speed. As a result, we find that, when the overall workload is small, servers expend more and more sales efforts with the increase in workload at a cost of slower service speed. However, above a certain workload threshold, servers start to reduce their sales efforts and work more promptly with the further rise in workload. In the focal restaurant chain, we find that this saturation point is currently not reached and, counterintuitively, the chain can reduce the staffing level and achieve both significantly higher sales (an estimated 3% increase) and lower labor costs (an estimated 17% decrease).
This paper was accepted by Noah Gans, special issue on business analytics.
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.
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.
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.
This paper proposes an extension of generalized linear models to the analysis of longitudinal data. We introduce a class of
estimating equations that give consistent estimates of the regression parameters and of their variance under mild assumptions
about the time dependence. The estimating equations are derived without specifying the joint distribution of a subject's observations
yet they reduce to the score equations for niultivariate Gaussian outcomes. Asymptotic theory is presented for the general
class of estimators. Specific cases in which we assume independence, m-dependence and exchangeable correlation structures from each subject are discussed. Efficiency of the pioposecl estimators
in two simple situations is considered. The approach is closely related to quasi-likelihood.
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.
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.
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.
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.
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.
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 and variety (i.e., working on different tasks) to keep workers motivated and provide them opportunities to learn. In this paper, we investigate how these two strategies may bring different productivity benefits over time. 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 a number of days, we find that variety helps improve worker productivity. Additionally, we show that part of this benefit results from workers' cumulative experience with changeovers. Our results highlight the need for organizations to transform specialization and variety into mutually reinforcing strategies rather than treating them as mutually exclusive. Overall, our paper identifies new ways to improve operational performance through the effective allocation of work.
This paper was accepted by Christian Terwiesch, operations management.
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.
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.
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.
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.
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.
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.
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.
Flexible work assignment has great potential to increase productivity. When bottlenecks develop, for example, downstream operations may halt for lack of materials. A flexible