Manufacturing Automobiles, Managing Innovation

Product cycles entail the mass production of new – and often increasingly complex – products. While this is an important feature of innovation, it can also result in shocks to the functioning of manufacturing firms. Firms typically experience either model shocks, where new or changed parts have to be assembled, or volume shocks, where models stay the same but the quantity of production increases substantially. Possibilities of defects may rise in both instances. This intervention studies the organizational responses implemented by an auto plant in Colombia to bring down defects per vehicle after critical operational changes.

How do production cycle changes impact workers? Can changes be introduced without creating inefficiencies, and also ensuring the wellbeing of workers? What strategies can managers employ during a period of transition?

Our study focuses on the production of new models of automobiles in a Colombian plant. Plants, typically located in low and middle income countries, have no discretion as to whether or when to implement product changes. Such decisions are made by manufacturers. The plant is tasked only with executing. This may complicate operations in a plant which have to deal, with little control over, decisions regarding rapid changes to model designs or volume demands. At times, this can create inefficiencies in the plant. We combined granular administrative data from a leading global auto manufacturer and tracked both model and volume shocks, to see how plants and workers respond to them.

Our intervention shows that there may be space for not only improving the rate of defects in new vehicles but also the division of decisions taken by manufacturers and plants.

• The plant’s model shock response shows how an increase in the complexity of products can lead to a reduction in organizational hierarchies.
• Mid-level workers are usually reallocated to higher level positions.
• This is not the case with the plant’s volume shock response where the plant hires more entry-level frontline workers, leading to a larger base for the organization.
• In both responses, the number of defects per vehicle increased substantially. These decrease to their prior level only after a period of 2-3 weeks. 

We aim to further investigate the impact these shocks have on worker wellbeing.