From IDS reports
Extensive use of overtime shifts by factories contributes to costly auto recalls, according to a seven-year study of the North American auto industry.
Faculty members in the Kelley School of Business conducted the study, along with faculty from University of Minnesota’s Carlson School of Management and INSEAD business school.
The paper based off the study’s findings was recently published in Management Science.
Five of the top 10 biggest auto company recalls in United States history have occurred during the last decade.
In the study, researchers found factories favor overtime and extra shifts over expansion of their capacity with more employees to meet rising demands of auto production.
“If managers run an auto factory on consistent overtime, recalls stemming from manufacturing errors increase by more than 300 percent,” said George Ball, assistant professor of operations and decision technologies at Kelley, in a press release.
“Such errors become even more prevalent when overtime is combined with high levels of variety.”
Upon completion of the study, researcher found the total cost of U.S. auto recalls in the last seven years alone exceeded $167 million.
“While previous studies had focused on linking product recalls to financial costs and loss of market share, our intent was to identify operational characteristics of an assembly line such as overtime and variety and link them to future recalls,” said Rachna Shah, associate professor of supply chain and operations at the Carlson School and the paper’s lead author, in a press release.
Researchers studied recalls of all cars made in North America by Chrysler, Ford, General Motors, Honda, Mazda, Mitsubishi and Toyota from 2000 to 2006. The researchers used three sources: the Harbour Report, Ward’s Automotive and the National Highway Traffic and Safety Administration.
Three former executives from GM read the paper and vouched for the validity of its findings.
Taylor Telford
