Non-Convex Costs and Capital Utilization: A Study of Production and Inventories at Automobile Assembly Plants
نویسنده
چکیده
This paper studies how managers at automobile assembly plants organize production across time. Detailed data from eleven single-source automobile assembly plants display considerable cross-plant heterogeneity. At plants which make lowand medium-selling vehicles the capital stock often sits idle, production is more variable than sales, and weeklong shutdowns are often used to vary output. In contrast, at plants which make high-selling vehicles, the capital stock rarely sits idle, production is about as variable as sales, and overtime { not weeklong shutdowns { is most frequently used to vary output. To explain this di erence in production scheduling, I formulate and solve a dynamic programming model of a plant manager. The solution to the dynamic program predicts that when sales are low, non-convexities at the plant level induce the manager to bunch production at points of low average cost; thus, the manager uses less than full capital utilization on average and makes production more volatile than sales. When sales are high, the plant operates in a convex region of the cost curve. Hence the manager employs high levels of capital utilization and makes production about as volatile than sales.
منابع مشابه
Non-convex costs and capital utilization: A study of production scheduling at automobile assembly plants ¬リニ
I study detailed data from eleven automobile assembly plants. These data display considerable cross-plant heterogeneity in production scheduling. To explain the observed heterogeneity, I solve a dynamic programming model. When desired production is below the plant's minimum e$cient scale, non-convexities induce production bunching; the plant uses less than full capital utilization on average an...
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