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research-article

Is More Less? Benefits and Costs of High-Variety Production in Non-Assembled Manufacturing

[+] Author and Article Information
Rianne E. Laureijs

PhD Student, Engineering and Public Policy, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
rlaureij@andrew.cmu.edu

Erica R.H. Fuchs

Professor, Engineering and Public Policy, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
erhf@andrew.cmu.edu

Kate Whitefoot

Assistant Professor, Engineering and Public Policy, Mechanical Engineering, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
kwhitefoot@cmu.edu

1Corresponding author.

ASME doi:10.1115/1.4041943 History: Received April 24, 2018; Revised October 12, 2018

Abstract

Firms use product variety to target different customer segments and increase revenue. However, product variety can introduce costs into the production line. While many studies have characterized the costs of product variety in assembly production, little research details the sources and costs of increased product variety in non-assembled (fabrication) production, despite non-assembled products accounting for over 50% of U.S. manufacturing. Our research examines the production-level costs, benefits, and margins associated with producing a variety of non-assembled product designs on a single line, and how design attributes affect these outcomes. We identify six general design attributes that influence product-variety outcomes, and establish a framework of potential sources of variety costs and benefits. We then conduct a case study of a plant that produces a large variety of unique products in a single year. We use Process Based Cost Modeling to simulate production at scale to examine the production costs and benefits of various product mixes. In our case study, we find that cost increases related to changeovers between product designs are small relative to the cost benefits of product variety derived from sharing equipment and labor. Consequently, producing a diverse mix of product designs on the same line, while eliminating some products with certain design attributes, leads to the highest margins. In cases where varying design attributes can be processed by the same flexible equipment, or products are highly customized, firms could be in a different regime where changeover costs instead dominate.

Copyright (c) 2018 by ASME
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