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Modular Production's Impact on Japan's Electronics Industry
Get PDFThis paper examines the notion that national industrial models evolve with time, and provides evidence of transformation
when elements are transferred from one society to another. The Japanese Production System, itself an adaptation of
American-style mass production to the constraints of the post World War Two Japanese economy, in turn had a profound
impact on the organization of industrial production in the United States, especially during the 1990s. I characterize the
new model that emerged in the United States as the “Modular Production System.” This paper examines the response of
Japanese electronics firms to Modular Production in the period 2000-2004. It is based on forty-three interviews with top
managers at Japan’s largest electronics firms, conducted during the calendar years 1999-2004, as well as insights gained from
more than 600 field interviews conducted between 1999 and 2005 for the MIT Industrial Performance Center’s
Globalization Study. I argue that Japanese electronics firms have been strongly influenced by Modular Production but that
they have, unsurprisingly, adapted it to their current environment and in the process may have begun to transform both the
Japanese and Modular Production Systems. While it is too early to determine if these changes amount to the emergence of
a distinct industrial model, the chapter concludes by laying out the challenges and opportunities that now face Japanese
electronics firms given their recent experiments with joint technology development, production alliances, and global
outsourcing
Assessing Predation in Airline Markets with Low-Fare Competition
Get PDFAssessment of unfair competitive practices in airline markets has traditionally been based on the analysis of changes in average fares, revenue and traffic following low-fare entry. This paper demonstrates the severe limitations of using such measures. In particular, our case studies show that despite very different perceptions by some analysts of apparent incumbent carrier response to entry, average fares, revenues and traffic measures showed very similar patterns of change in the cases studied. We then use a competitive airline market simulation to illustrate the importance of often ignored factors – revenue
management and the flows of connecting network passengers on the flight legs affected by low-fare entry – in explaining the effects of entry on these aggregate measures of airline performance. These simulations results further reinforce the danger in using such measures as indicators of predatory behavior in airline markets
Supermarket Human Resource Practices and Competition from Mass Merchandisers
Get PDFThe rise of supercenters and the entry of Wal-Mart into food retailing have dramatically altered the competitive
environment in the industry. This paper explores the impact of such changes on the labor market practices of traditional
food retailers. We use longitudinal data on workers and firms to construct new measures of compensation and employment,
and examine how these measures evolve within and across firms in response to changes in product market competition. An
additional feature of the analysis is to combine rich case study knowledge about the retail food industry with the new
matched employer-employee data from the Census Bureau. We compare a set of human resource practices using measures
based on the matched employer-employee data to an index based on survey data and case studies. The consistency between
the two approaches suggests that the measures are capturing important differences in supermarket human resource practices
and policies. Analysis of administrative data combined with case study observations strengthens our understanding of the
diversity of human resource practices in the retail food industry
The Effect of HRM Practices and R&D Investment on Worker Productivity
Get PDFUsing data on a large sample of electronics firms in seven large states from a newly developed employer-employee matched database (Longitudinal Employer Household Dynamics, LEHD), we examine the impact of human resource management
(HRM) practices and technology on worker productivity. Motivated by extensive site visit research in the semiconductor industry in which we observe the interaction of HRM practices, technology and product markets, we use linked employer-employee data to test the generalizability of our case study observations. Specifically, we examine the relationship between product markets and HRM practices. Empirically, we identify HRM clusters for firms based on firm-level observations of nine measures of HRM outcomes. Next, we use principal components analysis to examine the relationships between the HRM measures. Then we use these principal components and their interactions with R&D investment as explanatory variables in a worker productivity regression.
We find that there are large differences on the impact of human resource practices on labor productivity across levels of technological investment. Our preliminary results indicate that firms with high levels of R&D investment and HRM systems with multiple ports of entry, performance incentives, and lower turnover have higher worker productivity than comparable high-R&D firms without these HRM practices. Similarly, firms with low R&D that implement HRM systems with performance incentives have higher productivity than low R&D firms without performance incentives. These results suggest that high R&D firms are more likely to buy new skills compared to low R&D firms, and yet these high R&D firms suffer if they lose too many experienced workers. These findings are consistent with the implications of our “make versus buy” model of workforce skill adjustment as a response to technological change
Integration of the Load Matching and Routing Problem with Equipment Balancing for Small Package Carriers
Get PDFSmall package delivery is a multi-billion dollar industry with complex planning decisions required to efficiently utilize costly resources and meet tight time requirements. The planning process is typically decomposed into sequential subproblems to establish tractability. This decomposition can greatly degrade solution quality. In this paper, we therefore consider the integration of two closely related key sub-problems: load matching and routing, and equipment balancing. First, we identify critical challenges faced in trying to solve these problems. Then, we present a novel modeling approach to address these challenges. Finally, we conclude with computational results from UPS, the world’s largest package delivery company, demonstrating an improvement of approximately 5% over their existing methods for solving this pair of problems
Flexibility and Complexity in Periodic Distribution Problems
Get PDFIn this paper, we explore trade-offs between operational flexibility and operational complexity in periodic distribution
problems. We consider the gains from operational flexibility in terms of vehicle routing costs and customer service benefits,
and the costs of operational complexity in terms of implementation difficulty. Periodic distribution problems arise in a
number of industries, including food distribution, waste management and mail services. The period vehicle routing problem
(PVRP) is a variation of the classic vehicle routing problem in which driver routes are constructed for a period of time; the
PVRP with service choice (PVRP-SC) extends the PVRP to allow service (visit) frequency to become a decision of the
model. While introducing operational flexibility in periodic distribution systems can increase efficiency, it poses three
challenges: the difficulty of modeling this flexibility accurately; the computational effort required to solve the problem as
modeled with such flexibility; and the complexity of operationally implementing the resulting solution. This paper considers
these trade-offs between the system performance improvements due to operational flexibility and the resulting increases in
operational and computational complexity as they relate to periodic vehicle routing problems. In particular, increasing the
operational complexity of driver routes can be problematic in industries where some level of system regularity is required. As
discussed in the paper, recent work in the literature suggests that dispatching drivers consistently to the same geographic
areas results in driver familiarity and improved driver performance. Additionally, having the same driver visit a customer on
a continual basis can foster critical relationships. According to UPS, such driver-customer relationships are a key competitive
advantage in its package delivery operations, attributing 60 million packages a year to sales leads generated by drivers. In this
paper, we develop a set of quantitative measures to evaluate the trade-offs between flexibility and complexity
Offshoring in the Semiconductor Industry: A Historical Perspective
Get PDFSemiconductor design is one of the many white-collar job categories considered to be at risk from offshoring by U.S.
companies via investments and outsourcing. Data about this activity are scarce and hard to interpret, but there is much to be learned from looking at earlier periods in the industry’s history when other phases of the semiconductor value chain – assembly and fabrication – experienced rapid offshore expansion.
This paper reviews the lessons from these earlier offshore movements of semiconductor industry jobs in assembly. Then it analyzes the offshoring of semiconductor fabrication and then design; this analysis is based on our ongoing field research combined with trade press reports and government data.
The experience of assembly and fabrication supports the claim by some that offshoring is a reasonable response to the competitive challenges and opportunities facing the semiconductor industry, and that the industry will adapt in ways that aren’t necessarily clear from the outset. Nevertheless, the outcome of the current offshoring of design provides evidence that some U.S. chip design engineers face at least short-term displacement as a result of the industry’s current round of globalization
Decoupling Market Incumbency from Organizational Experience: Locating the Real Sources of Competence in the Research and Development of Radical Innovation
Get PDFThis paper examines the proposition that, during a radical technological change, incumbents’ “incompetence” in
researching the new technology results from their organizational inertia. I argue that prior studies have inappropriately assigned the disadvantage of organizational inertia and (implicitly) the advantage of competence re-use (both consequences of previous organizational experience) only to incumbents or to diversifying entrants respectively (both categories of experienced firms), because they failed to decouple market incumbency from organizational experience. I explore this proposition in the context of the anti-cancer drug market as it is disrupted by the biotechnology revolution through a combination of direct observation (based on semi-structured interviews and industry presentations) followed by statistical analysis (based on several sources to understand the market in the period 1949-2004). I find that when destroyed and reusable
competences are considered, the significant firm categories to compare are no longer incumbents vs. entrants, but experienced (i.e., incumbents and diversifying entrants) vs. de novo firms. Moreover, within the area of R&D with the most competence destruction, I find that, counterintuitively, incumbents outperform all other firms, supporting my final proposition to integrate the corporate diversification framework into creative destruction studies
Call-Routing Schemes for Call-Center Outsourcing
Get PDFCompanies may choose to outsource parts, but not all, of their call-center operations. In the course of studying contact centers in the telecommunications and financial services industries, we have observed the following (apparently) common scheme. A company classifies its customers as high- or low-value, serving the former with their “in house” operations and routing the latter to an outsourcer. Typically, the company imposes service-level constraints on the time each type of customer waits on hold.
This paper considers four schemes for routing low-value calls between the client company and the outsourcer. These
schemes vary in the complexity of their routing algorithms, as well as the sophistication of the telephone and information technology infrastructure they require of the two operations. For three of these schemes, we provide a direct characterization of system performance. For the fourth, most complex, scheme we provide performance bounds for the important special case in which the service requirements of high- and low-value callers are the same. These results allow us to systematically compare the performance of the various routing schemes. Our results suggest that, for clients with large outsourcing requirements, the simpler schemes that require little client-outsourcer coordination can perform very well
Early Experience with Pay-for-Performance from Concept to Practice
Get PDFThe adoption of pay-for-performance mechanisms for quality improvement is growing rapidly. While there is intense
interest in and optimism about pay-for-performance programs, there is little published research on pay-for-performance in
health care. In this study, we examine the impact of a prototypical physician pay-for-performance program on quality of
care. We evaluate a natural experiment with pay-for-performance using administrative reports of physician group quality
from PacifiCare Health Systems for both an intervention group (California physician groups) and a contemporaneous
comparison group (Pacific Northwest physician groups).
Compared to physician groups in the Pacific Northwest, PacifiCare’s California network demonstrated greater quality
improvement after the pay-for-performance intervention only in cervical cancer screening (a 3.6 percentage point difference
in improvement (p<.05)). In total, PacifiCare awarded $3.4 million (27% of the amount set aside) in bonus payments
between July 2003 and April 2004, the first year of the program. For all three measures, physician groups with baseline
performance at or above the performance threshold for receipt of a bonus improved the least but garnered the largest share
of the bonus payments. We conclude that paying providers to reach a common, fixed performance target may produce little
gain in quality for the money spent and will largely reward those with higher performance at baseline. Paying explicitly for
quality improvement may be a more effective means to induce accelerated improvement in quality.
This evaluation is developed from and is informed by a decade-long collaboration between the researchers (affiliates of
Harvard’s Sloan Center for Managed Care Industry Research) and PacifiCare that began with a series of in-depth site visits
to the physician groups in PacifiCare’s network, followed by a survey of those groups that examined the use of organizational
and financial mechanisms for managing care