Impact of Manufacturing Flexibility on Supply Chain Performance in the Automotive Industry

  • Stephan Biller
  • Ebru K. Bish
  • Ana Muriel
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 42)


The basis of competition in the automotive industry is changing. While product innovation and styling remain the most important areas of competition, an almost equally fierce battle is now developing in the areas of customization and order fulfillment (Stalk, Stephenson and King [35]). Currently, all models of vehicle distribution are fundamentally inventory-driven and do not promote customized ordering. However, several vehicle manufacturers — most notably Ford and General Motors — have recently launched initiatives to transform their companies from predominantly make-to-stock to predominantly make-to-order producers. This will enable vehicle manufacturers and their dealers not only to dramatically reduce their finished goods inventory but also respond to challenges and threats from third party Internet companies.


Supply Chain Inventory Level Mass Customization Allocation Policy Flexible System 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. [1]
    Andreou, S.A. (1990) A Capital Budgeting Model for Product-Mix Flexibility. Journal of Manufacturing Operations Management, Vol. 3, 5–23.Google Scholar
  2. [2]
    Bassok, Y., R. Anupindi, and R. Akella. (1999) Single-period Multiproduct Inventory Models with Substitution. Operations Research, Vol. 47, 632–642.Google Scholar
  3. [3]
    Beach, R., A.P. Muhlemann, D.H.R. Price, A. Paterson, and J.A. Sharp. (2000) A Review of Manufacturing Flexibility. European Journal of Operational Research, Vol. 122, 41–57.Google Scholar
  4. [4]
    Biller, S., L.M.A. Chan, D. Simchi-Levi, and J. Swann. (2000) Dynamic Pricing and the Direct-to-Consumer Model in the Automotive Industry. In preparation.Google Scholar
  5. [5]
    Bish, E.K., A. Muriel, and S. Biller. (2000) Capacity and Flexibility Planning in a Make to-Order Environment. Under review for Management Science.Google Scholar
  6. [6]
    Bitran, G.R. and S. Dasu. (1992) Ordering Policies in an Environment of Stochastic Yields and Substitutable Demands. Operations Research, Vol. 40, 999–1017.Google Scholar
  7. [7]
    Bitran, G.R. and S. Gilbert. (1996) Managing Hotel Reservations with Uncertain Arrivals. Operations Research, Vol. 44, 35–49.CrossRefGoogle Scholar
  8. [8]
    Brady, D., K. Kerwin, D. Welch, L. Lee, and R. Hof. Customizing for the Masses. Business Week, March 20, 2000.Google Scholar
  9. [9]
    Caulkins, J.P. and C.H. Fine. (1990) Seasonal Inventories and the use of Product-Flexible Manufacturing Technology. Annals of Operations Research, Vol. 26, 351–375.Google Scholar
  10. [10]
    Carroll, W.J. and R.C. Grimes. (1995) Evolutionary Change in Product Management: Experiences in the Car Rental Industry. Interfaces, Vol. 25, 84–104.CrossRefGoogle Scholar
  11. [11]
    DE Toni, A. and S. Tonchia. (1998) Manufacturing Flexibility: A Literature Review. International Journal of Production Research, Vol. 36, 1587–1617.CrossRefGoogle Scholar
  12. [12]
    Dickinson, J., S. Dembkowski, C. Shah, and R. Morrison. (1998) The Future of Automotive Distribution. Financial Times Automotive,London, UK.Google Scholar
  13. [13]
    Drucker, P. (1946) The Concept of a Corporation. John Day, New York, NY.Google Scholar
  14. [14]
    Edelstein, M. and M. Melynk. (1977) The Pool Control System. Interfaces, Vol. 8, 21–36. Google Scholar
  15. [15]
    Eppen, G.D., R.K. Martin, and L. Schrate. (1989) A Scenario Approach to Capacity Planning. OR Practice, Vol. 37, 517–527. Google Scholar
  16. [16]
    Fine, C.H. AND R.M. Freund. (1990) Optimal Investment in Product-Flexible Manufacturing Capacity. Management Science,Vol. 36, 449–466. Google Scholar
  17. [17]
    Fine, C.H. (1998) Clockspeed. Harper Collins, New York, NY.Google Scholar
  18. [18]
    Geraghty, M.K. AND E. Johnson. (1996) Revenue Management Saves National Car Rental. Interfaces, Vol. 27, 1–7–127. Google Scholar
  19. [19]
    Graves, S.C. AND B.T. Tomlin. (2000) Process Flexibility in Supply Chains, under review for Management Science. Google Scholar
  20. [20]
    Hsu, A. and Y. Bassok. (1997) Random Yield and Random Demand in a Production System with Downward Substitution. To appear in Operations Research. Google Scholar
  21. [21]
    J.D Power Automotive and Associates 2000 J.D. Power Automotive and Associates (2000) 2000 New Study, in The Power Report, October, Augora Hills, CA.Google Scholar
  22. [22]
    Jones, R.A. AND J.M. Ostory. (1984) Flexibility and Uncertainty. Rev. Economic Studies, Vol. 51, 13–32. Google Scholar
  23. [23]
    Jordan, W.C. AND S.C. Graves. (1995) Principles and Benefits of Manufacturing Process Flexibility. Management Science, Vol. 41, 577–594. Google Scholar
  24. [24]
    Karaesmen, I. AND G. VAN Ryzin. (1998) Overbooking with Substitutable Inventory Classes. Working paper, Columbia University, NY.Google Scholar
  25. [25]
    Khouja, M. (1999) The Single-period (News-vendor) Problem: Literature Review and Suggestions for Further Research. Omega,Vol. 27, 537–553. Google Scholar
  26. [26]
    Kouvelis, P. (1992) Design and Planning Problems in Flexible Manufacturing Systems: A Critical Review. Journal of Intelligent Manufacturing, Vol. 3, 75–99. Google Scholar
  27. [27]
    Lapidus, G. (2000) Gentlemen, Start Your Engines. Goldman Sachs Research Report, New York, NY.Google Scholar
  28. [28]
    Larson, R.C. AND A.R. Odoni. (1981) Urban Operations Research. Prentice-Hall, Inc., New Jersey.Google Scholar
  29. [29]
    Muriel, A. AND A. Somasundaram. (2000) Simulation Study of the Impact of Manufacturing Flexibility on Sales, Inventory, and Transportation Costs. Working paper, University of Massachusetts, Amherst, MA.Google Scholar
  30. [30]
    Netessine, S., G. Dobson, AND R.A. Shumsky. (2000) Flexible Service Capacity: Optimal Investment and the Impact of Demand Correlation. To appear in Operations Research.Google Scholar
  31. [31]
    Pasternak, B. AND Z. Drezner. (1991) Optimal Inventory Policies for Substitutable Commodities with Stochastic Demand. Naval Research Logistics, Vol. 38, 221–240.CrossRefGoogle Scholar
  32. [32]
    Sethi, A.K. and S.P. Sethi. (1990) Flexibility in Manufacturing: A Survey. The International Journal of Flexible Manufacturing Systems, Vol. 2, 289–328.CrossRefGoogle Scholar
  33. [33]
    Sloan, A.P. (1963) My Years with General Motors. Currency and Doubleday, New York, NY.Google Scholar
  34. [34]
    STALK, G. (1988) Time the next source of competitive advan-tage. Harvard Business Review July—August 1988, Vol. 66, No. 4.Google Scholar
  35. [35]
    Stalk, G., S. Stephenson, and T. King. (1996) Searching for Fulfillment: Breakthroughs in Order-to-Delivery Process in the Auto Industry. The Boston Consulting Group.Google Scholar
  36. [36]
    Triantis, A.J. and J.E. Hodder. (1990) Valuing Flexibility as a Complex Option. The Journal of Finance, Vol. 45, 549–565.CrossRefGoogle Scholar
  37. [37]
    Van Mieghem, J.A. (1998) Investment Strategies for Flexible Resources, Management Science, Vol. 44, 1071–1078.CrossRefGoogle Scholar
  38. [38]
    Van Oyen, M., E. SENTURK-GEL, and W. Hopp. (2000) Performance of Workforce Agility in Collaborative and Non-Collaborative Work Systems. To appear in IIE Transactions.Google Scholar
  39. [39]
    Welch, D. Where’s My Dream Car? Business Week, November 27, 2000.Google Scholar
  40. [40]
    Womack, J.P., D.T. Jones, and D. Roos. (1990) The Machine that Changed the World. Harper Collins, New York, NY.Google Scholar

Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Stephan Biller
    • 1
  • Ebru K. Bish
    • 2
  • Ana Muriel
    • 3
  1. 1.Enterprise Systems LabGM Research and Development CenterWarrenUSA
  2. 2.Department of Industrial and Systems EngineeringVirginia TechBlacksburgUSA
  3. 3.Mechanical and Industrial Engineering DepartmentUniversity of Massachusetts AmherstAmherstUSA

Personalised recommendations