Productivity and Cost
In this paper, I will describe a company that has made a strategic decision based on productivity, wages and benefits, and other fixed and variable costs. I will also include the decision that was made and discuss the outcomes. In addition, I will incorporate the law of diminishing marginal productivity and the relationship between productivity and cost.
For the purpose of this paper, I have chosen the company Visteon Automotive Systems. Visteon Automotive Systems is an enterprise of the Ford Motor Company, as well as the world's second largest supplier of automotive parts and components. They employ 82,000 people and have 120 manufacturing, engineering sales, and technical centers located in 21 countries" (Holcomb et al., 2000).
In 1996, one of Visteon's plants, the Sterling Plant, started a new production line to assemble front axles for four wheel drive trucks and sport utility vehicles. They quickly discovered there is an incredible demand for four wheel drive trucks had become overwhelmed by it. In fact, in the first year of production, the demand increased to 550,000 units, however, Visteon had only projected a production capacity of 400,000. Visteon knew that every axle they were not able to produce meant a loss in sales of one of the highly profitable 4x4 vehicles. It became extremely critical for them to increase the productivity of the front-axle line (Holcomb et al., 2000).
One of the problems they realized is the production cycle is so cumbersome and complex that if one of the 39 stations goes down, then the entire assembly line eventually shuts down, causing the loss of valuable production time and hindering their ability to meet the demand. In order to resolve this, Visteon decided to set up two new s ...