Determining the capacity of a process can be tricky. It depends on product mix, how easily resources can be moved around etc. Many students have found out just how hard this can be on the core OM midterm. One part of the equation, however, is easy: If you run more time, you get more done. Thus if GM decides to run a third shift instead of two at a factory, capacity should go up 50%. GM is indeed looking at running one of its factories 24 hours a day (In Risky Move, GM to Run Plants Around Clock, Wall Street Journal, Dec 20). The inspiration for this comes from outside the auto industry:
The Obama administration auto task force that oversaw GM’s reorganization last spring was startled to learn that the industry standard for plants to be considered at 100% capacity was two shifts working about 250 days a year. In recommending that the government invest about $50 billion in GM, the task force urged the company to strive toward operating at 120% capacity by traditional standards.
There is some logic here. Auto assembly plants are very capital intensive making having them sit idle for large chunks of time very expensive. However, there are some good reasons for only running two shifts:
Typically, car makers have added third shifts only as a temporary reaction to market surges. Even then, a more-common tactic is to place two shifts on overtime. “Two shifts gives us the flexibility to perform any necessary maintenance on equipment between shifts,” said Mike Goss, a spokesman for Toyota’s U.S. manufacturing operations.
A few idle hours between shifts also enables a plant to perform cleaning and restocking. A plant’s paint shop alone generally requires about four hours of cleaning a day, said [industry consultant Ron] Harbour, adding that the efficiencies of a third shift can disappear quickly amid slowdowns for such maintenance.
“If running three shifts means you’re moving [the line] at only 60% of capacity, then you haven’t gained anything,” he said.
GM is well aware of these maintenance issues and is trying to find clever solutions:
Inside the plant is a “war room” where GM managers and union officials are plotting the launch of the third shift. Among challenges, they have figured out how to clean the assembly line without halting all of it. It involves “overspeeding” some parts of the line so it can be slowed down later. Once the third shift starts, the line will run about 21.6 hours a day, up from 14.5 hours with two shifts, and will make 6,300 vehicles a week, up from 4,500.
I find this an interesting experiment. The maintenance issue may be overblown. If there is an industry in the world and a firm within that industry that should not get the benefit of the doubt by saying “this is how we’ve always done it” it is the US auto industry and GM. For all its faults, GM has always been able to recruit smart people and (from the article) the UAW local seems willing to play ball. If there is any feasible way of doing this, I expect they will find it.
The real issue to my mind is the supply-demand balance. This is also touched on in the article. The Kansas City plant produces popular cars (the Chevy Malibu and the Buick Lacrosse) but like any auto plant it has a limited repertoire. Will there be consistent demand to sustain three shifts? It is easy to come up with (plausible) scenarios that make three shifts excessive just six months from now. Arguably, a third shift at one plant is less risky (and quicker) than retooling a second plant to make the same cars. However, limiting supply and selling a full price may be even less risky.