This paper analyzes the basic performance of 27 automobile engine linesoperated by 18 companies on three continents, based on questionnaire datagathered in the Spring and Fall of 1995. Engine plants differ from assemblyplants in being very capital-intensive. Thus a traditional "hours/engine"metric of performance is inappropriate. Here a composite cost comprisinglabor and amortization of capital, accounting for downtime, is used tocompare plant performance. We find that performance varies widely, evenfor similar engines. Cost drivers comprise number of workers, capitalinvested, and efficiency (fraction of scheduled time actually used forproduction). The drivers are in turn driven by external factors out of theplant?s control and internal factors that are under its control to some degree.We find that about half the variance in cost is due to the external factors, suchas number of cylinders, utilization of scheduled time, and number of variantsof engine made (the last loosely related to age of the engine family). Internalfactors such as work in process inventory (strongly) and age of the workers(somewhat) drive cost. Downtime, the reverse of efficiency, is itself dividedinto scheduled and unscheduled downtime; the former is driven largely bynumber of variants while the latter is driven to some degree by the age of thefamily. The results of this study include a methodology to estimate the cost ofvariety. Statistical analyses are used to calculate the additional cost ofmachining blocks ($4.92 more per block, $15 million extra investment, 9additional workers and -4.40 operating efficiency associated with oneadditional square root of number of variants). This methodology can beextended to create a cost of variety for an entire engine.
