How Company-Specific Production Systems Affect Plant Performance : The S-Curve Theory

Inspired by the Toyota Production System, many multinational manufacturers have recently developed their own company-specific production systems. While there is a general consensus that these systems can boost plant performance, the literature does not offer an explanation for the pattern of this improvement. We propose that this pattern follows an S-curve: as a plant implements a company-specific production system, its performance improves slowly at first, then grows rapidly, then less rapidly, and, finally, the improvement rate tapers off. We developed this empirically grounded theory by using a case research methodology. The case is the implementation of the Volvo Production System (VPS) in Volvo Group's 67 factories worldwide. The data were collected from different sources: a survey, Volvo's formal audit process, and 40 plant visits, which included observations on the factory floor and 200 interviews with managers. We used locally weighted regression to discern the pattern of improvement directly from the data. The S-curve theory has significant managerial and theoretical implications. It suggests that managers should tailor their targets and action plans based on the level of maturity the plant has reached in implementing the company-specific production system. Knowledge of what to expect when implementing such a system fills a gap in the literature and offers explanations of the forces that shape the pattern of change in a plant's performance during implementation