Effects of Poor Transportation on Lean Production and Industrial Clustering: Evidence from the Indian Auto Industry

Abstract Conventional wisdom suggests that poor transportation systems adversely affect industrial competitiveness by raising the unit cost of freight. This study finds that freight is neither the only nor the most significant cost that poor transportation creates for auto firms in India. Poor transportation also raises the damages incurred in transit, total inventories, and ordering and overhead costs. Worse, it creates external diseconomies by introducing inefficiencies and unreliability in the supply chain, making it difficult for assemblers to implement lean production. These external diseconomies—rather than excessive freight prices or other direct costs—may be the more debilitating impact of poor transportation infrastructure on industrial performance. In India, transportation constraints and the imperatives of lean production are driving assemblers to create auto clusters.

[1]  Daniel Roos,et al.  The machine that changed the world : the story of lean production , 1991 .

[2]  E. Jimenez,et al.  Human and physical infrastructure : public investment and pricing policies in developing countries , 1994 .

[3]  Yosef Sheffi,et al.  A Review and Evaluation of Logistics Metrics , 1994 .

[4]  Sumila Gulyani.  Innovating with Infrastructure , 2001 .

[5]  P. Krugman.  Geography and Trade , 1992 .

[6]  E. Gramlich,et al.  Infrastructure Investment: A Review Essay , 1994 .

[7]  Sumila Gulyani,et al.  Innovating with infrastructure : the automobile industry in India , 2001 .

[8]  Antonio Estache,et al.  World development report 1994 : infrastructure for development , 1994 .

[9]  G. Gereffi,et al.  Commodity Chains and Global Capitalism , 1994 .

[10]  David Alan Aschauer,et al.  IS PUBLIC EXPENDITURE PRODUCTIVE , 1989 .

[11]  Theofanis P. Mamuneas,et al.  The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries , 1991 .

[12]  Douglas Holtz-Eakin,et al.  Public-Sector Capital and the Productivity Puzzle , 1992 .

[13]  Emmanuel Jimenez.  Chapter 43 Human and physical infrastructure: Public investment and pricing policies in developing countries , 1995 .

[14]  A. Hirschman,et al.  The strategy of economic development , 1959 .

[15]  Sumila Gulyani.  Innovating with Infrastructure: How India's Largest Carmaker Copes with Poor Electricity Supply , 1999 .

[16]  C. Sabel,et al.  The Second Industrial Divide: Possibilities for Prosperity , 1984 .

[17]  K M Gwilliam,et al.  SUSTAINABLE TRANSPORT: PRIORITIES FOR POLICY REFORM , 1996 .

[18]  Kyu Sik Lee,et al.  Infrastructure Bottlenecks, Private Provision, and Industrial Productivity: A Study of Indonesian and Thai Cities , 1996 .

[19]  Daniel T. Jones,et al.  From lean production to the lean enterprise , 1994 .

[20]  David L. Levy.  Lean Production in an International Supply Chain , 1997 .

[21]  John Humphrey,et al.  Industrial reorganization in developing countries: From models to trajectories , 1995 .

[22]  Nigel Spence,et al.  Infrastructure and industrial costs in British industry , 1989 .

[23]  Alicia Haydock Munnell,et al.  Policy Watch: Infrastructure Investment and Economic Growth , 1992 .