Production smoothing in the Japanese vehicle industry

Abstract Physical data from the Japanese vehicle industry, covering monthly observations from 1985:1 to 1994:12, are investigated across nine goods, ranging from bicycles to large buses. Smaller variance of production is found relative to sales across all goods for unadjusted data and in 17 out of 18 cases for seasonally adjusted data. Such evidence in favor of the production smoothing model (PSM) is confirmed by full information maximum likelihood employed jointly on inventories and sales equations. The estimates suggest the industry operates in the range of increasing marginal costs in six out of nine goods. Positive costs of being away from targeted inventory are also present in six out of these nine goods, which make the PSM a good description of this industry.

[1]  S. Zeldes,et al.  Seasonality, Cost Shocks, and the Production Smoothing Model of Inventories , 1987 .

[2]  M. Gorman,et al.  Seasonality and the production-smoothing model , 2000 .

[3]  Paul Ingrassia,et al.  Comeback: The Fall and Rise of the American Automobile Industry , 1994 .

[4]  Robert J. Rossana.  Structural Instability and the Production-Smoothing Model of Inventories , 1998 .

[5]  David Terkla,et al.  Hybrids or Hodgepodges? Workplace Practices of Japanese and Domestic Startups in the United States , 1998 .

[6]  Moheb A. Ghali.  Seasonality, Aggregation and the Testing of the Production Smoothing Hypothesis , 1987 .

[7]  M. Eichenbaum.  Some Empirical Evidence on the Production Level and Production Cost Smoothing Models of Inventory Investment , 1988 .

[8]  G. Hall,et al.  Non-Convex Costs and Capital Utilization: A Study of Production Scheduling at Automobile Assembly Plants , 2000 .

[9]  Spencer D. Krane,et al.  Production Smoothing Evidence from Physical-Product Data , 1991, Journal of Political Economy.

[10]  Dick Beason,et al.  Tests of Production Smoothing in Selected Japanese Industries , 1992 .

[11]  Moheb A. Ghali.  Production-planning horizon, production smoothing, and convexity of the cost functions , 2003 .

[12]  David W. Wilcox,et al.  Production and Inventory Control at the General Motors Corporation During the 1920's and 1930's , 1993 .

[13]  R. Hart,et al.  Excess Labour and the Business Cycle: A Comparative Study of Japan, Germany, the United Kingdom and the United States , 1996 .

[14]  O. Blanchard.  The Production and Inventory Behavior of the American Automobile Industry , 1982, Journal of Political Economy.

[15]  Scott D. Schuh,et al.  Estimating the linear-quadratic inventory model: maximum likelihood versus generalized method of moments , 1995 .

[16]  John Paul Macduffie.  Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry , 1995 .

[17]  D. S. Allen,et al.  Seasonal production smoothing , 1999 .

[18]  Valerie A. Ramey,et al.  Nonconvex Costs and the Behavior of Inventories , 1991, Journal of Political Economy.

[19]  Louis J. Maccini.  The Impact of Demand and Price Expectations on the Behavior of Prices , 1978 .

[20]  The impact of shocks to exchange rates and oil prices on U.S. sales of American and Japanese automakers , 1999 .

[21]  M. Lovell.  Seasonal Adjustment of Economic Time Series and Multiple Regression Analysis , 1963 .

[22]  Louis J. Maccini,et al.  Measuring Noise in Inventory Models , 1993 .