Overhead costs of plants in the Michigan Manufacturing (MM) system vary greatly from plant to plant for several reasons, but the major one is that the varying complexity of the mission of each plant. Exhibits 2A and 2B show that different plants vary greatly in the number of product families they produce, and then also in the number of product models. We did not calculate the correlation between these numbers and the burden rates, but it is evident that the higher the number of products/product families, the higher the burden rates.
The role of the Pontiac plant in the current manufacturing system: Pontiac was the first plant of MM. When products became popular, MM built new plants, dedicated to those high volume, standardized products. With time, Pontiac lost this position of a feeder of new product into the MM - it was »left with a residue of low volume products« (1). Pontiac also retained responsibility for many replacement parts (even for discontinued products).
The recommendations of the task force are in our opinion short sighted, and based mostly on financial analysis, while neglecting other major factors such as complexity of operations and human resources issues. Even the financial analysis itself is not necessarily accurate. Let us consider the following points:
1.It is true that some of the products may be transferred to other plants, some of which are not operating at full capacity. However, under-utilization does not mean these plants would have no problem to handle low volume production. Transferring too many products would mean that the complexity level at those plants will increase, and they will not be as focused as they are at the present time and therefore not as profitable. We may end up moving overhead from Pontiac to those other plants. 2.Closing Pontiac would mean losing many experienced and versatile people with a proven track record of developing and...