Lead time in automobile product development explaining the Japanese advantage

Abstract

This paper examines the determinants of lead time performance in the world auto industry, a complex consumer durable industry which is facing intensifying global competition and volatile market demands. We focus on explaining the apparent lead time advantage of the Japanese firms compared to their American and European competitors. Drawing on an extensive base of data on development projects, the paper studies the effect of product and project characteristics and organizational capabilities on development lead time. The notion that product development is a system of problem solving cycles provides a conceptual framework for the analysis. A central theme in the paper is the distinction between planning and engineering. We model the differences in problem solving in these activities and examine the determinants of lead time in them. We examine the effects of product content, project scope, and organizational capability for quick development. The results suggest that different factors influence planning and engineering: product innovation and project scope affect planning lead time, while process innovation and organizational capability affect engineering lead time. Overall, we find that the real lead time advantage of the Japanese is on the order of 12 months. In a competitive market with changing customer demands and rapid technological advance, a lead time gap of that magnitude is competitively significant.