The Hidden Cost of Worker Turnover: Attributing Product Reliability to the Turnover of Factory Workers

Abstract

Traceability enables manufacturers to link the work performed by individual workers with downstream effects in a supply chain. With good traceability, firms may be able to observe the downstream quality of specific product units, recognize lapses in product reliability, connect those lapses to workforce dynamics occurring upstream in the supply chain, and correct the problems by improving those dynamics. To study this potential, we focus on the impact of worker turnover on product reliability. We collect and integrate (1) data reporting factory worker staffing and turnover within a major consumer electronics producer's supply chain and (2) traceable data covering the component quality and field failures—i.e., replacements and repairs—of nearly 50M consumer mobile devices over four years of customer usage. Devices are individually traced back to the factory conditions and staffing, down to the assembly line-week, under which they were produced. Despite the manufacturer's extensive quality-control efforts, each percentage-point increase in the weekly rate of workers quitting from an assembly line (its weekly worker turnover) is found to increase field failures by 0.74-0.79%. In the high-turnover weeks following paydays, eventual field failures are strikingly 10.2% more common than for devices produced during the lowest-turnover weeks immediately before paydays. In other weeks, the assembly lines experiencing higher turnover produce an estimated 2-3% more field failures on average. The associated costs amount to hundreds of millions USD. We demonstrate that staffing and retaining a stable factory workforce critically underlies product reliability and showcase the value of work traceability in supply chain operations.