From the April/May 2012 issue of Treasury & Risk magazine

Rain, Wind Go Away

Bad weather can affect output at manufacturing plants.

Manufacturing plants in areas with a lot of bad weather see their production suffer, according to a study by researchers from Columbia Business School and the Wharton School.

The analysis of 10 years of weekly production data and weather conditions for 64 U.S. auto plants shows a week with six or more days of rain resulted in 6% lower production than a week with no rain, while a day with a high-wind advisory cut a plant’s production that week by about 26%. The plant with the best weather, in Arlington, Texas, lost only 2% of production a year, while the plant with the worst weather, in Lordstown, Ohio, lost 11%, according to the study.

Inclement weather could affect production by delaying the delivery of parts or interfering with employees’ travel to work, or because very hot or cold temperatures lower workers’ productivity, researchers say.

The study has implications for where companies locate factories, says Gerard Cachon, a professor at Wharton and one of the study’s co-authors.

Companies should also consider internal operating procedures, Cachon says, including “how many spare parts you carry, how to time the delivery of the parts that come in, and how you manage employee shifts.”

 

The research paper can be found here.

 

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