An Empirical Study of Flexibility in Manufacturing

Much has been written in recent years about flexible factories and flexible manufacturing systems (FMS), but the literature has been largely theoretical; managers who are interested in making their factories more flexible have little empirical research on which to base their decisions. In particular, a number of questions have yet to be answered: What are the types of flexibility that affect a company’s competitive position? How can different types of flexibility be achieved? What kinds of tradeoffs must managers make between flexibility and productivity, quality, or other performance dimensions?

To address some of these questions, we studied thirty-one printed circuit board (PCB) plants belonging to fourteen electronics firms in the United States, Japan, and Europe.1 Although our data originates from only one industry, we believe they have important implications for manufacturers elsewhere. Specifically, our research has implications for plant automation, worker participation, relationships with suppliers, wage schemes, and component reusability. We found significant relationships among different types of flexibility and discovered that increased flexibility in certain areas had no adverse quality and cost effects. In this paper, we propose a framework for incorporating flexibility into mainstream strategy analysis, describe our research, and explain our findings.

Flexibility and Strategy

The literature on manufacturing flexibility that we used as background is divided into two areas: analytical models and empirical studies. The analytical models have come almost exclusively from the fields of operations research and operations management. According to Fine’s classification scheme, there have been four main concerns in the modeling literature: (1) flexibility and life cycle theory, (2) flexibility as a hedge against uncertainty, (3) interactions between flexibility and inventory, and (4) flexibility as a strategic variable that influences competitors’ actions.2

We divide the empirical literature into four groups. The first is concerned with developing taxonomies of flexibility and is represented by the work of Gerwin; Buzacott; Mandelbaum; Browne; Slack; Kumar and Kumar; and Zelanovic.3 The second group deals with the relationship between flexibility and performance and includes work by Jaikumar; Tombak; Tombak and de Meyer; and Fiegenbaum and Karnani.4 The third group covers historical and economic analyses of flexibility and tends to view flexibility as an important attribute for the competitiveness of a firm, industry, or country. This group includes research by Piore and Sabel; Harrigan; Storper and Christopherson; Adler; Womack, Jones, and Roos; and Cusumano.

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References

1. We did not select these companies randomly; with one exception, all are large electronics manufacturers that are members of programs at the Massachusetts Institute of Technology (Leaders for Manufacturing Program, International Center for Research on the Management of Technology, and Industrial Liaison Program). We gathered data in questionnaires, plant visits, and in-person or telephone interviews. Overall, the authors visited sixteen plants and conducted phone interviews with all of them. For further information on the methodology, see:

F.F. Suarez, M.A. Cusumano, and C.H. Fine, “An Empirical Study of Manufacturing Flexibility in Printed Circuit Board Assembly,” Operations Research, forthcoming.

2. C.H. Fine, “Development in Manufacturing Technology and Economic Evaluation Models,” in Logistics of Production and Inventory, S.C. Graves et al., eds. (Amsterdam, Holland: North Holland, 1989).

3. D. Gerwin, “An Agenda for Research on the Flexibility of Manufacturing Process,” International Journal of Operations and Production Management 7 (1987): 38–49;

J.A. Buzacott, “The Fundamental Principles of Flexibility in Manufacturing Systems” (Brighton, England: proceedings for the First International Conference on Flexible Manufacturing Systems, 1982);

M. Mandelbaum, “Flexibility in Decision Making” (Toronto, Canada: University of Toronto, Department of Industrial Engineering, Ph.D. dissertation, 1978);

J. Browne et al., “Classification of Flexible Manufacturing Systems,” The FMS Magazine, April 1984;

N. Slack, “Flexibility as a Manufacturing Objective,” International Journal of Production Management 3 (1983): 4–13;

N. Slack, “Manufacturing Systems Flexibility — An Assessment Procedure,” Computer-Integrated Manufacturing Systems 1 (1988):1;

V. Kumar and U. Kumar, “Entropic Measures of Manufacturing Flexibility,” IEEE Transactions on Engineering Management 35 (1987): 250–257; and

D.M. Zelanovic, “Flexibility: A Condition for Effective Production Systems,” International Journal of Production Research 20 (1982): 319–337.

4. R. Jaikumar, “Postindustrial Manufacturing,” Harvard Business Review, November–December 1986, pp. 69–76;

M. Tombak, “The Importance of Flexibility in Manufacturing” (Fontainebleau, France: INSEAD, working paper 88/35);

M. Tombak and A. de Meyer, “Flexibility and FMS: An Empirical Analysis,” IEEE Transactions on Engineering Management 35 (1988): 101–107;

A. Fiegenbaum and A. Karnani, “Output Flexibility: A Competitive Advantage for Small Firms,” Strategic Management Journal 12 (1991): 101–114.

5. M. Piore and C. Sabel, The Second Industrial Divide (New York: Basic Books, 1984);

K.R. Harrigan, Strategic Flexibility: A Management Guide for Changing Times (Lexington, Massachusetts: Lexington Books, 1984);

M. Storper and S. Christopherson, “Flexible Specialization: A Critique and Case Study” (Los Angeles, California: University of California, Institute of Industrial Relations, mimeo, 1986);

P.S. Adler, “Managing Flexibility: A Selective Review of the Challenges of Managing the New Production Technologies’ Potential for Flexibility” (Stanford, California: Stanford University, report to the Organization for Economic Cooperation and Development, 1985);

J. Womack, D. Jones, and D. Roos, The Machine That Changed the World (New York: Rawson Associates, 1990); and

M.A. Cusumano, “Shifting Economies: From Craft Production to Flexible Systems and Software Factories,” Research Policy, 1992.

6. A.K. Sethi and P.S. Sethi, “Flexibility in Manufacturing: A Survey,” International Journal of Flexible Manufacturing Systems 2 (1990): 289–328;

F.F. Suarez, M.A. Cusumano, and C.H. Fine, “Flexibility and Performance: A Literature Critique and Strategic Framework” (Cambridge, Massachusetts: MIT Sloan School of Management, working paper 3298-91, 1991);

J.H. Hyun and B.H. Ahn, “Flexibility Revisited: Review, Unifying Frameworks, and Strategic Implications” (Korea: Korean Advanced Institute of Science and Technology, mimeo, 1990); and

D. Gerwin, “Manufacturing Flexibility: A Strategic Perspective” (Ontario, Canada: Carleton University School of Business, mimeo, 1991).

7. Piore and Sabel (1984).

8. S. Kekre and K. Srinivasan, “Broader Product Line: A Necessity to Achieve Success?” Management Science 36 (1990): 1216–1231.

9. K.B. Clark and T. Fujimoto, Product Development Performance: Strategy, Organization, and Management in the World Auto Industry (Boston: Harvard Business School Press, 1991); and

K. Imai, I. Nonaka, and H. Takeuchi, “Managing the New Product Development Process: How Japanese Companies Learn and Unlearn,” in The Uneasy Alliance, K. Clark et al., eds. (Boston: Harvard Business School Press, 1985).

10. Fiegenbaum and Karnani seem to use these concepts interchangeably. Stigler and Marschak and Nelson give theoretical support to our definition. See:

Fiegenbaum and Karnani (1991);

G. Stigler, “Production and Distribution in the Short Run,” Journal of Political Economy 47 (1939): 305–327; and

T. Marschak and R. Nelson, “Flexibility, Uncertainty, and Economic Theory,” Metroeconomica 14 (1962): 42–58.

11. This is consistent with Jaikumar’s observations regarding American flexible manufacturing systems. See:

Jaikumar (1986).

12. See, for example:

M.A. Cusumano, The Japanese Automobile Industry: Technology and Management at Nissan and Toyota (Cambridge, Massachusetts: Harvard University Press, 1985);

J.F. Krafcik, “Triumph of the Lean Production System,” Sloan Management Review, Fall 1988, pp. 41–52;

Womack et al. (1990); and

J.P. MacDuffie, “Beyond Mass Production: Flexible Production Systems and Manufacturing Performance in the World Auto Industry” (Cambridge, Massachusetts: MIT Sloan School of Management, Ph.D. dissertation, 1991).

13. D.A. Garvin, Managing Quality (New York: Free Press, 1988);

Krafcik (1988);

Womack et al. (1990); and

MacDuffie (1991).

14. Skinner was the first proponent of this view. See:

W. Skinner, “The Focused Factory,” Harvard Business Review, May–June 1974, pp. 113–121.