Performance Payoffs from Manufacturing Flexibility: The Impact of Market-Driven Mobility

The capabilities needed to achieve excellent manufacturing performance have changed in recent years (Hayes, 2000). Global competitive pressures have stimulated the need for rapid organizational change. Jeff Bleustein (CEO of Harley Davidson) declared, "The only thing that can stop us is if we get complacent. Even though we've been successful, we can't stand still." (Helyar, 2002: 124). Bleustein's comment echoes corporate America's sentiment that adjusting to environmental change is one of the primary challenges facing organizations today. It also reflects some of the unconventional measures taken by manufacturing firms to maintain their competitive position in the marketplace (Skaggs and Droege, 2004). Manufacturing flexibility gives an organization the option to adjust to changing conditions in its environment. However, it is quickly becoming evident that infusing flexibility in manufacturing systems is not as simple or as straightforward as initially envisioned. The reality is that building flexibility in a manufacturing environment is challenging and often involves tough trade-offs (Bengtsson, 2001; Kulatilaka, 1988). There exists a significant body of literature that identifies manufacturing flexibility as a competitive priority of the organization. For example, Price, Beach, Muhlemann, Sharp and Paterson (1998) have studied it within the context of decision support systems that enable organizations to adjust their corporate strategies. Newman, Hanna and Maffei (1992) researched strategic uncertainties faced by organizations that required high levels of manufacturing flexibility. Such research positions manufacturing flexibility as a critical precursor to manufacturing performance and organizational performance. However, empirical evidence to support the relationship between manufacturing flexibility and manufacturing performance is not equivocal. Some researchers (e.g., Bengtsson, 2001) have argued that increased manufacturing flexibility does not necessarily improve manufacturing performance. Empirical evidence (e.g., Das and Nagendra, 1993; Suarez et al., 1995) seems to support such a contrary contention. Past research provides valuable insights into the relationship between elements of manufacturing flexibility and manufacturing performance. Several studies have been conducted at the dimensional level. However, these have been rather dispersed, and have not resulted in a comprehensive interpretation of the relationship between these two constructs. In summary, researchers have arrived at conflicting positions regarding the relationship between manufacturing flexibility on manufacturing performance. Objectives of the Study The discussion presented above raises three interesting questions. First, why has empirical evidence not wholeheartedly supported the theoretical arguments of researchers, or the practical wisdom of business executives, that flexibility has a significant and positive impact on performance? Second, could a re-specification of the manufacturing flexibility construct shed new light on the flexibility-performance relationship? Third, if a significant relationship does exist, how exactly are these constructs related at the dimensional level? Finding answers to the first two questions would certainly benefit academicians. For example, the use of a re-specified and more integrated model would allow us to tease out the relative impact of each dimension of manufacturing flexibility on manufacturing performance. Answers to the third question will provide valuable tools to business executives who are constantly looking for ways to improve manufacturing performance. I will address each of the three questions in this article. I begin by reviewing the literature on the linkages between manufacturing flexibility and manufacturing performance. I then provide an overview of the dimensions of manufacturing flexibility and manufacturing performance. …