The effectiveness of flexible manufacturing strategies

Abstract

Purpose Against a background of a customization imperative embraced by manufacturing firms in industrialised nations and the concomitant call for more balanced performance measurement systems (PMS), this study seeks to examine the mediating role of both non‐financial and financial performance measures in the relationship between a firm's strategic orientation of flexible manufacturing and organisational performance. Design/methodology/approach A path‐analytical model is adopted using questionnaire data from 84 Australian manufacturing firms. Findings The results indicate that, first, firms emphasising a flexible manufacturing strategy utilise non‐financial as well as financial performance measures; second, these performance measures are associated with higher organisational performance; and third, there is a positive association between a firm's strategic emphasis on flexible manufacturing and organisation performance via non‐financial and financial performance measures. Practical implications While there is agreement on the beneficial role of non‐financial performance measures in supporting strategic priorities associated with customization strategies, equivocal research results have emerged on the role of financial performance measures in this context. The study underscores the importance of both non‐financial and financial performance measures in this context. Originality/value The paper reinstates the value of financial performance measures for firms pursuing customization type strategies and adds to one's knowledge of PMSs by exploring the intervening role of such systems in linking flexible manufacturing strategy to organisation performance.