ECONOMIC JUSTIFICATION FOR FLEXIBLE MANUFACTURING SYSTEMS: COUNTING THE STRATEGIC BENEFITS

A major Japanese manufacturer, by installing a flexible manufacturing system (FMS), has reduced the number of machines in one facility from 68 to 18, the number of employees from 215 to 12, space requirements from 103,000 sq. ft. to 30,000, and processing time from 35 days to a day and a half. However, the financial return over the first two years was only $6.9 million on an investment of $18 million. On the basis of conventional accounting principles, this scale of return on investment would be difficult, if not impossible, to justify. This paper urges manufacturers to consider investment in FMS as a strategic decision with broad implications for competitive positioning rather than a tactical one with only financial implications. In the example quoted above, the strategic benefits of FMS--such as increased flexibility and reduced production lead times--may contribute far more significantly to corporate success in world markets than the financial savings it generates.

  • Supplemental Notes:
    • ISATA 84, "In Pursuit of Technical Excellence". Proceedings Volume 2. International Symposium on Automotive Technology and Automation with particular reference to Vehicle Management Systems and Flexible Manufacturing Systems, Milan, Italy 24-28 September 1984.
  • Corporate Authors:

    Automotive Automotion Limited

    42 Lloyd Park Avenue
    Croydon CRO 5SB, Surrey,   England 

    Alfa Romeo Auto SpA

    Milan,   Italy 
  • Authors:
    • Young, C
  • Publication Date: 1984

Media Info

  • Pagination: 7 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00399947
  • Record Type: Publication
  • Source Agency: National Highway Traffic Safety Administration
  • Report/Paper Numbers: ISATA 84069, HS-038 487
  • Files: HSL, USDOT
  • Created Date: Nov 30 1985 12:00AM