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Justification of Strategic Investments in Flexible Manufacturing Technology

Integrated Manufacturing Systems

ISSN: 0957-6061

Article publication date: 1 March 1992

Abstract

Over the last years traditional accounting methods of investment appraisal (such as pay‐back period and discounted cash‐flow analysis) have been abundantly criticized for not being appropriate to evaluate strategic investments, in advanced production technology. It has been argued that strategic arguments should be used as the only sound basis for investment justification. However, opinions continue to be divided about which evaluation criterion (strategic and/or financial) should prevail in the evaluation of flexible manufacturing technology (FMT) investments if the firm is to end up with a successful project. Studies the investment decision‐making process which precedes a major investment in FMT. It is hypothesized that different ways of investment justification can lead to high financial performance of investment projects in FMT, but each way may not be equally effective in every situation. Based on field research in six manufacturing companies, some of the key characteristics of the decision process on the one hand and the investment context on the other have been identified. Suggests how their interaction may affect the ex post financial performance of an FMT investment project.

Keywords

Citation

Slagmulder, R. and Bruggeman, W. (1992), "Justification of Strategic Investments in Flexible Manufacturing Technology", Integrated Manufacturing Systems, Vol. 3 No. 3, pp. 4-14. https://doi.org/10.1108/09576069210015856

Publisher

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MCB UP Ltd

Copyright © 1992, MCB UP Limited