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Justification of Strategic Investments in Flexible Manufacturing Technology

Justification of Strategic Investments in Flexible Manufacturing Technology Over the last years traditional accounting methods of investmentappraisal such as payback period and discounted cashflow analysishave been abundantly criticized for not being appropriate to evaluatestrategic investments, in advanced production technology. It has beenargued that strategic arguments should be used as the only sound basisfor investment justification. However, opinions continue to be dividedabout which evaluation criterion strategic andor financial shouldprevail in the evaluation of flexible manufacturing technology FMTinvestments if the firm is to end up with a successful project. Studiesthe investment decisionmaking process which precedes a major investmentin FMT. It is hypothesized that different ways of investmentjustification can lead to high financial performance of investmentprojects in FMT, but each way may not be equally effective in everysituation. Based on field research in six manufacturing companies, someof the key characteristics of the decision process on the one hand andthe investment context on the other have been identified. Suggests howtheir interaction may affect the ex post financial performanceof an FMT investment project. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Integrated Manufacturing Systems Emerald Publishing

Justification of Strategic Investments in Flexible Manufacturing Technology

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0957-6061
DOI
10.1108/09576069210015856
Publisher site
See Article on Publisher Site

Abstract

Over the last years traditional accounting methods of investmentappraisal such as payback period and discounted cashflow analysishave been abundantly criticized for not being appropriate to evaluatestrategic investments, in advanced production technology. It has beenargued that strategic arguments should be used as the only sound basisfor investment justification. However, opinions continue to be dividedabout which evaluation criterion strategic andor financial shouldprevail in the evaluation of flexible manufacturing technology FMTinvestments if the firm is to end up with a successful project. Studiesthe investment decisionmaking process which precedes a major investmentin FMT. It is hypothesized that different ways of investmentjustification can lead to high financial performance of investmentprojects in FMT, but each way may not be equally effective in everysituation. Based on field research in six manufacturing companies, someof the key characteristics of the decision process on the one hand andthe investment context on the other have been identified. Suggests howtheir interaction may affect the ex post financial performanceof an FMT investment project.

Journal

Integrated Manufacturing SystemsEmerald Publishing

Published: Mar 1, 1992

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