Managing demand variability using requisite variety for improved workflow and operational performance: the role of manufacturing flexibility

Abstract

In this study, we use the law of requisite variety to investigate the effect of manufacturing flexibility on workflow and operational performance. After developing a requisite variety construct using a parsimonious conceptualisation of manufacturing flexibility, we test our research model with data collected from US manufacturers. The results of the analysis using structural equation modelling support our hypotheses. Our study makes three important contributions. First, we provide a more complete understanding of manufacturing flexibility and its relationship to operational performance. By empirically testing our model, we develop support for manufacturing flexibility as a workflow regulator which provides an organisation with the necessary variety in its response-repertoire to effectively manage demand variability. Second, our analysis of our requisite variety construct allows us to better understand the complex relationship between manufacturing flexibility and efficiency. Our findings suggest that the trade-off between manufacturing flexibility and efficiency can be attenuated. Third, we provide evidence to show that manufacturing flexibility positively influences performance by increasing the speed of material flow and improving organisational efficiency.

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