In this paper, we examine how manufacturing strategic alignment and process integration affect manufacturing plant performance under two distinct environmental contexts presented by long-term macroeconomic instability. A large-scale dataset was specifically assembled for the purpose of this research investigation by combining plant-level survey data on practices and performance with secondary macroeconomic data for 14 countries from multiple sources. The results from multi-level regression analyses indicate that while manufacturing strategy alignment and process integration are beneficial for plant performance, they have distinct effects when the contingency factor, macroeconomic instability, is taken in consideration. Notably, when plants face high macroeconomic instability, process integration has a stronger effect on performance whereas in low instability environment manufacturing strategy alignment provides higher performance benefits.
The findings have implications for managers in pointing out ways in which firms can successfully compete during times of recession. In particular, the study found that overly emphasizing the internal manufacturing alignment during recession could lead to opposite result than expected. Although, it could be a common policy to strengthen the internal alignment during recession, too much internal focus could lead firms to go far away from the requirements of the market. The study also offers practical insight regarding the lack of cost implication of manufacturing alignment during recession. The study finds no costs, delivery and flexibility benefit of alignment but negative impact of the same on quality performance. Hence, it would be important for the managers to re-consider the justification of investigating in alignment, especially during recessions. Recessions do not have a set start and conclusion time; hence, decisions about any questionable investment during recession can be detrimental to the future survivability of the firms.
On the other hand, the findings validate the need for process integration during economic instability. Supply and operation managers might hesitate to support processes integration due to initial negative impact on costs and popular negative news such as the cost overruns at Boeing and Airbus due to poor suppliers’ integration. However, the findings of this study highlight that process integration exerts a positive effect on all dimensions of performance when there is no recession, and provides higher quality, delivery and flexibility performance in the presence of economic recession (although cost performance does suffer). Hence, during recession, process integration efforts by firms present a trade-off between costs and other three operational performance factors. Moving the focus from internal alignment to external integration through improving real time information sharing with suppliers and customers will help firms identify the problems quickly and respond accordingly, especially during recession. It is also suggested by several studies that during recession, firms’ sole focus on cost cutting could be detrimental for brand image, future recovery and overall performance. Nonetheless, considering the range of practices required for supplier integration, such as, product/process integration, supplier involvement with new product development, joint decision making, and information sharing, the focal firms need to identify the priority areas for integration rather than integrating all aspects between the parties. To summarize, managers should not expect universal impact of recession on the manufacturing performance but should carefully consider the wide-ranging impact of the recession on the firm’s performance. This is in line with other contingency theory studies that found that contingency factors could have varied influence on manufacturing performance.
Internationalization of manufacturing is a growing trend necessitating a joint examination of international business and operations management issues. Our study aimed at finding the role played by organization-level and supply chain-level factors that impact perfor- mance under different environmental conditions, particularly as pre- sented by the severity of the recent Great Recession. The conceptual framework and the results of this study allow us to integrate these issues and show that careful attention to these factors is needed for manufacturing competitiveness. The organizational and supply chain factors have distinct performance implications.