Justifying investment in advanced manufacturing technology: a portfolio analysis

Abstract

PurposeThis paper seeks to present the results of an investigation on the justification of investments in advanced manufacturing technology (AMT) at manufacturing plants in the USA. Unlike previous research that explored the adoption and use of a specific AMT or groups of similar AMT, this study focuses on a plant's combination of technologies or its technology portfolio.Design/methodology/approachMail survey responses from a sample of 82 plants are used to examine the relationships between the type of technology portfolio being used and the justification approaches and evaluation techniques that were utilized to justify these investments. The study also investigates the level of functional integration and the level of effort applied to several activities during the justification stage of the AMT projects.FindingsThe majority of plants that had adopted the more complex technology portfolios were using hybrid (economic and strategic) justification approaches supported by ratio and discounted cash flow justification techniques. Plants that were using the less complex portfolio also used hybrid approaches, but tended to concentrate on the use of ratio techniques. Findings on the level of functional integration at various stages of the AMT project are also reported.Research limitations/implicationsThis research concentrated on discrete‐parts durable goods producers in the USA. Further studies are needed to determine whether the findings can be generalized across other industries or in other countries.Originality/valueThis research uses an innovative portfolio analysis approach to investigate the important topic of justification of AMT. Managerial implications arising from the results of this study and a number of new research avenues are advanced.