The relationship between manufacturing integration and performance from an activity-oriented perspective

Abstract

Manufacturing integration with other functional areas and suppliers is a key aspect for achieving sustainable competitive advantage. The objective of this study is to analyze manufacturing integration from an activity-based perspective. We hypothesize that manufacturing integration with suppliers, marketing, and R&D is positively related to profit and sales growth when it occurs simultaneously in key internal activities. We surveyed 366 companies located in the southern region of Brazil, chosen from the SEBRAE(1) database. We used structural equations modeling to address validity and reliability issues. We evaluated common method variance (CMV) with the MTMM model and used path analysis to test the structural relations. We found that all manufacturing integration aspects are positively related to sales growth, but only manufacturing-R&D integration is positively related to profitability. Therefore, managers interested in improving the performance of their plants should favor the integration between manufacturing and R&D teams, at all hierarchical levels. We did not find any evidence, however, that direct interaction between manufacturing and marketing improves performance.