Relationship between manufacturing complexity, strategy, and performance of manufacturing industries in Indonesia

Abstract

Previous research has emphasized the need to further investigate the impact of manufacturing complexity on company strategies and performance in developing countries manufacturing sector. Indonesia is one such developing country where this relationship has yet to be adequately studied. The manufacturing industry sector is expected to drive Indonesia s economic growth to achieve the targeted average growth of 6% per year in the next five years. This study aimed to examine the relationship between manufacturing complexity, manufacturing strategies (cost, delivery, flexibility, and quality), and manufacturing performance of Indonesian automotive component manufacturing industries. Partial least square structural equation modeling (PLS-SEM) was employed in the investigation. The sample size comprised 72 automotive component manufacturing companies located in the Jakarta region. Results indicated that the higher the value of manufacturing complexity, the higher the manufacturing strategies should be prioritized. The manufacturing strategy related to quality, particularly, has a significant positive impact on manufacturing performance. The novelty of this study lies in its detailed examination of the relationship between manufacturing complexity, manufacturing strategies, and manufacturing performance, particularly in developing countries. The results are expected to fill the existing research gaps.