The decision to adopt new technology--Effects on organizational size

FMS is new technology with many considerations that differ from those familiarly applied to job shop, flow shop and automated flow shop work configurations. A major obstacle to using FMS is that little is known about how to co-ordinate flexible work and transfer activities to obtain a relatively constant flow of marketable output. In the past year, articles on FMS have appeared with increasing frequency. Their emphasis highlights the reduction in variable production costs that FMS promises. This paper describes a different approach, namely, to uncover the effects of FMS technology on optimal organizational size. To achieve this end, we must consider factors other than variable production cost savings. This enlarges the scope of the decision model required to evaluate FMS configurations. The investigation proceeds along two diverse, but complementary paths. One is based on a theoretical model, using non-linear breakeven analysis. The second employs empirical data obtained from industrial users. The theoretical model indicates that FMS requires a larger total output than the system it replaces. Empirical results tend to confirm this finding. In addition, FMS alters other managerial considerations, including appropriate marketing strategies.