The effect of facility size on manufacturing structure and performance

There has been considerable discussion over the last several years concerning the size of manufacturing facilities and their productivity. Anecdotal evidence suggests that smaller facilities are more productive than larger facilities since they tend to be more focused on a smaller set of products. The assumption is that as facilities become larger, they lose their focus by expanding their product mix and as a result, productivity suffers. Very little empirical evidence exists to support this idea.

In an attempt to bring some empirical clarity to this question, a study was conducted involving over 300 US manufacturing facilities of various sizes, as measured by number of employees. The performance level of each facility was estimated through the use of 29 performance indicators. A statistical analysis was conducted addressing the relationship between facility size and performance.

While some differences in operating characteristics between the two groups were found, only a few significant differences in performance were found. Results of this data analysis do not support the general suggestion that small facilities are more productive than larger facilities.

Since respondents spanned all manufacturing industries, there may be some differences in certain industries that are not reflected due to the cross‐industry nature of this study. Also, the responses to the items were all perceptual based on a seven‐point Likert scale. There were no objective measures included because of the incomparability between industries, particularly for performance measures.

Results of this study can provide valuable insight into the relationship between facility size and productivity.