Effect of Dispersed Manufacturing System on Performance in a Stagflated Developing Economy: A Study of Selected Companies in Nigeria

Abstract

This study looked at the impact of dispersed manufacturing system on performance of Nigerian firms. The need to reduce cost of production has made organizations to adapt to the many challenges the manufacturing industry faces today. Such challenges for industrial companies include: innovation, speed, and flexibility, possibilities of information technology and data-communication, the globalization of markets, and the ongoing specialization of firms. Another phenomenon is the increasing participation of innovative small and medium sized enterprises in international manufacturing networks. As such, the problems associated with manufacturing firms either dispersed or concentrated are; inability of dispersed or concentrated firms to minimize cost of production; un-sustainability and growth of potential; insufficient return on capital employed and insufficient earnings on per book value basis. It is against this background that this study sought to examine: the impact of cost of production on sustainability and growth of dispersed and concentrated manufacturing firms in Nigeria; the impact of cost of production on return on capital of dispersed and concentrated manufacturing firms in Nigeria and the impact of cost of production on earnings per share of dispersed and concentrated manufacturing firms in Nigeria. The research design adopted for the study was the ex-post facto research which enabled the researcher to make use of secondary data from ten (10) manufacturing firms as well as determine cause-effect relationship between dependent and independent variables both on a firm by firm basis as well as on aggregate basis. The cost of production rate (CPR) was the dependent variable while Sustainability and Growth (SG), return on capital (ROC) and earnings per share (EPS) were the independent variables as performance indicators and the study adapted the OLS Regression model to test the hypotheses. The findings from the study revealed that on a firm by firm basis, there was mixed variations on the impact cost of production rate on the performance of Nigerian firms however on aggregate basis for dispersed firms; there is positive non-significant impact of cost of production rate on sustainability and growth (t-value =0.109, SG coefficient = 0.002); there was a positive non-significant impact of cost of production rate on return on capital (t-value = 1.030, ROC coefficient = 0.353); and the impact of cost of production rate (CPR) on earnings per share (EPS) for dispersed firms was positive and non-significant (t-value = 0.595, EPS coefficient = 0.001). On the other hand for concentrated firms on aggregate basis, there was positive non-significant impact of cost of production rate on sustainability and growth (t-value = 0.103, SG coefficient = 0.229), there was a positive non-significant impact of cost of production rate on return on capital (t-value = 0.695, ROC coefficient = 0.180) and the impact of cost of production rate on earnings per share for concentrated firm is negative and non-significant (t-value = 0.599, EPS coefficient = -0.015). Thus, it was recommended that for improved performance, firms should adapt dispersed manufacturing system since performance indicators performs better when compared with concentrated firms and government should increase expenditure on basic infrastructural facilities such as road, electricity as to enhance the growth of manufacturing firms in Nigeria.