The effect of strategic external integration on financial performance with mediating role of manufacturing flexibility: Evidence from bottled drinking industry in Indonesia

Abstract

Manufacturing flexibility is critical for businesses in adapting to the unstable conditions created by environmental influences such as consumer demand complexities, raw material disruptions, and industrial policy changes. In order to analyze the way of improving manufacturing flexibility, this study suggests that strategic supplier integration (SSI) and strategic customer integration (SCI) lead to the flexibilities in production process, resulting in high financial performance. This research measures the analysis of structural equation modelling based on empirical data obtained from 139 manufacturers in Indonesia. The study aims to shed light into how manufacturing flexibility mediates the impact of strategic external integration on financial performance within the bottled drinking industry in Indonesia. The study reveals that both SSI and SCI had a major impact on financial performance, while they indirectly increase the financial performance through manufacturing flexibility.