click on star to go back to Joseph Sarkis' HomepageOver the past two decades, the traditional investment appraisal criteria and techniques used in the evaluation of advanced manufacturing technology (AMT) have come under increasing scrutiny. Several reasons have been put forward concerning the perceived inadequacy of these traditional approaches. Included among these reasons are the myopic (short-term) focus of the criteria, the difficulty in quantifying the benefits associated with AMT, and the treatment of project risk. An empirical study, summarized in this paper, was completed to determine if practitioners have taken the advice of experts and academics. This international study surveyed financial directors and senior executives in the UK and the USA on several factual and perceptual questions. The results show that the sophisticated investment appraisal techniques, such as discounted cash flow, are perceived to unsuitable for evaluating AMT projects, and what is preferred by management is a basic financial appraisal method, such as Payback, possibly linked to some form of qualitative evaluation. It was expected that the more sophisticated techniques of appraisal would have been used to appraise, what must be regarded as, sophisticated AMT projects, but the exact opposite appears to be the case. There is therefore strong evidence to suggest that the economic justification of AMT projects is not without its problems and that the financial appraisal methods used in its evaluation are, to some extent, perceived to be inadequate. It was shown that there are few differences in practice and perception between the UK and USA in the appraisal of AMT and the concern over short-termism. Areas of further interest have been highlighted.
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