Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A flexible manufacturing system (FMS) is a production method that is designed to easily adapt to changes in the type and quantity of the product being manufactured. Machines and computerized systems can be configured to manufacture a variety of parts and handle changing levels of production.

A flexible manufacturing system (FMS) can improve efficiency and thus lower a company's production cost. Flexible manufacturing also can be a key component of a make-to-order strategy that allows customers to customize the products they want.

Such flexibility can come with higher upfront costs. Purchasing and installing the specialized equipment that allows for such customization may be costly compared with more traditional systems.

The concept of flexible manufacturing was developed by Jerome H. Lemelson (1923-97), an American industrial engineer and inventor who filed a number of related patents in the early 1950s. His original design was a robot-based system that could weld, rivet, convey, and inspect manufactured goods.

Systems based on Lemelson's FMS inventions debuted on factory floors in the U.S. and Europe in the late 1960s and proliferated in the 1970s.

A flexible manufacturing system may include a configuration of interconnected processing workstations with computer terminals that process the end-to-end creation of a product, from loading/unloading functions to machining and assembly to storing to quality testing and data processing. The system can be programmed to run a batch of one set of products in a particular quantity and then automatically switch over to another set of products in another quantity.

A make-to-order production process that allows customers to customize their products would also be an example of flexible manufacturing.

The main benefit is the enhancement of production efficiency. Downtime is reduced because the production line does not have to be shut down to set up for a different product.

Flexible manufacturing can be a key component of a make-to-order strategy that allows customers to customize the products they want.

Disadvantages of FMS include its higher upfront costs and the greater time required to design the system specifications for a variety of future needs.

There also is a cost associated with the need for specialized technicians to run, monitor, and maintain the FMS. Advocates of FMS maintain that the increase in automation typically results in a net reduction in labor costs.