Integrating operational excellence and sustainability: development of a performance measurement framework for manufacturing small and medium-sized enterprises

Manufacturing small and medium-sized enterprises (SMEs) play a vital role in economic development; however, they continue to face substantial sustainability bottlenecks due to limited resources, weak operational capabilities, and the lack of an integrated framework that links sustainability with operational excellence. This study addresses this gap by developing a sustainability performance measurement framework that systematically incorporates operational excellence dimensions within sustainability assessment for manufacturing SMEs. A multi-method approach combining fuzzy delphi method (FDM), partial least squares structural equation modeling (PLS-SEM), and fuzzy full consistency method (fuzzy FUCOM) was employed to identify, validate, and prioritize critical key performance indicators (KPIs). Initially, 43 KPIs were screened using FDM, resulting in 22 critical indicators across operational excellence, economic, environmental, and social sustainability dimensions. The PLS-SEM results reveal that cost efficiency, equipment effectiveness, human resource management, and quality significantly enhance sustainability performance, whereas flexibility and responsiveness demonstrate insignificant effects. Subsequently, fuzzy FUCOM was applied to determine KPI weights and develop an integrated sustainability performance index framework. The findings indicate that economic sustainability and operational excellence are the most influential dimensions for manufacturing SMEs, while profitability, quality, cost efficiency, reliable customer relationships, and return on investment emerge as the highest-priority KPIs. Moreover, the framework was further validated through sensitivity analysis and case studies involving five manufacturing SMEs, demonstrating its practical applicability in benchmarking sustainability performance and identifying improvement priorities. The study contributes new knowledge by proposing a quantitatively validated and operationally integrated sustainability assessment framework tailored specifically for resource-constrained manufacturing SMEs in developing economies.