Increasing Small to Medium size Enterprises (SME’s) competitive edge requires continuously developing creative and novel methods and solutions. This paper presents a novel design for a manufacturing system named Smart Manufacturing Systems (SMS). The new design can be viewed as a modification to the Flexible Manufacturing System (FMS) to better suits continuously changing market conditions, which may lead a company to develop a more sustainable competitive edge. The new design address several issues in manufacturing system design that affect the competitiveness of the system such as: merger of different manufacturing processes, non-productive times, and to be able to performing economically under different market conditions.

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