This paper investigates the effect of routing and machine flexibility on the performance of manufacturing systems. The results obtained here indicate that in a variable environment there is a positive correlation between flexibility and several measures of performance. These measures include part mean flow time and waiting time, flow time and waiting time variance, and mean and variance of work-in-process inventory. The significance of the effect of routing and machine flexibility is shown to increase with increases in either the degree of variability in the system or in the level of system loading. In addition, the relationship between flexibility and performance is found to be of the diminishing return type. That is, most of the performance improvements are achieved at relatively low levels of flexibility. It is also shown that the effect of part flow control policies (e.g., dispatching rules) diminishes with increase in routing and machine flexibility.