Keywords

inventory turnover, supply chain efficiency, inventory factor model

Abstract

Using inventory turnover to measure the efficiency of corporate inventory management, we perform econometric analyses to verify whether the inventory efficiency of a firm’s supply chain partners is a statistically significant driver of the firm’s own inventory efficiency. We test two mutually exclusive hypotheses. First, suppliers hold inventory on behalf of customers, effectively displacing inventory up the supply chain and resulting in a negative correlation between supplier and customer inventory turnover. Alternatively, inventory efficiency is integrated along the supply chain, resulting in a positive correlation between supplier and customer inventory turnover. Our bivariate and multivariate analyses of both firm- and industry-level data support the “integration” hypothesis of higher inventory efficiency along the supply chain. Our findings highlight the importance of expanding the research and practice of working capital management beyond the firm-level.

Original Publication Citation

Interrelationships in Inventory Turnover Performance Between Supplier and Customer Firms, with Peter Christensen and Joe Henry, Business and Economics Research Journal, Vol. 14, Iss. 2, 2023, 157-171.

Document Type

Peer-Reviewed Article

Publication Date

2023

Publisher

Business and Economics Research Journal

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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