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Investigating causal relations between labour productivity and JIT in SMEs

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  • Seyed-Mahmoud Aghazadeh

Abstract

The inventory-productivity relationship has been described in many studies but never examined statistically. This paper uses historical data for 33 Small and Medium Enterprises (SMEs) from various manufacturing industries in the USA. In this exploratory analysis, a model is developed and tested to determine the correlation between labour productivity and Just in Time (JIT) minimising inventory. We approach this model in two different ways. The results of the first approach indicate that a higher inventory or Work in Process (WIP) inventory, each tested separately, has a positive effect on labour productivity, which was not expected. A higher WIP/sales ratio, however, has a negative effect on labour productivity, as expected. The results of the modified model demonstrate that a higher capital investment per employee and a higher WIP/sales ratio have a negative impact on labour productivity.

Suggested Citation

  • Seyed-Mahmoud Aghazadeh, 2008. "Investigating causal relations between labour productivity and JIT in SMEs," International Journal of Globalisation and Small Business, Inderscience Enterprises Ltd, vol. 2(4), pages 362-370.
    • Handle: RePEc:ids:ijgsbu:v:2:y:2008:i:4:p:362-370
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