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Production stability in a supply-chain environment

Listed author(s):
  • Bivin, David G.

There is evidence that the growth rate of GDP in the United States stabilized in 1984 and improvements in production management are frequently cited as a source. This paper defines the quality of production as the scale of the firm's production shock and assumes that the firm can exercise control over the scale of the shock. The firm is assumed to operate in a supply-chain environment and the question of interest is what, if any, influence the adoption of more reliable production techniques by a single firm has for aggregate volatility. The results indicate that the adoption of more reliable production techniques by a single firm typically have minor effects on aggregate volatility because the benefit dies out rapidly as the product moves downstream. The exceptions are those cases in which the firm adopting the improved technology lies near the end of the chain. There is also some benefit when deliveries of materials to the initial firm in the production chain stabilize.

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File URL: http://www.sciencedirect.com/science/article/pii/S0925-5273(08)00059-5
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Article provided by Elsevier in its journal International Journal of Production Economics.

Volume (Year): 114 (2008)
Issue (Month): 1 (July)
Pages: 265-275

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Handle: RePEc:eee:proeco:v:114:y:2008:i:1:p:265-275
Contact details of provider: Web page: http://www.elsevier.com/locate/ijpe

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  1. Lovell, Michael C., 1993. "Simulating the inventory cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 21(2), pages 147-179, June.
  2. Fisher, J.D.M. & Hornstein, A., 1995. "(S,s)Inventory Policies in General Equilibrium," UWO Department of Economics Working Papers 9514, University of Western Ontario, Department of Economics.
  3. Hirsch, Albert A., 1996. "Has inventory management in the US become more efficient and flexible? A macroeconomic perspective," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 37-46, August.
  4. Aubhik Khan & Julia Thomas, 2003. "Inventories and the Business Cycle: An Equilibrium Analysis of (S,s) Policies," NBER Working Papers 10078, National Bureau of Economic Research, Inc.
  5. F. Owen Irvine & Scott Schuh, 2005. "The roles of comovement and inventory investment in the reduction of output volatility," Working Papers 05-9, Federal Reserve Bank of Boston.
  6. Bivin, David G., 2008. "Production management, output volatility, and good luck," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2118-2136, July.
  7. Gabriel Perez-Quiros & Margaret M. McConnell, 2000. "Output Fluctuations in the United States: What Has Changed since the Early 1980's?," American Economic Review, American Economic Association, vol. 90(5), pages 1464-1476, December.
  8. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  9. Julia K. Thomas & Aubhik Khan, 2005. "Modeling Inventories Over the Business Cycle," 2005 Meeting Papers 182, Society for Economic Dynamics.
  10. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2004. "Recent U.S. Macroeconomic Stability: Good Policies, Good Practices, or Good Luck?," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 824-832, August.
  11. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
  12. Irvine, F. Owen & Schuh, Scott, 2005. "Inventory investment and output volatility," International Journal of Production Economics, Elsevier, vol. 93(1), pages 75-86, January.
  13. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
  14. E. S. Mills, 1954. "Expectations, Uncertainty and Inventory Fluctuations," Review of Economic Studies, Oxford University Press, vol. 22(1), pages 15-22.
  15. Thomas F. Siems, 2005. "Supply chain management: the science of better, faster, cheaper," Southwest Economy, Federal Reserve Bank of Dallas, issue Mar, pages 1,7-12.
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