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Interrelationships in Inventory Turnover Performance Between Supplier and Customer Firms

Author

Listed:
  • Henry, Joseph J.

    (Rowan University)

  • Christensen, Peter

    (Brigham Young University)

  • Brau, James C.

    (Brigham Young University)

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.

Suggested Citation

  • Henry, Joseph J. & Christensen, Peter & Brau, James C., 2023. "Interrelationships in Inventory Turnover Performance Between Supplier and Customer Firms," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 14(2), pages 157-171, April.
    • Handle: RePEc:ris:buecrj:0630
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    More about this item

    Keywords

    Inventory Turnover; Supply Chain Efficiency; Inventory Factor Model;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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