Interrelationships in Inventory Turnover Performance Between Supplier and Customer Firms

Joseph J. Henry, Peter Christensen and James C. Brau
Additional contact information
Joseph J. Henry: Rowan University
Peter Christensen: Brigham Young University
James C. Brau: Brigham Young University

Business and Economics Research Journal, 2023, vol. 14, issue 2, 157-171

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.

Keywords: Inventory Turnover; Supply Chain Efficiency; Inventory Factor Model (search for similar items in EconPapers)
JEL-codes: C51 L14 M41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0630

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