Drivers of Finished-Goods Inventory in the U.S. Automobile Industry

Gérard P. Cachon () and Marcelo Olivares ()
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Gérard P. Cachon: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Marcelo Olivares: Columbia Business School, Columbia University, New York, New York 10027

Management Science, 2010, vol. 56, issue 1, 202-216

Abstract: Automobile manufacturers in the U.S. supply chain exhibit significant differences in their days of supply of finished vehicles (average inventory divided by average daily sales rate). For example, from 1995 to 2004, Toyota consistently carried approximately 30 fewer days of supply than General Motors. This suggests that Toyota's well-documented advantage in manufacturing efficiency, product design, and upstream supply chain management extends to their finished-goods inventory in their downstream supply chain from their assembly plants to their dealerships. Our objective in this research is to measure for this industry the effect of several factors on inventory holdings. We find that two factors, the number of dealerships in a manufacturer's distribution network and a manufacturer's production flexibility, explain essentially all of the difference in finished-goods inventory between Toyota and three other manufacturers: Chrysler, Ford, and General Motors.

Keywords: empirical; supply chain management; distribution; product variety; inventory theory; manufacturing flexibility (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:56:y:2010:i:1:p:202-216

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