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Impact of global sourcing and exports on US manufacturing inventories

Impact of global sourcing and exports on US manufacturing inventories Purpose – The purpose of this paper is to empirically investigate the impact of global sourcing and exports on US domestic manufacturing inventories and quantify the additional inventory costs associated with global operations. Design/methodology/approach – A panel data set of 19 US manufacturing sectors is constructed over the period 2002‐2005. Data are collected from the US economic census and other government statistics. Fixed and random effects models in both linear and LOG terms are estimated and the estimated coefficients used to calculate the cost to US manufacturing industries of additional inventories attributed to global operations. Findings – Imports and exports have a positive, significant impact on raw materials inventory and finished goods inventory, respectively, in terms of days of supply. Based on estimations using 2005 data, a 10 percentage point increase in the import and export ratios for all US manufacturers is estimated to be accompanied by $3.03 billion additional costs for raw materials inventory and $5.33 billion for finished goods inventory, respectively. Originality/value – This study is among the first to quantify the impact of global sourcing and exports on US domestic inventories using secondary data. To macroeconomic policy makers and industry managers, the results may serve as a benchmark to how domestic inventories are affected by global outsourcing and exports, and as a reminder that the benefits of global activities may be overestimated if inventory costs are not explicitly taken into consideration. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Physical Distribution & Logistics Management Emerald Publishing

Impact of global sourcing and exports on US manufacturing inventories

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0960-0035
DOI
10.1108/09600030810893517
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to empirically investigate the impact of global sourcing and exports on US domestic manufacturing inventories and quantify the additional inventory costs associated with global operations. Design/methodology/approach – A panel data set of 19 US manufacturing sectors is constructed over the period 2002‐2005. Data are collected from the US economic census and other government statistics. Fixed and random effects models in both linear and LOG terms are estimated and the estimated coefficients used to calculate the cost to US manufacturing industries of additional inventories attributed to global operations. Findings – Imports and exports have a positive, significant impact on raw materials inventory and finished goods inventory, respectively, in terms of days of supply. Based on estimations using 2005 data, a 10 percentage point increase in the import and export ratios for all US manufacturers is estimated to be accompanied by $3.03 billion additional costs for raw materials inventory and $5.33 billion for finished goods inventory, respectively. Originality/value – This study is among the first to quantify the impact of global sourcing and exports on US domestic inventories using secondary data. To macroeconomic policy makers and industry managers, the results may serve as a benchmark to how domestic inventories are affected by global outsourcing and exports, and as a reminder that the benefits of global activities may be overestimated if inventory costs are not explicitly taken into consideration.

Journal

International Journal of Physical Distribution & Logistics ManagementEmerald Publishing

Published: Jul 11, 2008

Keywords: Globalization; Sourcing; Exports; Manufacturing industries; Inventory costs; United States of America

References