The effect of inventory management on firm performance

The effect of inventory management on firm performance Purpose Lean management is getting more and more attention in today's highly competitive environment. In this context, the aim of this study is to test the hypothesis that efficient lean inventory management leads to an improvement in a firm's financial performance.Designmethodologyapproach Data for the analysis came from the ICAP database, which contains financial information on all medium to large Greek firms. The sample period extended from 2000 to 2002. For each year all manufacturing firms with the corporate form of societs anonyms operating in any one of the three representative industrial sectors in Greece food, textiles and chemicals were selected.Findings Preliminary results, obtained by crosssection linear regressions, reveal that the higher the level of inventories preserved departing from lean operations by a firm, the lower its rate of returns. Findings are additionally tested by the use of pseudolikelihood ratio test which constitutes a more reliable tool, thus verifying the robustness of the linearity of the relationship.Research limitationsimplications Given the great number of the possible determinants of performance it is difficult to isolate the effect of inventories even by using large samples and advanced methodologies.Originalityvalue Since the results from other empirical studies on the microeconomic determinants and consequences of inventories are somewhat contradictory, this study sheds more light to this issue by employing more sophisticated statistical tests applied to a large and recent sample of Greek manufacturers across different industries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Productivity and Performance Management Emerald Publishing

The effect of inventory management on firm performance

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1741-0401
DOI
10.1108/17410400810881827
Publisher site
See Article on Publisher Site

Abstract

Purpose Lean management is getting more and more attention in today's highly competitive environment. In this context, the aim of this study is to test the hypothesis that efficient lean inventory management leads to an improvement in a firm's financial performance.Designmethodologyapproach Data for the analysis came from the ICAP database, which contains financial information on all medium to large Greek firms. The sample period extended from 2000 to 2002. For each year all manufacturing firms with the corporate form of societs anonyms operating in any one of the three representative industrial sectors in Greece food, textiles and chemicals were selected.Findings Preliminary results, obtained by crosssection linear regressions, reveal that the higher the level of inventories preserved departing from lean operations by a firm, the lower its rate of returns. Findings are additionally tested by the use of pseudolikelihood ratio test which constitutes a more reliable tool, thus verifying the robustness of the linearity of the relationship.Research limitationsimplications Given the great number of the possible determinants of performance it is difficult to isolate the effect of inventories even by using large samples and advanced methodologies.Originalityvalue Since the results from other empirical studies on the microeconomic determinants and consequences of inventories are somewhat contradictory, this study sheds more light to this issue by employing more sophisticated statistical tests applied to a large and recent sample of Greek manufacturers across different industries.

Journal

International Journal of Productivity and Performance ManagementEmerald Publishing

Published: Jun 20, 2008

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