Inventory Types and Firm Performance:

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Inventory Types and Firm Performance:
The effects of inventory management on firm performance have been well documented. Most previous research, however, has focused on the performance effects of total inventories and has ignored the potentially differential performance effects of raw materials, work-in-process, and finished goods inventories. This research investigates the effects of various inventory types on firm performance. The empirical analyses of data from U.S. manufacturing industries reveal that the magnitude of the inventory–performance relationship varies by type of inventory and across industries. Specifically, raw materials inventories have a greater impact on firm performance than work-in-process and finished goods inventories. As a possible explanation, intertemporal interactions among these inventory types are explored using vector autoregressive and vector error correction models. The results suggest that raw materials and finished goods inventories asymmetrically affect each other over time. Implications for research and practice as well as future research opportunities are discussed. Close the feedbackYou are previewing our new enhanced HTML article. If you can't find a tool you're looking for, please click the link at the top of the page to go "Back to old version". We'll be adding more features regularly and your feedback is important to us, so please let us know if you have comments or ideas for improvement. Introduction

Inventory management is an important part of logistics, given its significant impact on firm and supply chain performance (Shapiro and Wagner 2009). Firms recognize inventory management as an important driver of firm performance and undertake initiatives to improve inventory management efficiency and effectiveness. To this end, they invest in supply chain software (Blankley et al. 2008), implement supply chain collaboration initiatives such as vendor-managed inventory and quick response (Waller et al. 1999),...
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