Low interest rate environment: inventory management in Finland and Baltic states

Abstract

Purpose

For decades, it was emphasized that manufacturing and trading companies should aim to be lean with very small inventories. However, in the recent decade, time-significant change has taken place as nearly all of the “old west” countries have now low interest rates. Holding inventories have been beneficial for the sake of customer service and for achieving savings in transportation and fixed ordering costs.

Design/methodology/approach

In this study, inventory management change is examined in publicly traded manufacturing and trade companies of Finland and three Baltic states (Estonia, Latvia and Lithuania) during the years 2010–2018.

Findings

Inventory efficiency has been leveled off or falling in these countries and mostly declining development has concerned small- and medium-sized enterprises (SMEs). It is also found that inventory efficiency is in general lower in SMEs than in larger companies. Two companies sustaining in inventory efficiency are used as an example that lean has still significance, and higher inventories as well as lower inventory efficiency should not be the objective. Two companies show exemplary financial performance as well as shareholder value creation.

Research limitations/implications

Work concerns only four smaller countries, and this limits its generalization power. Research is one illustration what happens to private sector companies under low interest rate policies.

Practical implications

Continuous improvement of inventory efficiency becomes questionable in the light of current research and the low interest rate environment.

Originality/value

This is one of the seminal studies from inventory efficiency as the global financial crisis taken place in 2008–2009 and there is the implementation of low interest rates.

Citation

Hilmola, O.-P., Li, W. and Tolli, A. (2021), "Low interest rate environment: inventory management in Finland and Baltic states", International Journal of Productivity and Performance Management, Vol. 70 No. 3, pp. 544-566. https://doi.org/10.1108/IJPPM-10-2019-0480