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1 – 10 of over 9000Managing inventory levels in the aggregate is a common concern of senior management. A generalized formula (turnover curve) developed in previous research that mimics practical…
Abstract
Managing inventory levels in the aggregate is a common concern of senior management. A generalized formula (turnover curve) developed in previous research that mimics practical inventory control is used to audit inventory control performance of inventories in the aggregate and at multiple stocking points. The same turnover curve is used to estimate the impact of changing the inventory control procedures or to set new targets for inventory levels. It is a simple yet powerful tool for evaluating inventory managerial performance that can be developed from readily available company data. This research provides additional examples to further validate the practical usefulness of the turnover curve.
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Rahul Pandey, Dipanjan Chatterjee and Manus Rungtusanatham
In this paper, the authors introduce supply disruption ambiguity as the inability of a sourcing firm to attach probability point estimates to the occurrence of and to the…
Abstract
Purpose
In this paper, the authors introduce supply disruption ambiguity as the inability of a sourcing firm to attach probability point estimates to the occurrence of and to the magnitude of loss from supply disruptions. The authors drew on the “ambiguity in decision-making” literature to define this concept formally, connected it to relevant supply disruption information deficit, positioned it relative to supply chain risk assessment and hypothesized and tested its negative associations with both supply base ties and inventory turnover.
Design/methodology/approach
The authors analysed survey data from 171 North American manufacturers and archival data for a subset (88 publicly listed) of these manufacturers via Ordinary Least Squares (OLS) estimation after ensuring that methodological concerns with survey research have been addressed. They used appropriate controls and employed the heteroskedasticity-based instrumental variable (HBIV) approach to ensure that inferences from our results are not unduly influenced by endogeneity.
Findings
Strong supply base ties decrease supply disruption ambiguity, which, in turn, increases inventory turnover. Moreover, strong supply base ties and data integration with the supply base have indirect and positive effects on inventory turnover. As sourcing firms strengthen ties and integrate data exchange with their supply base, their inventory turnover improves from access to information relevant to detect and diagnose supply disruptions effectively.
Originality/value
Research on supply disruption management has paid more attention to the “disruption recovery” stage than to the “disruption discovery” stage. In this paper, the authors add novel insights regarding the recognition and diagnosis aspects of the “disruption discovery” stage. These novel insights reveal how and why sourcing firms reduce their overall ambiguity associated with detecting and assessing losses from supply disruptions through establishing strong ties with their supply base and how and why reducing such ambiguity improves inventory turnover performance.
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In comparing results across organisations, inventory turnovers often provide a simple, useful and pragmatic utilisation measure of this working asset. Managers, however, must take…
Abstract
In comparing results across organisations, inventory turnovers often provide a simple, useful and pragmatic utilisation measure of this working asset. Managers, however, must take into account differences such as size and product lines to interpret safely comparisons. In this paper a simple model relates turnover to volume and the breadth of product lines. Several case histories are presented to show how managers can develop meaningful turnover targets to adjust for these differences.
Giuliano Almeida Marodin, Guilherme Luz Tortorella, Alejandro Germán Frank and Moacir Godinho Filho
The purpose of this paper is to understand the relationship between the implementation of Lean shop floor (LSF) practices and Lean supply chain management, and their effect on…
Abstract
Purpose
The purpose of this paper is to understand the relationship between the implementation of Lean shop floor (LSF) practices and Lean supply chain management, and their effect on quality and inventory turnover.
Design/methodology/approach
A survey-based research method was conducted and data were collected from 110 plants located in Brazil. The research constructs were validated through rigorous procedures (unidimensionality and discriminant validity and reliability) through confirmatory factor analysis and two hypotheses were tested using ordinary least square regression.
Findings
The results indicate that: Lean supplier relationship positively moderates the effect of LSF practices on inventory turnover; Lean customer relationship negatively moderates the effect of LSF practices on inventory turnover; and Lean supplier relationship positively moderates the effect of LSF practices on quality.
Originality/value
From a theoretical perspective, the results of this study provide evidences supporting the importance of understanding the systemic relationships between Lean implementation at the shop floor and the firm’s relationships with supply chain partners, that was not tested before. As managerial implications, the results suggest that managers should take a decision to foster a Lean supply chain management depending on which performance metrics they need to improve: quality or inventory turnover.
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Patrik Jonsson and Stig-Arne Mattsson
The purpose of this paper is to examine the inventory performance effect of advanced material planning modes and analyse how internal and external contextual difficulties moderate…
Abstract
Purpose
The purpose of this paper is to examine the inventory performance effect of advanced material planning modes and analyse how internal and external contextual difficulties moderate this relationship. This study also identifies avenues for future research.
Design/methodology/approach
The empirical analysis uses a survey of material planning for purchased items in 292 Swedish manufacturing and wholesaling companies. Three dimensions of inventory performance are dependent variables: material planning performance, inventory turnover rate, and service level.
Findings
Advanced material planning modes are directly associated with material planning performance, but this study could not verify direct associations with inventory turnover rate and service-level performances. External and internal contextual difficulties have direct effects on all inventory performance dimensions and moderate the inventory performance effect of advanced material planning modes. The moderating effect is stronger in non-difficult contexts, for which advanced material planning has significant inventory performance effects. Demand- and human-related contextual dimensions are especially critical.
Practical implications
The study identifies the following guidelines for companies to consider in order to unlock the potential of advanced material planning: consider full implementation of advanced material planning in non-difficult contexts; minimise the plan variability effects of high parameter revision and planning frequencies; minimise the need for, and use of, manual modification of planned orders before release; reduce demand uncertainty and variability; and secure appropriate human skills and working time.
Originality/value
This study somewhat contradicts the literature on material planning by not finding a direct positive effect on any inventory performance dimension from analytical design of order quantities and safety stocks. The research adds to the literature by identifying direct and moderating effects of external and internal contextual difficulties on all three-inventory performance dimensions. The relative importance of managing automatic order release identified in the study motivates future research as the effect has not been previously highlighted in the literature. Accordingly, avenues for future research and an agenda for practice-oriented research are suggested.
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Charles A. Watts, Chan K. Hahn and Byung‐Kyu Sohn
In order to ensure that an inventory system is performing correctly,management must continually monitor the system and take correctiveaction as necessary. Only a few previous…
Abstract
In order to ensure that an inventory system is performing correctly, management must continually monitor the system and take corrective action as necessary. Only a few previous articles have suggested techniques for monitoring and diagnosing the performance of a reorder point system. Uses statistical process control charts to monitor the systems performance on an ongoing basis. The proposed system is triggered by unplanned stockouts or by a periodic review of each item′s inventory turnover rate. The system then systematically analyses the stockout and the control charts and identifies the causes, which can be fitness‐related and/or operations related. Problems can be quickly diagnosed and corrective action taken so the reorder point system will perform as intended.
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Stresses the crucial importance of the balance between companies' policies of inventory management and the occurrence of disturbances in logistics flows. The study is based upon a…
Abstract
Stresses the crucial importance of the balance between companies' policies of inventory management and the occurrence of disturbances in logistics flows. The study is based upon a mail survey in the automotive industry. It is concluded that there is in part a significant association between companies' inventories and disturbances in inbound and outbound logistics flows. The financial benefits that might be achieved through leanness in inventory management might also negatively influence the financial costs due to increased disturbances. Therefore, it is a crucial managerial task in the automotive industry to achieve a suitable balance between the inventory and the occurrence of disturbance within inbound and outbound logistics flows. It is this balance that generates the best managerial outcome in a competitive business setting. A principle of balance, a process of balance, and a typology of companies' inventories and disturbances in inbound or outbound logistics flows are introduced.
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Belverd E. Needles, Marian Powers, Mark L. Frigo and Anton Shigaev
The present study investigates whether companies that exhibit high performance characteristics in the pre-financial crisis period can maintain their high performance in the…
Abstract
Purpose
The present study investigates whether companies that exhibit high performance characteristics in the pre-financial crisis period can maintain their high performance in the financial crisis period of 2007–2009 and, in particular, the post-financial crisis period of 2010–2011.
Methodology
The current study of 1,473 companies in 25 countries and 66 industries (MSCI index) (1) extends the empirical research of prior studies through the year 2011; (2) identifies the operating characteristics (performance drivers and performance measures) and associated risk factors which were most critical with regard to sustaining, exiting, and entering HPC companies during the five 10-year periods since 1998–2007, and (3) summarizes conclusions about HPC results from the 13 ten-year periods (1989–1998 to 2002–2011) in this stream of research.
Findings
(1) Companies that sustain high performance over periods of financial stress clearly excel in asset turnover performance driver and on the performance measures of growth in revenues, profit margin, return on equity and return on assets. Sustaining HPC had less debt than other companies and consistent cash flow yields. Operating turnover ratios became less important in recent years as an indicator of high performance. (2) Although exiting companies maintained profitability, financial risk and liquidity, the key factor in their dropping out of HPC status is their failure to grow revenues. (3) Entering companies did not exhibit the superior performance in all categories.
Practical implications and value
The results provide strategic direction for management of companies that aspire to HPC status and to maintain HPC status once gained, particularly in times of global financial stress.
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Amanda Oliveira Fontenelle and Juliana Keiko Sagawa
Lean manufacturing (LM) has advocated gains by reducing waste and intensifying continuous improvement. As a holistic organizational policy, it must overpass the limits of the…
Abstract
Purpose
Lean manufacturing (LM) has advocated gains by reducing waste and intensifying continuous improvement. As a holistic organizational policy, it must overpass the limits of the manufacturing function. Management accounting should be aligned to lean thinking, aiming to meet the demands and goals of a lean organization. This paper aims to investigate the degree of alignment between management accounting systems and LM practices.
Design/methodology/approach
Two representative case studies were carried out in industry leaders in the implementation of LM, in Brazil. The key research constructs and were identified by means of a systematic literature review. The rhetoric and practice concerning the alignment between management accounting and LM are discussed based on the existing theory and the conducted case studies.
Findings
The analysis showed that many of the principles that form the rhetoric of lean accounting are far from the accounting practices observed in the companies. Using the theory-building function of case studies, 10 propositions to be tested in future research are proposed. The main propositions are also summarized in a framework based on analogies with optical lenses.
Originality/value
To the best of the knowledge, there are no previous in-depth studies focusing on characterizing this alignment between management accounting and LM practices. The analysis yields prescriptive directions for managers that seek to improve this alignment in their business. This study also proposes a five-stage maturity model, which can be used by the managers to assess this alignment and to set goals for reaching more advanced levels of maturity.
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Norazira Abd Karim, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin
The purposes of this study are to examine the standard operating procedure (SOP) on inventory management practices, identify any weaknesses in inventory management and examine its…
Abstract
Purpose
The purposes of this study are to examine the standard operating procedure (SOP) on inventory management practices, identify any weaknesses in inventory management and examine its impact on the performance of the company. Inventory management is important because it ensures smooth production and prevents loss of sales because of stockout and/or customer dissatisfaction.
Design/methodology/approach
This study selects one manufacturing company as a case study and uses the mixed data collection method of document analysis and observation. The research analysis was conducted by using COSO Internal Control – Integrated Frame work 2013 as guidance.
Findings
It is revealed that a company practices risky inventory management in keeping stock, as it relies heavily on third-party warehousing services beyond the control of the company. This study also reveals that the SOPs are too general and lack specificity. However, poor inventory management has a modest influence on the financial performance of the company.
Research limitations/implications
In completing this study, some limitations are experienced such as changes on the management structure of the company as well as the department itself. Frequent changes on several procedures also may influence this study to obtain accurate information. In addition, some highly confidential documents such as detailed information and minutes from management meeting were not permitted to be examined.
Practical implications
This study provides recommendations to improve weak internal controls particularly on SOPs, so that fraud and mismanagement opportunities can be reduced.
Originality/value
This study makes an original contribution, as it enhances the theoretical and practical understanding on inventory control and management systems, particularly for a manufacturing company in the emerging market environment. In addition, it examines various internal financial reports and directly observes the process in supply change management, which are generally difficult to be accessed by academic researchers.
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