The Myth of Decline: A New Perspective on the Supply Chain and Changing Inventory-Sales Ratios
October 2004
Working Paper Number:
CES-04-18
Abstract
There is a widely held perception that improved supply chain practices and new technologies have led to declines in the inventory-sales ratio. Our empirical analyses of 87 inventory-sales ratios in 45 manufacturing, wholesale distribution, and retail trade industries casts doubt on assumptions of widespread declines in these ratios. We find that less than half of the ratios showed statistically significant declines during the 12 year period from January 1992 through December 2003. Information technology may indeed have improved inventory management, but this improvement is not reflected in inventory-sales ratio data for many U.S. industries. Our detailed case study of the pharmaceutical supply chain also offers additional insights by showing how relevant technological investments led to an extended period in which inventory-to-sales ratios increased.
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demand,
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manufacturing,
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inventory,
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wholesale,
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Electronic Data Interchange,
New York University,
Wholesale Trade,
North American Industry Classification System,
Ohio State University
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