Content uploaded by Vishal Gaur
Author content
All content in this area was uploaded by Vishal Gaur on Mar 07, 2014
Content may be subject to copyright.
A preview of the PDF is not available
An Econometric Analysis of Inventory Turnover Performance in Retail Services
Abstract and Figures
Inventory turnover varies widely across retailers and over time. This variation undermines the usefulness of inventory turnover in performance analysis, benchmarking, and working capital management. We develop an empirical model using financial data for 311 publicly listed retail firms for the years 1987--2000 to investigate the correlation of inventory turnover with gross margin, capital intensity, and sales surprise (the ratio of actual sales to expected sales for the year). The model explains 66.7% of the within-firm variation and 97.2% of the total variation (across and within firms) in inventory turnover. It yields an alternative metric of inventory productivity, adjusted inventory turnover, which empirically adjusts inventory turnover for changes in gross margin, capital intensity, and sales surprise, and can be applied in performance analysis and managerial decision making. We also compute time trends in inventory turnover and adjusted inventory turnover, and find that both have declined in retailing during the 1987--2000 period.
Figures - uploaded by Vishal Gaur
Author content
All figure content in this area was uploaded by Vishal Gaur
Content may be subject to copyright.
... For the inventory management efficiency the author used two proxy variables focusing on change in stocks of goods and services, in line with the approach of most of the literature on inventory management optimization, which uses the cost minimization criterion (Koumanakos, 2008). At the same time, the author moved away from the commonly used variable in analyses of this kind, Inventory turnover, not only for the sake of originality, but also because some studies consider that this variable should not be used in performance analysis (Gaur, Fisher and Raman, 2005). On the other hand, the author used two variables as proxies for performance: Gross margin and Gross operating surplus. ...
... The author's focus on the trade sector is due to the extraordinary importance of inventories specifically in this sector, but also to the reduced complexity of the relationship between inventory management and firm performance compared to firms from the manufacturing sector (Marzolf, Miller and Peinkofer, 2024). The importance of inventories in retailing, for example, could be reflected in the fact that, on average, more than one-third of all assets and more than half of current assets of retailers are represented by inventories (Gaur et al., 2005). The results of this analysis will advance the understanding of how inventory management influences firm performance, what peculiarities exist in the application of different performance indicators, and also in the approach to the Wholesale trade and Retail trade sectors, as well as the Trade sector in general. ...
... The influence of inventory management on firm performance is a frequently addressed topic in the literature and, what is equally important, it does not lose its topicality over time. At the same time, this topic is also of major interest to the members of the operational management community (Gaur et al., 2005), due to multiple obvious reasons, including the importance that investors attach to performance indicators (Lee, 2022). The main reason is, of course, the major influence that inventory management efficiency has on firm performance. ...
Inventory management is an indispensable element of the firm's operational efficiency that determines the results of its activity and its long-term performance. The present study aims to analyze the influence of efficient inventory management on the performance of firms in the Wholesale and Retail trade sector, trying to isolate this relationship in order to bring out as many peculiarities as possible. In order to achieve the aim, fixed effects panel linear regression analysis was undertaken, applying the least squares dummy variables method. The regression models were constructed separately for the dependent variables of Gross Margin and Gross operating surplus as proxies for performance, and separately for the three datasets: Wholesale and Retail trade, Wholesale trade and Retail trade. The results of the analysis reveal the existence of significant relationships between inventory management and firm performance. The significant relationships identified did not confirm the expectations, although were validated by previous results identified in the literature.
... Савдо хизматалари тармоғининг барқарор ривожланиш шарт-шароитлари у рганган xорижии олимлар Vishal Gaur, Marshall Fisher, Ananth Raman, (2005) аксарият тадқиқотларда товар аи ланмаси ку рсаткичи марказии белги сифатида қараи ди. ...
Мақолада минтақада савдо тармоғида бандлар сони ва чакана савдо товар айланмаси ўртасидаги корреляцион боғлиқлиги, Минтақада савдо корхоналарининг сонининг ўзгариш тенденцияси нафақат чакана савдо товар айланмаси, Қашқадарё вилоятининг иқтисодий салоҳияти динамикасининг нисбийлик кўрсаткичи ҳамда савдо тармоғининг нисбийлик даражаларини таққослаш минтақанинг умумий ва хусусий иқтисодий салоҳиятини баҳолаш кўрсатилган.
... Based on the findings of Gaur et al. (2005), there is a strong correlation between changes in the macroeconomic environment and a firm's inventory turnover rate. Specifically, when macroeconomic uncertainty increases, a firm's inventory turnover rate tends to slow down. ...
... To understand how institutional investors affect the acquired firm's inventory performance, we use the empirical leanness indicator (denoted as ELI) as a proxy for corporate inventory performance [53][54][55]. Although inventory turnover and inventory days have been widely used in traditional studies that examine inventory performance [31,56], inventory needs to be understood using specific industry and year characteristics [54]. In fact, traditional inventory measures have a limitation in reflecting industry effects and economies of scale [54], making it difficult to investigate whether institutions have different views on inventory performance considering industry heterogeneity. ...
This study investigates the relationship between institutional investors and the inventory performance of companies engaged in mergers and acquisitions (M&As). Specifically, we examine the role of institutional ownership in the selection of target firms and their post-M&A performance. Additionally, we analyze how the effects of institutional investors vary based on their investment horizons and strategies. Our regression analysis reveals that acquiring firms with a large proportion of short-term institutional investors are more inclined to target firms with low inventory levels. This tendency stems from the preference of short-term institutional investors for better current operational performance, which drives decision-makers to merge with leaner firms. In contrast, acquiring firms with long-term institutional investors are more focused on performance improvement, even if the target firms have large inventories at the time of the M&A.
... Efficient operations also liberate resources that might otherwise be tied to non-value-added activities (Chase et al., 2021). In accordance with this viewpoint, studies have consistently reported positive relationships between various forms of efficiency and firms' performance metrics (Dutta et al., 1999;Shah and Ward, 2003;Chen et al., 2005;Gaur et al., 2005;Krasnikov and Jayachandran, 2008;Browning and Heath, 2009). ...
Theoretical and empirical evidence point to the ability of political leaders to manipulate economic policies and leverage local firms to elevate their political careers. Despite this, there is limited understanding of how these career incentives impact the operational dynamics of the firms involved. This empirical study delves into this gap, revealing that city leaders with fewer promotional incentives are more inclined to mobilize state-owned enterprises (SOEs) within their jurisdiction to pursue sustainable development, as indicated by heightened corporate operational efficiency. Our analysis further indicates that the career prospects of city leaders significantly influence the operational efficiency of SOEs by driving a shift in focus from rapid growth to sustainable development and firms’ adoption of disruptive technologies. We posit that this increase in operational efficiency not only benefits the SOEs but also generates unique value for stakeholders, resulting in elevated market capitalization and reduced stock price crash risk. Our findings carry direct relevance to the ongoing discourse on political incentives and contribute to operations management research, shedding light on the intricate ways in which the political environment can impact the operational performance of firms.
... The advantages of efficient inventory management are numerous: The company will save money as they will not need to buy inventory that is not selling; they will have better cash flow, which also contributes to better customer satisfaction. Cost Savings: First, there is risk of holding excess inventory that tends to increase costs in storage, insurance, and some may become obsolete as was pointed out by number of authors including Gaur, Fisher and Raman (2005). For example, JIT reduces the cost of storing expensively and eliminates wastage through coordinating the amount of inventory with the rate of production per period (Fullerton et al., 2003). ...
Inventory control is a subdiscipline in the broad field of supply chain management, and it deals with the control of stock of items in a business. The information presented in this work is a synthesis of the current approaches to inventory management, along with the advantages and disadvantages concerning this issue. The main approaches to inventory control and management discovered in the literature review are JIT, EOQ, and ABC analysis. JIT focuses on manufacturing only as many units as are currently required avoiding pilferage along the predefined supply chain; EOQ on the other hand applies a theoretical balancing by identifying the most appropriate quantity to order to avoid high costs. ABC analysis helps to classify inventory by its value and level of priority to optimize resource distribution. The advantages of good stock management are great and include reduced holding costs, increase in cash flow from minimizing on stocks held, and customer satisfaction arising from the improved holding of stocks. But problems remain; demand forecasting is a challenge as is the handling of multiple inventory types, the costs and issues of applying new technologies for inventory management are also challenging. This specific review engages both peer-reviewed literature and the "grey" literature from leading databases and conference proceedings incorporating string search and snowballing technique for overall comprehensive understanding of the topic. The implications drawn from the research show the importance for managerial adaptation especially to business inventory that require optimization in efficiency as well as the utilization of technology to overcome the inherent flaws. This is why sustained research and development of materials concerning inventory management are critical to business operations in the context of a dynamic environment.
Problem definition: A fundamental issue faced by operations management researcher relates to striking the right balance between rigor and relevance in their work. Another important aspect of operations management research relates to influencing and positively impacting businesses and society at large. We constantly struggle to achieve these objectives. Methodology/results: This MSOM Fellow forum article discusses key opportunities for increasing the relevance and impact of Operations Management research. In particular, it highlights two major areas: technology enabled operations and society and operations where unique opportunities exist for the field to make lasting contributions to business and society. Managerial implications: It concludes with a menu of approaches to enhance practical impact of our research.
The present study aimed to investigate the impact of two of the most commonly used strategies (i.e., cost leadership strategy and differentiation strategy) on the supply chain management efficiency (SCME) of companies listed in Tehran Stock Exchange (TSE). The data about 215 companies were analyzed during 2014–2021. The sale per inventory ratio was used to calculate SCME. The study focused on cost leadership strategy and differentiation strategy. The results showed that cost leadership strategy and differentiation strategy have a significant and positive effect on SCME. Hypothesis testing based on the robustness checks confirmed these findings. In spite of the growing interest in supply chain management, there is little research on emerging economies compared to developed economies. There is also a significant gap of research on how business strategy could influence the performance of supply chains. The present findings will not only help company managers in developing countries, but due to the lack of similar research, they are of great help to managers in developed countries and the global community.
This study investigates how supply chain characteristics influence a rival firm's response to a focal firm's product preannouncements from a competitive dynamics perspective. Indeed, many firms recognize that it is critical to leverage their supply chains to gain a competitive advantage. We propose that common suppliers enhance a rival firm's awareness of the focal firm's credibility, reducing competitive responses. In addition, a rival firm's strong supplier inventory performance will motivate rivals to respond more aggressively, while the rival's supply–chain partnerships enhance its capability to react to the focal firm. Using panel data from S&P 1500 firms between 2007 and 2015, our findings provide support for our hypotheses, illustrating that supply chain characteristics can significantly influence a rival firm's responses to the focal firm's preannouncements. This research contributes to the competitive dynamics and supply chain management literature by highlighting the strategic role of supply chain characteristics in interfirm competition, offering practical insights for managers on leveraging supply chain resources to effectively navigate competitive threats.
SAMPLING THEORY AND BAYESIAN APPROACHES TO INFERENCE. The Classical Inference Approach for the General Linear Model. Statistical Decision Theory and Biased Estimation. The Bayesian Approach to Inference. INFERENCE IN GENERAL STATISTICAL MODELS AND TIME SERIES. Some Asymptotic Theory and Other General Results for the Linear Statistical Model. Nonlinear Statistical Models. Time Series. DYNAMIC SPECIFICATIONS. Autocorrelation. Finite Distributed Lags. Infinite Distributed Lags. SOME ALTERNATIVE COVARIANCE STRUCTURES. Heteroskedasticity. Disturbance--Related Sets of Regression Equations. Inference in Models that Combine Time Series and Cross--Sectional Data. INFERENCE IN SIMULTANEOUS EQUATION MODELS. Specification and Identification in Simultaneous Equation Models. Estimation and Inference in a System of Simultaneous Equations. Multiple Time Series and Systems of Dynamic Simultaneous Equations. FURTHER MODEL EXTENSIONS. Unobservable Variables. Qualitative and Limited Dependent Variable Models. Varying and Random Coefficient Models. Non--Normal Disturbances. On Selecting the Set of Aggressors. Multicollinearity. Appendices.
This paper examines whether firms exhibiting improved inventory utilization subsequent to JIT adoption achieve a corresponding increase in their Return on Assets (ROA) and whether firm-specific characteristics affect such ROA responses. On average, we do not find a significant ROA response to JIT adoption. Cross-sectionally, JIT adopting firms with a diffuse customer base have a superior ROA response relative to both adopting firms with a high degree of customer concentration and their matched control firms. Evidence is consistent with a superior ROA response for firms with lower inventory turns in the adoption year, particularly for work-in-process inventory. Data do not supportthe prediction that firms with lower committed costs will report a greater ROA response than firms with a higher proportion of committed costs.
Just-in-Time (JIT) and its impact on select aspects of the balance sheet are examined from a long-term perspective. Data on financial statements from 28 companies were examined and statistically analyzed over a 10-year period. The results indicate statistically significant improvements in managing inventories, which are reflected in relative ratios and can be documented in a company's statement of financial position.