INVENTORY PERFORMANCE, INFORMATION TECHNOLOGY, ANDPROFITABILITY: AN INDUSTRY LEVEL LONGITUDINAL STUDY

摘要

This research investigates the effect of inventory performance on profitability and the antecedenteffect of information technology (IT) investment on inventory performance. The objective is tofind the empirical evidence for the theory that operational excellence in inventory managementand relevant IT investment improves profitability in the long run. In search of evidence, weexamine industry level longitudinal data (14 manufacturing industries at SIC two digit level)with coverage between 1958 and 1999, using a series of hierarchical regression analyses. Thestatistical results confirm that a lower inventory level measured as industry inventory-to-saleratio has a positive influence on industry profitability measured as profit-to-sales ratio. Thisevidence was found significant in 9 out of 14 manufacturing industries. We also learned that notall the inventories, categorized by stage of fabrication, equally contributed to improving industryprofitability. For example, while the primary and fabricated metal industries have benefitedfrom reduction in finished goods inventories, the profitability of petroleum & coal productsindustry has been influenced mostly by reduction in work-in-process inventories.