Drivers of Finished-Goods Inventory in the U.S. Automobile Industry
Columbia University - Columbia Business School - Decision Risk and Operations; University of Chile - Engineering Department
Gerard P Cachon
The Wharton School - Operations, Information and Decisions Department
January 1, 2010
Management Science, Vol. 56, No. 1, pp. 202-216, January 2010
Columbia Business School Research Paper No. 11-25
Automobile manufacturers in the U.S. supply chain exhibit significant differences in their days-of-supply of finished vehicles (average inventory divided by average daily sales rate). For example, from 1995 to 2004, Toyota consistently carried approximately 30 fewer days-of-supply than General Motors. This suggests that Toyota's well-documented advantage in manufacturing efficiency, product design and upstream supply chain management extends to their finished-goods inventory in their downstream supply chain from their assembly plants to their dealerships. Our objective in this research is to measure for this industry the effect of several factors on inventory holdings. We find that two factors, the number of dealerships in a manufacturer's distribution network and a manufacturer's production flexibility, explain essentially all of the difference in finished goods inventory between Toyota and three other makes, Chrysler, Ford and General Motors.
Number of Pages in PDF File: 15
Date posted: October 20, 2011
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