Supply Chain Structure, Inventory Turnover, and Financial Performance: Evidence from Manufacturing Companies in China

32 Pages Posted: 3 Sep 2010

See all articles by Shanshan Hu

Shanshan Hu

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies

Qing Ye

Tsinghua University - School of Economics and Management

Wei Chi

Tsinghua University - School of Economics and Management

Barbara B. Flynn

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies

Date Written: September 1, 2010

Abstract

Using data collected by the World Bank, we empirically investigate the relationship between Chinese manufacturers’ supply chain attributes, raw material and finished goods inventory turnover, and return on sales. Our findings indicate that location proximity, relationship continuity, and the relative power of the manufacturer over suppliers and customers have a significant impact on inventory performance, which in turn drives profitability. We especially focus on characteristics unique to China’s business environment. We find that Chinese manufacturing companies have relatively weak operational performance, and better operational performance is associated with closer distance, longer relationship with suppliers and customers, and relative power over suppliers. Unlike their counterparties in some developed countries, Chinese manufacturers’ profitability relies on both downstream and upstream inventory performance, with downstream inventory performance playing a somewhat more important role.

Keywords: Supply Chain Management, Inventory Turnover, Financial Performance, China Research

JEL Classification: D21, L11, L23, L60, M11

Suggested Citation

Hu, Shanshan and Ye, Qing and Chi, Wei and Flynn, Barbara B., Supply Chain Structure, Inventory Turnover, and Financial Performance: Evidence from Manufacturing Companies in China (September 1, 2010). Available at SSRN: https://ssrn.com/abstract=1670261 or http://dx.doi.org/10.2139/ssrn.1670261

Shanshan Hu (Contact Author)

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States
812-856-2342 (Phone)

Qing Ye

Tsinghua University - School of Economics and Management ( email )

Beijing, 100084
China

Wei Chi

Tsinghua University - School of Economics and Management ( email )

Beijing, 100084
China

Barbara B. Flynn

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States

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