An Econometric Analysis of Inventory Turnover Performance in Retail Services
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...
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| Veröffentlicht in: | Management science 2005-02, Vol.51 (2), p.181-194 |
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| creator | Gaur, Vishal Fisher, Marshall L Raman, Ananth |
| description | 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 19872000 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 19872000 period. |
| doi_str_mv | 10.1287/mnsc.1040.0298 |
| format | Article |
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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 19872000 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. 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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 19872000 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 19872000 period.</description><subject>benchmarking</subject><subject>Benchmarks</subject><subject>Business studies</subject><subject>Capital assets</subject><subject>Codes</subject><subject>Consumer electronics</subject><subject>Correlation analysis</subject><subject>Datasets</subject><subject>Decision making</subject><subject>Econometrics</subject><subject>Gross margins</subject><subject>Hypotheses</subject><subject>Inventories</subject><subject>Inventory</subject><subject>Inventory control</subject><subject>Inventory data</subject><subject>Inventory management</subject><subject>Inventory turnover</subject><subject>Investments</subject><subject>Management science</subject><subject>Operations management</subject><subject>Operations research</subject><subject>performance measures</subject><subject>Product management</subject><subject>Productivity</subject><subject>Raw materials</subject><subject>Retail industries</subject><subject>Retail industry</subject><subject>retail operations</subject><subject>Retail stores</subject><subject>Retail trade</subject><subject>Retailing industry</subject><subject>Sales forecasting</subject><subject>Securities markets</subject><subject>Trends</subject><subject>Turnover</subject><subject>Variables</subject><subject>Work in process</subject><subject>Working 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| ispartof | Management science, 2005-02, Vol.51 (2), p.181-194 |
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| subjects | benchmarking Benchmarks Business studies Capital assets Codes Consumer electronics Correlation analysis Datasets Decision making Econometrics Gross margins Hypotheses Inventories Inventory Inventory control Inventory data Inventory management Inventory turnover Investments Management science Operations management Operations research performance measures Product management Productivity Raw materials Retail industries Retail industry retail operations Retail stores Retail trade Retailing industry Sales forecasting Securities markets Trends Turnover Variables Work in process Working capital |
| title | An Econometric Analysis of Inventory Turnover Performance in Retail Services |
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