IDEAS home Printed from https://ideas.repec.org/a/eee/bracre/v44y2012i3p173-188.html
   My bibliography  Save this article

Inventory investment & control: How have UK companies been doing?

Author

Listed:
  • Pong, Christopher K.M.
  • Mitchell, Falconer

Abstract

Since the 1980s UK manufacturers have been exposed to the strong promotion of inventory control and reduction as a component of Just-in-Time (JIT), World Class Manufacturing (WCM) and Supply Chain Management (SCM) supported by a range of Enterprise Resource Planning System (ERPS) software packages. There is evidence that these ideas have found extensive favour in practice although existing research studies have also shown that inventory control and reduction is challenging and its impact on performance appears mixed. However, the questions of whether inventory reduction has been achieved and whether it has been beneficial to corporate performance have not been subject to systematic investigation in the UK setting. This study rectifies this deficiency by providing evidence on inventory and inventory turnover levels and trends in UK manufacturers over the two decades ending in 2005. This is supplemented, by benchmarking UK companies against those of Japan, USA and Germany, by investigating possible factors that can explain variation in inventory levels, and by exploring the association between high standards of inventory control and the financial performance of companies.

Suggested Citation

  • Pong, Christopher K.M. & Mitchell, Falconer, 2012. "Inventory investment & control: How have UK companies been doing?," The British Accounting Review, Elsevier, vol. 44(3), pages 173-188.
    • Handle: RePEc:eee:bracre:v:44:y:2012:i:3:p:173-188
    DOI: 10.1016/j.bar.2012.07.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0890838912000431
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.bar.2012.07.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cooper, Robin & Slagmulder, Regine, 2004. "Interorganizational cost management and relational context," Accounting, Organizations and Society, Elsevier, vol. 29(1), pages 1-26, January.
    2. Demeter, Krisztina, 2003. "Manufacturing strategy and competitiveness," International Journal of Production Economics, Elsevier, vol. 81(1), pages 2015-2213, January.
    3. Protopappa-Sieke, Margarita & Seifert, Ralf W., 2010. "Interrelating operational and financial performance measurements in inventory control," European Journal of Operational Research, Elsevier, vol. 204(3), pages 439-448, August.
    4. Azhagaiah Ramachandran & Muralidharan Janakiraman, 2009. "The Relationship between Working Capital Management Efficiency and EBIT," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(1), pages 61-74.
    5. Hong Chen & Murray Z. Frank & Owen Q. Wu, 2005. "What Actually Happened to the Inventories of American Companies Between 1981 and 2000?," Management Science, INFORMS, vol. 51(7), pages 1015-1031, July.
    6. Robert Scapens & Mostafa Jazayeri, 2003. "ERP systems and management accounting change: opportunities or impacts? A research note," European Accounting Review, Taylor & Francis Journals, vol. 12(1), pages 201-233.
    7. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    8. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
    9. Cannon, Alan R., 2008. "Inventory improvement and financial performance," International Journal of Production Economics, Elsevier, vol. 115(2), pages 581-593, October.
    10. Pong, Chris & Mitchell, Falconer, 2006. "Full costing versus variable costing: Does the choice still matter? An empirical exploration of UK manufacturing companies 1988–2002," The British Accounting Review, Elsevier, vol. 38(2), pages 131-148.
    11. Dechow, Niels & Mouritsen, Jan, 2005. "Enterprise resource planning systems, management control and the quest for integration," Accounting, Organizations and Society, Elsevier, vol. 30(7-8), pages 691-733.
    12. Vastag, Gyula & Clay Whybark, D., 2005. "Inventory management: Is there a knock-on effect?," International Journal of Production Economics, Elsevier, vol. 93(1), pages 129-138, January.
    13. Wildemann, Horst & Carlson, John G., 1987. "Implementing just-in-time concepts into European companies," Engineering Costs and Production Economics, Elsevier, vol. 13(1), pages 27-37, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad Amin Hasan & Ali Sajid & Aman Abbas Ghouri & Talal Ahmed Khan, 2023. "Re-Examining Working Capital Management and Firm Performance Nexus: Does Investment Policy Matter?," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 269-278.
    2. Omer Bagais & Khaled Aljaaidi & Abdulaziz Alothman, 2021. "An Empirical Investigation of the Associations of Short and Long Debt Policies with Economic Values of Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 249-254.
    3. da Silva Stefano, Gustavo & Antunes, Tiago dos Santos & Lacerda, Daniel Pacheco & Wolf Motta Morandi, Maria Isabel & Piran, Fabio Sartori, 2022. "The impacts of inventory in transfer pricing and net income: Differences between traditional accounting and throughput accounting," The British Accounting Review, Elsevier, vol. 54(2).
    4. Godfred Adjapong Afrifa & Ahmad Alshehabi & Ishmael Tingbani & Hussein Halabi, 2021. "Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 581-617, February.
    5. Naliaka V.W. & G.S. Namusonge, 2015. "Role of Inventory Management on Competitive Advantage among Manufacturing Firms in Kenya: A Case Study of Unga Group Limited," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(5), pages 87-104, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brandenburg, Marcus, 2016. "Supply chain efficiency, value creation and the economic crisis – An empirical assessment of the European automotive industry 2002–2010," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 321-335.
    2. Godfred Adjapong Afrifa & Ahmad Alshehabi & Ishmael Tingbani & Hussein Halabi, 2021. "Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 581-617, February.
    3. Zbigniew Gołaś, 2020. "The effect of inventory management on profitability: evidence from the Polish food industry: Case study," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(5), pages 234-242.
    4. Genesis Gyasi Sah & Judit Furedi-Fulop, 2022. "The Effects of Proper Inventory Management on the Profitability of SMEs," Technium Social Sciences Journal, Technium Science, vol. 32(1), pages 340-351, June.
    5. Lupu Dan, 2013. "Financial Micromanagement For Bse Firms," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 5-9, October.
    6. Folinas, Dimitris & Shen, Chia-Yi, 2014. "Exploring Links among Inventory and Financial Performance in the Agricultural Machinery," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(4), pages 1-12, October.
    7. Parvin Moradi Dehcheraghi & Farshid Kheirollahi, 2017. "Factors Determining the Relation between Firm Expenditure and Working Capital Management in Firms Listed in Tehran Stock Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 245-251.
    8. Eunhye (Olivia) Park & Woo-Hyuk Kim, 2021. "The effect of inventory turnover on financial performance in the US restaurant industry: The moderating role of exposure to commodity price risk," Tourism Economics, , vol. 27(7), pages 1417-1429, November.
    9. Chisti Khalid ASHRAF, 2012. "The relationship between working capital efficiency and profitability," The Journal of Accounting and Management, Danubius University of Galati, issue 3, pages 21-45, December.
    10. Isaac Elking & John-Patrick Paraskevas & Curtis Grimm & Thomas Corsi & Adams Steven, 2017. "Financial Dependence, Lean Inventory Strategy, and Firm Performance," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 22-38, April.
    11. Aktas, Nihat & Croci, Ettore & Petmezas, Dimitris, 2015. "Is working capital management value-enhancing? Evidence from firm performance and investments," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 98-113.
    12. Taipaleenmäki, Jani & Ikäheimo, Seppo, 2013. "On the convergence of management accounting and financial accounting – the role of information technology in accounting change," International Journal of Accounting Information Systems, Elsevier, vol. 14(4), pages 321-348.
    13. Casalin, Fabrizio & Pang, Gu & Maioli, Sara & Cao, Ting, 2017. "Inventories and the concentration of suppliers and customers: Evidence from the Chinese manufacturing sector," International Journal of Production Economics, Elsevier, vol. 193(C), pages 148-159.
    14. Wang, Baolian, 2019. "The cash conversion cycle spread," Journal of Financial Economics, Elsevier, vol. 133(2), pages 472-497.
    15. Ivakina, A. & Zenkevich, N., 2018. "Working capital optimization under liquidity constraints in collaborative supply chains," Working Papers 15110, Graduate School of Management, St. Petersburg State University.
    16. Berry, A.J. & Coad, A.F. & Harris, E.P. & Otley, D.T. & Stringer, C., 2009. "Emerging themes in management control: A review of recent literature," The British Accounting Review, Elsevier, vol. 41(1), pages 2-20.
    17. Bilgehan TEKİN & Yusuf GÖR, 2022. "Cash conversion cycle and its relationship with profitability as a cash management tool in companies: An application on companies trading in Borsa Istanbul," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(632), A), pages 113-130, Autumn.
    18. Talwar SHALINI, 2018. "Analysis of Working Capital, ROA and Business Turnover for Firms in the FMCG, Manufacturing and Infrastructure Sectors in India," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 22-28.
    19. Godfred Adjapong Afrifa, 2013. "Working Capital Management Practices of UK SMEs: The Role of Education and Experience," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 185-196, October.
    20. Dbouk, Wassim & Moussawi-Haidar, Lama & Jaber, Mohamad Y., 2020. "The effect of economic uncertainty on inventory and working capital for manufacturing firms," International Journal of Production Economics, Elsevier, vol. 230(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:bracre:v:44:y:2012:i:3:p:173-188. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-british-accounting-review .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.