Inventory Productivity Impacts of IT-Enabled Supply Chain Coordination in Manufacturing Environments

Abstract

This chapter describes an empirical analysis of the mediating effects of supply chain coordination strategy and manufacturing IT infrastructure on the relationship between business complexity and inventory turnover. Business complexity describes the diversity and volatility associated with a firm’s product markets. To cope with this complexity, firms deploy inventory buffers. This deployment should decrease inventory turnover.  An extensive manufacturing IT infrastructure can increase a firm’s “sense and respond” capability, reducing the need for buffers, and can thereby improve inventory turnover. As this technology enables enhanced coordination, and as firms’ efforts to reduce buffers within their own organizational boundaries earn diminishing marginal returns, firms attempt to optimize performance across organizational boundaries within the supply chain, i.e., adopt a cooperative supply chain coordination strategy. This supply chain coordination should improve inventory turnover.