An Operational Metric or An Operational Capability? The Role of Growth in Inventory Efficiency Growth

Abstract

Inventory efficiency is used as an operational benchmark in comparing performance against competitors. In this study, we propose extending to inventory efficiency growth over time on performance. Analyzing data from 1,286 US firms from 2003 to 2013 reveals that firms with significant improvements in inventory efficiency over time realize higher performance. Marketing efficiency, operational slack, and negative sales surprise negatively affect inventory efficiency growth. Overall, to realize higher performance, managers must aim to improve inventory efficiency growth over time and manage three levers of marketing efficiency, operational slack, and negative sales surprise.