Abstract
Automobile manufacturers in the U.S. supply chain exhibit signi…cant dierences in their days-of-supply of …nished vehicles (average inventory divided by average daily sales rate). For example, from 1995 to 2005, Toy- ota consistently carried approximately 30 fewer days-of-supply than General Motors. This suggests that Toyota's well documented advantage in manu- facturing e¢ ciency and upstream supply chain management extends to their control of the …nished goods supply chain downstream from their assembly plants. Our objective in this research is to measure for this industry the eect of several factors on inventory holdings, including product variety, demand variability, product sustitutability and production ‡exibility. Four of the factors we study explain aproximately half of the dierence between Toyota and GM. We also make methodological contributions to the econo- metric analysis of inventory performance. In particular, we use panel data to control for endogenous decisions related to product variety and, in contrast to previous empirical studies, …nd that increasing variety has a negative impact on inventory performance.
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