Higher Inventory Turnover Research Articles

Effect of Determinants on Financial Leverage in FMCG Industry: An Empirical Study of Capital Structure Prior to COVID-19

FMCG stands for fast-moving consumer goods industry, also known as consumer packaged goods, which refers to an industry engaged in the production of packaged food, cosmetics, household goods and other readily consumable items. This industry’s main characteristics reveal frequent purchases by consumers, high inventory turnover and a short shelf life. The FMCG industry is the fourth-largest sector in the Indian economy. This study is aimed at understanding the capital structure financing and investigating the relationship between the capital structure determinants and financial leverage of NIFTY FMCG companies from the year 2000 to 2018, prior to the COVID-19 breakdown health emergency. It has been stated in the World Bank report for 2019 that India is the seventh largest consumer market in the world, which includes elements like private consumption, investments and exports, thus encouraging the study of the capital structure of FMCG companies to be conducted. It is postulated that the capital structure determinants are profitability, growth opportunity, size, risk, non-debt tax shield, liquidity and asset structure. It is believed that liquidity is expected to play an important role as a capital structure determinant. Thus, an approach is developed to investigate the impact of capital structure determinants on the debt ratio of FMCG firms in the light of capital structure theories.

Is supply chain finance an antidote to SMEs in the economic crisis? - A qualitative inquiry

PurposeThis exploratory study aims to explore the operational and financial constraints faced by small and medium enterprises (SMEs) in India during the COVID-19 pandemic. The paper highlights the role of supply chain finance (SCF) in the uncertain business environment caused by the pandemic.Design/methodology/approachThe study adopts an inductive approach and conducts convergent interviews with 32 SME owners and bank officials who are associated with SME-related financial transactions. The analysis of the interview data has been done through a grounded theory approach.FindingsThe findings portray four key themes representing the operational and financial constraints faced by SMEs during the pandemic. Further, the study identifies four drivers of SCF adoption among SMEs, including capital constraints, high inventory turnover cycle time, high order fulfilment cycle time and long debtors’ collection period.Practical implicationsThe study provides various insights to the managers and owners of SMEs to deal with the economic crisis and eliminate the financial pressure created by the pandemic. The study enlightens the policymakers about the struggles of the SMEs during the economic turmoil created by the pandemic and guides them to introduce the relevant policies to resolve their problems.Originality/valueTo the best of the authors’ knowledge, this is the first study to identify the factors driving the SMEs to adopt SCF due to the economic chaos created by the pandemic. Also, the study theoretically contributes to the literature by developing a theoretical framework for SCF adoption based on grounded theory.

Analisis Perputaran Persediaan terhadap Profitabilitas Perusahaan Farmasi di Bursa Efek Indonesia

Inventory turnover serves to determine the company's inventory that is sold and replaced within a certain time. Inventory turnover measures how well a company markets its inventory and will be compared to a balanced industrial company. Low inventory turnover indicates weak sales while high inventory turnover indicates influential sales. This study aims to examine and evaluate the effect of inventory turnover (at cost) and inventory turnover (at market) on profitability (ROA) of pharmaceutical companies on the Indonesia Stock Exchange in 2017-2021. This research is a quantitative research. The participants in this study were all manufacturing companies in the food and beverage sub-sector listed on the Indonesia Stock Exchange for the period 2017-2021. The sample size of this research is 8 companies. The results of the study concluded that inventory turnover (at cost) had a positive and significant effect on profitability. However, inventory turnover (at market) has a negative and insignificant effect on profitability. Meanwhile, inventory turnover (at cost) and inventory turnover (at market) simultaneously have a positive and significant effect on profitability (ROA).

FACTOR THAT AFFECTING DEBT TO EQUITY RATIO IN THE INDONESIA’S TOURISM INDUSTRY SECTOR

The research aim is to examine the influence of working capital turnover, current ratio, cash ratio, firm size and return on assets toward debt to equity ration in the tourism industry sector listed on the Indonesia Stock Exchange. This is a quantitative research which takes data from the company’s audited financial statement. There are five independent variables which are being examined by descriptive statistical analysis, classical assumption tests, multiple linear regression, and hypotheses testing. The population of this research is tourism companies and stores 10 samples of companies fulfilled certain criteria in the period of 2012-2018 annually. The technique used for multiple linear regression panel data is the random effect model. The outcomes reveal a value of adjusted R-squared towards dependent variable is 33.22% and the independent variables of working capital turnover, current ratio, firm size and return on assets have a significant influence on debt to equity ratio in hypotheses testing. The most significant independent variable influences debt to equity ratio in the tourism industry sector in Indonesia is working capital turnover. High working capital turnover indicates this shortage of working capital which may be due to high inventory turnover, accounts receivable or cash balances that are too small.

The contagion and competitive effects across national borders: Evidence from the 2016 Kumamoto earthquakes

It is unclear how a natural disaster such as earthquake affects disaster-stricken firms' industry peers located in other countries. While those industry peers might benefit from the disaster due to the competitive advantage gained over the disaster-stricken firms (positive competitive effect), they might also suffer from the disaster due to their linkages to the disaster-stricken firms (negative contagion effect). Based on a natural experiment in which a series of earthquakes struck Kumamoto, Japan's Silicon Island, in April 2016, we find that the earthquakes have a negative impact on the stock returns of the semiconductor manufacturers located in China, suggesting that the contagion effect overweighs the competitive effect. Moreover, the negative impact is more pronounced for firms with supply chain connections with Japanese firms. However, we also find a positive impact among Chinese firms with high inventory turnover and customer concentration. Overall, our research reveals the dynamic effects of a natural disaster across national borders, urging firms to pay attention to the negative contagion effect through supply chain linkages and the positive competitive effect resulting from better operational efficiency.

Classification of Japanese Electrical Equipment Manufacturing Industry Recovery Patterns after Disasters: Case Study of August 2019

In the paper, we analyze the recovery pattern of Japanese electrical equipment manufacturing companies after the President Trump remark in August 2019. The President’s remark made the companies’ stock prices decreased severely. The research consists of two parts. In the first part, we conducted Random Matrix Theory to extract representative decline/recovery patterns. Then we tagged A/B/C/D to the companies’ recovery types. The class A means a strong recover power. Then as the second part, we conducted machine learning tree-based classification using the tags A/B/C. The predictors are eight variables like ROA, ROE, and VAR. The resultant Decision Tree model provided us with the two different approaches to the class A group. The recovery and repulsion power will be higher in the company with high ROA and in the company that manufactured the product with high VAR. In addition, another class A company group is made and the feature is the high inventory turnover ratio.

The Impact of the Trans-Sumatran Highway Development on Logistic Cost Efficiency

The development of transport infrastructures of the Trans-Sumatran Highway is the policy of the Indonesian government to boost the economic growth. However, on the other hand, this idea needs to be proven since Indonesia has unique regional characteristics in terms of natural, social, and cultural conditions that bring impacts on congestion, low levels of travel security, and illegal costs or surcharges. This problem triggers inefficient logistics activities which can be seen from the high costs of shipping, transportation, and administrative. Therefore, this paper aims to examine the impact of the Trans-Sumatran Highway construction on logistics cost. The result of this study indicates that there are several benefits obtained from the toll road development. For the manufacturers, they may get a faster shipping process so that inventory turnover is getting higher. High inventory turnover can make inventory costs lower. While for the transporters, faster travel times and smooth toll road conditions can reduce the costs of vehicle maintenance and fuel. In addition, the toll road is able to eliminate the surcharges that previously often arise on trips between Lampung and Palembang. This paper argues that the Trans-Sumatra Highway can enhance the transportation and logistics activities.

The Sustainable Effect of Operational Performance on Financial Benefits: Evidence from Chinese Quality Awards Winners

Quality management practices have become increasingly important as firms seek to obtain quality certifications to dominate markets. To date, adequate research evaluating the effects of quality management is lacking. In this work, we used Chinese quality awards to evaluate a firm’s quality level. A PSM-DiD (propensity score matching and difference-in-difference) model describing the relationship between quality award effects and financial benefits in terms of return on assets was developed. We further used a hierarchical regression to examine the influence of operational performance on financial benefits. The results show that quality awards cannot assure their winners a higher return on asset. Indicators of operating performance, such as less lead time and higher inventory turnover, can significantly enhance firms’ profitability. The moderating effects of operational performance suggest that firms may focus on how to translate quality management practices into business improvement. This study also contributes to the operation management literature by describing how firms need outstanding financial performance for sustainable development and continuous improvement.

PENGARUH LEVERAGE, PROFITABILITAS, FIRM SIZE, DAN LIKUIDITAS TERHADAP RETURN SAHAM PERUSAHAAN SEKTOR INDUSTRI BARANG KONSUMSI

Stock return is an advantage obtained by investors in stock investment. One sector whose stock returns fluctuate and has a high inventory turnover is the consumer goods industry. The existence of stock return fluctuations is the background of this study which aims to determine the effect of leverage, profitability, firm size and liquidity on stock returns on the consumer goods industry sector companies in the Indonesia Stock Exchange in the 2014-2016 period. The sample used in this study amounted to 33 companies. The method of determining the sample used in this study was purposive sampling method. The data analysis technique used in this study is multiple linear analysis. The results of this study are leverage variables proxied by DER which have a positive and significant effect on stock returns. Profitability proxied by ROE has a positive and insignificant effect on stock returns. Firm size has a positive and significant effect on stock returns. Liquidity which is proxied by QR has a negative and insignificant effect on stock returns.
 Keywords: debt to equity ratio, return on equity, firm size, quick ratio, stock return

STOCHASTIC METHODS FOR FORECASTING SALES OF FAST-MOVING CONSUMER GOODS

The problem of formulating accurate sales forecasts of Fast-Moving Consumer Goods (FMCG) is related to the issues of planning of goods distribution, supply chain management and is important from the point of view of the development of theory within the discipline of management sciences and quality, as well as practical applications. Solving this problem requires developing research on methods of forecasting due to the growing requirements of the businessmen, who can be satisfied using in this field methods known from various fields and scientific disciplines. The objective of this article is to present one of the directions of development of forecasting methods resulting from the use of selected stochastic methods with particular emphasis on Markov chains. The considerations are presented on the example of short-term forecasting, characteristic for products with high inventory turnover rates. After presenting preliminary comments on the issues of forecasting and planning in supporting decision-making in enterprises, the currently used methods of sales prediction are briefly characterized. Next, attention is focused on the stochastic methods of forecasting FMCG products, among which the most attention was devoted to methods based on Markov chains. The article ends with remarks regarding the possibility of further developing this kind of study.

A Comparison of the Financial Characteristics of European and Asian Manufacturing Firms

Abstract Comparing the financial characteristics of firms in different countries has been a popular research topic in finance. However, general financial characteristics of European and Asian manufacturing firms have never been compared. In this paper, we undertake such a study with the MANOVA (Multivariate Analysis of Variance) technique. Our research uses all European and Asian manufacturing firms included in the Research Insight/Global Vintage database at the end of 2015. Our findings may provide valuable insights for financial managers and global investors. We find that Asian firms tend to have less liquidity risk but more bankruptcy risk compared with European firms. European firms have more efficient accounts receivable management and higher fixed and total assets turnover rates. However, Asian firms have higher inventory turnover and sales growth rates. Return on equity is not significantly different in European and Asian firms. However, Asian firms have significantly higher net profit margin and return on assets compared with European firms.

Decision policy scenarios for just-in-sequence (JIS) deliveries

Purpose: The Just-in-Sequence (JIS) approach is evidencing advantages in efficiently managing variety-driven costs, and reducing the risk of disruption in sourcing, manufacturing companies and third-party logistics. This has increased its implementation in the manufacturing industry, especially in highly customized manufacturing sectors such as the automotive industry. However, despite its growing interest by manufacturers, scholarly research focused on JIS still remains limited. In this context, little has been done to study the effect of JIS on the fluidity of supply chains and processes of logistics suppliers as well as providing them with a decision making tool to optimise the sequencing of their deliveries. Therefore, the aim of this paper is to propose a genetic algorithm to evaluate different decision policy scenarios to reduce risks of supply disruptions at the final assembly line. Consequently, an algorithm considering a periodic review of the inventory that assumes a steady demand and short response times is developed and applied.Design/methodology/approach: Based on a literature review and real-life information, an abductive reasoning was performed and a case study application of the proposed algorithm conducted in the auto-industry.Findings: The results obtained from the case study indicate that the proposed genetic algorithm offers a reliable solution when facing variability in safety stocks that operate under assumptions such as: i) fixed costs; ii) high inventory turnover; iii) scarce previous information available concerning material requirements; and iv) replenishment services as core business value. Although the results are based on an auto-industry case study, they are equally applicable to other global supply chains.Originality/value: This paper is of interest to practitioners and academics alike as it complements and supports the very limited scholarly research on JIS by providing manufacturers and 3PL suppliers competing in mass customized industries and markets a tool to support decision-making. Implications for the design of modern supply chain fluidity in the manufacturing industry are also exposed and future research streams presented.

The Impact of Supply Chains on Firm-Level Productivity

Firms in a vertical relationship are likely to affect each other’s productivity. Exactly how does productivity spill over across this type of relationship (i.e., through which mechanisms)? Additionally, how does the relative importance of these mechanisms depend on the structure of the supply chain? To answer these questions, we decompose the channels of upstream productivity spillovers—from customers to suppliers—by developing a structural econometric model on a sample of approximately 22,500 supply chain dyads. We find that the “endogenous channel” (i.e., the effect of the customer’s own productivity on the supplier’s productivity) is by far the most important source of spillovers. This is especially true if (i) the supplier has a concentrated customer base, (ii) the supplier and the customer have similar operational characteristics, and (iii) the relationship has medium maturity. In the converse scenarios, we find, it is more important to have a partner with a portfolio of favorable “contextual” characteristics (high inventory turnover, financial liquidity, and asset turnover) than to have a productive partner.The online appendix is available at https://doi.org/10.1287/mnsc.2016.2632 .This paper was accepted by Serguei Netessine, operations management.

The Impact of Supply Chains on Firm-Level Productivity

Firms in a vertical relationship are likely to affect each other’s productivity. But exactly how does productivity spill over across this type of relationship (i.e. through which mechanisms)? And how does the relative importance of these mechanisms depend on the structure of the supply chain? To answer these questions, we decompose the channels of upstream productivity spillovers -- from customers to suppliers -- across 22,500 supply chain dyads. We find that the “endogenous channel” (i.e. the effect of the customer’s own productivity on the supplier’s productivity) is by far the most important source of spillovers. This is especially true if: (i) the supplier has a concentrated customer base; (ii) the supplier and the customer have similar operational characteristics; and (iii) the relationship has medium maturity. In the converse scenarios, we find, it is more important to have a partner with a portfolio of favorable “contextual” characteristics (high inventory turnover, financial liquidity, and asset turnover) than to have a productive partner.

The Role of Operational Capabilities in Enhancing New Venture Survival: A Longitudinal Study

We investigate relationships between operational capabilities and new venture survival. On the basis of operations management and entrepreneurship literature, we develop a contingency framework of operational capabilities especially appropriate at different life phases of a new venture's evolution. We expect that in the first years of a new venture's life, entrepreneurs should emphasize high inventory turnover to preserve working capital, support customer responsiveness, and aid firm adaptability. As new ventures grow, entrepreneurs should emphasize internal working capital generation via larger gross margins to support production ramp‐up. Later, new venture entrepreneurs should emphasize employee productivity to buttress sustainable volume production. We analyze a 6‐year longitudinal sample of 812 Swedish manufacturing new ventures using a gamma frailty‐based Cox regression. The findings show that specific operational capabilities, while always supporting new venture survival, have exceptional influence in specific new venture life phases. The three hypotheses are confirmed, suggesting that higher inventory turnover, gross margin, and employee productivity further increase new venture survival likelihoods, respectively, in the venture's start‐up, growth, and stability phases. This suggests a phased‐capabilities approach to new venture survival. This study contributes to operations management and entrepreneurship theory and practice, and sets a foundation for future research on operations strategy for new ventures.

The knit on demand supply chain

The knit on demand supply chain As customers’ tastes become more differentiated, so must companies’ offerings evolve. The demand for variety may soon become unmanageable, and several companies are addressing this trend by adopting a system of mass customization. One project, Knit on Demand, has been conducted by the Swedish School of Textiles in close collaboration with a knitting company and a retailer of tailored fashion in Stockholm. Production and sales of customized products pose logistical challenges for the companies involved, including the one-piece flow through almost the entire supply chain and the demand for short lead times in an otherwise slow environment, adding to the cost of manufacturing mass customized garments. Customization has logistical benefits such as minimised inventory; hence, high inventory turnover and the possibility of fast response to meet customer demand. The Knit on Demand concept can be considered as leagile because it comprises both lean and agile components. It is lean in the manufacturing stage upstream and agile downstream to better respond to customer demand on the market.

Do High- and Low-Inventory Turnover Retailers Respond Differently to Demand Shocks?

This paper shows the benefits of high inventory turnover in responding to demand shocks. We identify quantity- and price-responsiveness as two mediating mechanisms that distinguish how high- and low-inventory-turnover retailers (HIT and LIT retailers, respectively) can manage demand shocks. Using quarterly firm-level data of 460 U.S. retailers between 1985 and 2009, we find that HIT retailers are able to respond quickly by changing their purchase quantities in response to demand shocks, while LIT retailers primarily rely on price changes to manage demand shocks. We demonstrate the responsiveness of HIT retailers by showing that they can postpone ordering to a later time period compared to LIT retailers, who react to older demand signals. In addition, we examine the differential implications of these mechanisms on the financial performance of HIT and LIT retailers. On average, HIT and LIT retailers appear to be adept at using quantity- and price-responsiveness to avoid excesses and shortages during demand shocks. However, the negative financial impact of excesses and shortages, when they occur, can be 20 times more severe for LIT retailers compared to HIT retailers.

The impact of lean practices on inventory turnover

Lean manufacturing (LM) is currently enjoying its second heyday. Companies in several industries are implementing lean practices to keep pace with the competition and achieve better results. In this article, we will concentrate on how companies can improve their inventory turnover performance through the use of lean practices. According to our main proposition, firms that widely apply lean practices have higher inventory turnover than those that do not rely on LM. However, there may be significant differences in inventory turnover even among lean manufacturers depending on their contingencies. Therefore, we also investigate how various contingency factors (production systems, order types, product types) influence the inventory turnover of lean manufacturers. We use cluster and correlation analysis to separate manufacturers based on the extent of their leanness and to examine the effect of contingencies. We acquired the data from the International Manufacturing Strategy Survey (IMSS) in ISIC sectors 28–35.

Comparison of profitability between international integrated device manufacturers and virtual integration firms

Most studies of semiconductor firms focus on the outcomes of the historical challenges, technological development and knowledge management of Integrated Device Manufacturers (IDMs). Few studies have discussed the trend which has developed since the 1990s. Many US semiconductor firms outsource their chip production to Asian foundries and act the role of Virtual Integration (VI) firms. This study explores this new trend and discusses the reason why VI firms' profitability is ahead of the IDMs. Using analysis of panel data, the study shows that capacity utilisation, cost of goods sold/sales, inventory turnover rate and R&D intensity of the semiconductor industry in the USA serve as significant determiners of profitability for semiconductor firms. The research finds that VIs' (Fabless) profitability is ahead of that of IDMs' because VI firms have a higher inventory turnover rate and, thus, better operational efficiency. In addition, VI firms save on capacity investment by following the trend of customisation and focusing on product R&D. This study confirms the value of a 'virtually vertical integration' strategy implemented by an inter-enterprise virtual team. Since the outsourcing of wafer manufacturing is an inevitable trend, for US and European large IDMs, it will restrain investment in new wafer factories in favour of utilising the capacities of emerging wafer foundries in Asia.