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Flexible Automation and Intelligent Manufacturing,  1997:<br>Proceedings of the Seventh International FAIM Conference

ISBN:
978-1-56700-089-4 (Print)
978-1-56700-442-7 (Online)

SMALL FIRMS, BIG STOCKS?

Michael Bedwell
School of Engineering, Coventry University, CV1 5FB

Paul Higginbottom
School of Engineering, Coventry University, CV1 5FB

Sharon Sandhu
School of Engineering, Coventry University, CV1 5FB

Abstract

A simple economic model is proposed to compare the relative values of stocks which, under notionally JIT conditions, firms in a given supply chain would be expected to carry. From the model it is hypothesised that, other things being equal, the Stocks/Turnover ratio will be greatest at the retail end of the chain, but elsewhere negatively correlated with turnover. Statistics from the automotive industry partially support this hypothesis; for the major car makers (Stocks/Turnover2) is indeed greater than that of their suppliers, for whom the predicted correlation is indeed generally negative, though only to the 75% confidence level. However, for the major five first-tier UK manufacturers earning more than £1000m/year, (Stocks/Turnover2) exceeds that of smaller firms, while the majority of firms earning less than £2.8m/year are self-excluded because they are not legally obliged to disclose their turnover. The paper concludes with a caveat that popular generalisations about lean supply rarely acknowledge this methodological problem.