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

ISBN Print: 978-1-56700-089-4

ISBN Online: 978-1-56700-442-7

SMALL FIRMS, BIG STOCKS?

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.
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