The impact of decentralised control on firm-level inventory: Evidence from the automotive industry

Sander de Leeuw*, Matthias Holweg, Geoff Williams

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

12 Citations (Scopus)

Abstract

Purpose: The purpose of this paper is to investigate the effect of decentralised control on finished goods inventory levels in a distribution system, and to identify the factors that determine the overall inventory level. Design/methodology/approach: The authors' study is based on a mixed method approach using both a survey and semi-structured interviews to assess inventory management practices and firm performance. Findings: It was found that the common assumptions that distribution outlets or dealers are homogenous and that their behaviour is uniform in response to central control, such as the manufacturer's strategy, do not hold in practice. In fact, the authors show that under conditions of decentralised control, the inventories held at outlet level vary greatly around the aggregate inventory at overall manufacturer level and in this sense bear little resemblance to it. Amongst other conclusions, these findings provide a possible explanation for previous studies' inconclusive evidence on inventory reduction. Research limitations/implications: The authors' research is based on evidence from the automotive industry in the USA; future research may include a wider industry analysis and geographical scope. Practical implications: The paper identifies how incentives and decision-making structures at the outlet level need to be considered in order to derive decisions that are optimal at the supply chain level. Originality/value: The paper extends the current literature on the determinants of inventory levels by using dealer-level data, as opposed to manufacturer or firm-level data in previous studies, thereby identifying possible causes for the previously inconclusive evidence on inventory levels in distribution systems.

Original languageEnglish
Pages (from-to)435-456
Number of pages22
JournalInternational Journal of Physical Distribution and Logistics Management
Volume41
Issue number5
DOIs
Publication statusPublished - 14 Jun 2011
Externally publishedYes

Keywords

  • Automotive industry
  • Decentralised control
  • Distribution
  • Inventory
  • Order fulfilment
  • Stocking policy
  • Supply chain management
  • United States of America

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