Examining Demand and Supply-Chain Causes of Inventory Dynamics: Evidence from the Automotive Industry

This study examines inventory dynamics on durable finished goods in an automotive supply chain with respect to manufacturers, distributors, and retailers. We apply a regression method to product-level industry data covering a period from 2010 to 2015. We test the demand-oriented and supply chain-associated influences on the development of inventory dynamics to provide the business managers more practical implications regarding how to better manage inventory dynamics and thereby attain improved stock performance. Our results show that information distortion, product variety, and planned obsolescence application directly influence inventory dynamics. In addition, our study also shows that the effects of product variety and planned obsolescence application are mediated by the demand variation to the development of inventory dynamics. Further, we demonstrate that the studied factors may influence inventory dynamics in various degree when the test is made based on individual product type.