Disaggregate and aggregate inventory to sales ratios over time: the case of German corporations 1993–2005

Although inventory reduction has been a major topic in production and operations management research for many years, there is a lack of empirically confirmed answers for questions such as: Have inventories in fully industrialized economies such as Germany decreased, overall, during the past decades? To the extent, inventory reductions were successfully realized, in which industries did they occur? Are there differences in inventory reduction achievements between raw materials, work-in-process, or finished goods? Are there measurable effects of inventory reductions upon the financial performance? To the best of our knowledge, this empirical study is the first one to investigate long-term inventory development on a firm as well as on industry level in a major European economy. It is based on data from German corporations and provides answers to the research questions stated above. The study’s findings indicate that total inventory to sales ratio decreased in a statistically significant extent in four out of six industry sectors during the time frame investigated. Further results suggest that the overall impact of inventory reductions to the financial performance of companies is only of a small degree