This study uses survey data on several hundred automotive suppliers in North America
to evaluate the determinants of inventory levels in high-volume discrete parts manufacturing. We
assess the magnitude of raw materials, work-in-process, and finished goods inventories, as well as
production lot sizes and through-put times. Results are broadly consistent with the EOQ
formula and related models of optimal inventory holding. Inventories are shown to be jointly
determined by technological factors and managerial practices.
Several categories of managerial practices are found to be important. Low inventories are
linked to employee training and problem solving activities and frequent communication with
customers. More unexpected findings show the absence of inventory differences between USowned
and Japanese-owned plants operating in the United States. This suggests that Japanese
transplant parts makers have not been completely successful in adapting Japanese manufacturing
methods to the US environment.The MIT International Motor Vehicle Program and the UCLA Academic Senate for financial
support
