Inventory Management in China: An Empirical Study

With the outsourcing of manufacturing activities from Western countries, China has gradually become the global manufacturing hub. In the presence of increased competition from both inside and outside of China, many Chinese manufacturers have turned to scientific management approaches and implemented various enterprise systems. In academia, there has been a growing interest in quantifying the impacts of such efforts on the corporate performance of Chinese firms, and research has been carried out in areas such as finance and accounting. However, due to limited visibility of operational decisions and data, there seems to be a lack of investigation into the impacts on the firms' operational performance in the literature. In this article, we apply an empirical method to investigate the inventories of 1286 firms listed on the two stock exchanges in China, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. We find that on average the inventory levels have declined over time and that the firm-level data is consistent with several implications derived from classical inventory models.