This break in the relationship between the UK and EU necessitates the need for UK manufacturing firms to revise their procurement policy and diversify their supplier base by the inclusion of non-EU suppliers. A research on inventory management is highly salient and timely, especially for British manufacturing industries that are heavily integrated into European supply chains, and will therefore be heavily affected by Brexit. However, prior studies have circumvented examining the value effect of abnormal inventory and avenues through which firms translate abnormal inventory into superior performance.Īgainst this backdrop, this paper examines the relationship between abnormal inventory and performance of United Kingdom (UK) manufacturing firms. For example, several firms have been using advanced computer technology for inventory control (Madhou et al. In recent times, however, many firms (see, e.g., Burberry Group Plc) have focused on inventory management as a potential avenue for cost savings because of its informativeness to firm value (Bao and Bao 2004). For example, during 2015, the leading 2000 companies in the United States of America (USA) and Europe had approximately $187.5 billion and $820 billion unnecessarily invested in inventory, respectively, Footnote 1 which shows evidence of inefficiencies in inventory management. However, the optimal control of inventory remains a key challenge to firms (Van Horenbeek et al. Inventory management is fundamental to firms’ performance because it represents a huge investment in working capital (Blinder and Maccini 1991 Valderrama 2003), especially for manufacturing firms.
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