Inventory Reduction and Productivity Growth: A Comparison of Japanese and US Automotive Sectors

Abstract

This study asseses the inventory and productivity performance of the Japanese and US automotive industries in recent decades. Within each country we distinguish between vehicle assemblers and parts suppliers. In Japan, assemblers and suppliers made dramatic inventory reductions and productivity gains, particularly during the 1970s. By comparison, we find an unbalanced pattern for the United States: American assembly plants have been streamlined but parts suppliers have stagnated. In both countries our findings suggest a strong association between inventory reduction and productivity growth.