Research On Customer Geographic Proximity And Inventory Management

With the continuous advancement of global economic integration in the 1980 s,the relationship between upstream and downstream enterprises in the supply chain has been widely concerned,and the role of customers in corporate decision-making has become a hot topic in practical discussions.The existing research on the relationship between customers and suppliers mostly focuses on customer concentration as an entry point to examine their impact on corporate profitability,earnings management,audit quality,bank loans,capital costs and tax avoidance behaviors,but pay less attention to the geographical location of customers.The geographical location of customers can influence the production and operation activities of enterprises through information exchange and cooperation.Customer are the important stakeholder of the company.It affects the inventory management in the production and operation of the enterprise through the purchase of raw materials,payment,and commercial credit.How does the customer's geographic location affect the company's inventory management level? How should companies weigh in the geographic location of each major customer? Existing studies haven't explain them.In view of those problems,this paper examines the effect of customer geographic proximity on the inventory management level of manufacturing enterprises using the hand collected data of the top five clients of manufacturing enterprises in China.On this basis,this paper further explores the regulatory role of the property rights and the degree of marketization of the region on the relationship between the customer's geographic proximity and the enterprise inventory management level.The results show that there is a positive relation between the geographic proximity and inventory management level: the greater the geography proximity of customers,the lower the proportion of inventory,the higher the inventory turnover rate.Further evidence shows that,the state-owned enterprises and in regions with low level of marketization,the relationship between customer geographic proximity and inventory management strengthens.This paper not only contributes to the literature on the factors affecting the level of inventory management and the supply chain management,but also provides reference on how the manufacturing enterprises can maintain the relationship with customers better,and improve inventory management efficiency.