An Empirical Research On The Impact Of Supply Chain Concentration On Inventory Level And Profitability

In the relationship between upstream and downstream transactions,whether it should be centralized or decentralized has always been a trade-off in firms.The research conclusions about the influence of supply chain concentration on firms' operation in the literature are not consistent.This paper uses the data of Chinese manufacturing listed companies from 2007 to 2018,and considers both operating and accounting variables in the control variables to verify the four hypotheses proposed.In the analysis of the correlation between supply chain concentration and inventory turnover rate,the fixed-effect regression is used to correct omitted variable bias,and the lagged independent variables are used as the instrument variables to correct the bias of reverse causality.Variable substitution method is used to test the regression results to verify the robustness.The regression results show that there is a positive correlation between supplier concentration and inventory turnover,but there is no significant correlation between customer concentration and inventory turnover.According to the research results of this paper,when considering the inventory turnover rate,companies should pay attention to the positive impact of the increase in supplier concentration.By establishing a stable cooperative relationship with suppliers,properly centralizing procurement,and strengthening information sharing,firms can improve inventory turnover rate.The regression results show that increasing customer concentration does not have a significant negative effect on inventory turnover,so companies do not need to deliberately reduce customer concentration because of concerns about the difficulty of inventory management due to higher customer concentration.In the analysis of the correlation between supply chain concentration and return on assets,the fixed effect regression is used to correct the omitted variable bias,and the generalized moment estimation method is used to correct the dynamic panel bias.Variable substitution method is used to test the regression results to verify the robustness.The regression results show that there is no significant correlation between supplier concentration and return on asset,while customer concentration has a positive correlation with return on assets.The Du Pont analysis shows that supplier concentration has a significant correlation with both gross margin and account payable turnover rate,which will reduce profitability.It also has a significant correlation with both management expenses and inventory turnover rate,which will increase profitability.This might be used to explain why the correlation between supplier concentration and return on assets is not significant.The positive impact of customer concentration on the firm's net profit is mainly reflected in the reduction of sales expenses.This may be because the firm can guarantee sales channels and reduce sales expenses such as advertising through cooperation with stable customers.The reduction in those expenses allows the firm to finally obtain a higher net margin rate.