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The principle of balance


between companies
inventories and disturbances
in logistics flows

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Empirical illustration and


conceptualisation
Goran Svensson
School of Business and Engineering, Halmstad University,
Halmstad, Sweden
Keywords Balancing, Inventory, Logistics, Supply chain management
Abstract Stresses the crucial importance of the balance between companies policies of inventory
management and the occurrence of disturbances in logistics flows. The study is based upon a mail
survey in the automotive industry. It is concluded that there is in part a significant association
between companies inventories and disturbances in inbound and outbound logistics flows. The
financial benefits that might be achieved through leanness in inventory management might also
negatively influence the financial costs due to increased disturbances. Therefore, it is a crucial
managerial task in the automotive industry to achieve a suitable balance between the inventory and
the occurrence of disturbance within inbound and outbound logistics flows. It is this balance that
generates the best managerial outcome in a competitive business setting. A principle of balance, a
process of balance, and a typology of companies inventories and disturbances in inbound or
outbound logistics flows are introduced.

Introduction
Companies in many industries are exposed to an extremely keen competitive
environment. Manufacturers in the automotive industry and their suppliers
have for many years implemented and applied just-in-time (JIT) and other lean
manufacturing principles in the inbound and outbound logistics flows, in order
to stay competitive, maintain cost-effectiveness, and achieve reasonable
profitability (e.g. Sugimore et al., 1977). In their search for waste reduction,
many manufacturers have been struggling to decrease their inventories in the
inbound and outbound logistics flows (Coleman and Jennings, 1998; Jones and
Riley, 1985). In addition, companies strive to reduce the number of
sub-contractors and at the same time to increase the outsourcing of internal
activities to external sub-contractors (Svensson, 2001). These actions have led
to the manufacturers risk of exposure to disturbances in the logistics flows
being increased. Furthermore, the dependence between the companies
inventories and disturbance in inbound and outbound logistics flows has
become substantially higher due to the implementation of lean supply chains.

International Journal of Physical


Distribution & Logistics Management
Vol. 33 No. 9, 2003
pp. 765-784
q MCB UP Limited
0960-0035
DOI 10.1108/09600030310503325

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In addition, these supply chains are sometimes also supposed to be agile and
responsive, which in turn increase the dependence between the companies
inventories and disturbances in inbound and outbound logistics flows.
Research objective
In general, it may be understood that when preventive activities are
successfully introduced companies succeed in diminishing the disturbances
and reducing the inventories in their inbound and outbound logistics flows.
The success of the preventive activities performed in the companies
manufacturing processes is dependent upon their ability with the inbound
and outbound logistics flows to manage unexpected changes. The
simultaneous consideration of the inventories and the disturbances in
inbound and outbound logistics flows are of immediate importance in many
industries, due to the fact that many companies strive to be lean in their
business activities. The UPS strikes demonstrated to JIT buyers and sellers
that companies activities are highly dependent upon each other in todays
highly integrated supply chains (Coleman and Jennings, 1998). The objective of
this research is to describe companies inventories and disturbances in inbound
and outbound logistics flows. Two research hypotheses have been formulated
to be tested in a mail survey:
H1. There is no association between companies inventories and
disturbances in inbound logistics flows.
H2. There is no association between companies inventories and
disturbances in outbound logistics flows.
The disturbance in inbound and outbound logistics flows may be mainly
categorised as either quantitative or qualitative (Svensson, 2001). Causes of
quantitative disturbances are events that create a lack of components and
materials for downstream activities in the supply chain, for example:
breakdowns or delays in transport (i.e. by road or sea) caused by unexpected
conditions, bad weather. Causes of qualitative disturbances are events that lead
to deficiencies in components and materials in the supply chain, for example:
poor paint surface, measurement errors in components, non-functioning
articles. The inventory refers to the inventory turnovers, inventory lead times,
and inventory trends in companies inbound and outbound logistics flows.
Theoretical limitations of research
This research is derived from the fact that there are dependencies between
companies in any competitive marketplace (Lambert et al., 1998; Hakansson
and Snehota, 1995; Stern, 1969; Alderson, 1965, 1957; McCammon and Little,
1965; Weld, 1916). In this research, dependencies refer to a link, a tie, or a bond
between one company in relation to another company or companies (Lambert
et al., 1998; Hakansson and Snehota, 1995). Hammarkvist et al. (1982) discuss
different types of dependencies between companies including technical

adaptations, co-ordination, knowledge about each other, social bonds and


economic as well as judicial ties. Furthermore, Mattsson (1999) writes about
market-related and IT-technological dependencies between companies. There
is an aspect of time dependence in all these dependencies, e.g. in terms of longand short-term dependencies. For this reason, the time dependence between
companies turns out to be of substantial importance to be taken into
consideration in this research. Time dependence refers to the notion that there
is a chronological or sequential dependence between companies activities in
supply chains. This might depend upon the activities per se, or the resources
that are available to perform these activities.
There is also a functional dependence between companies (Bucklin, 1966;
Alderson, 1957; Stigler, 1951). Functional dependence refers to the contention
that companies activities are specialised and complement each other in
channels or networks. For example, there is a functional diffusion between
companies in networks (Hakansson and Snehota, 1995). Furthermore, there is a
sequential co-ordination of activities between companies in channels (Bucklin,
1966; Alderson, 1957). This functional dependence between companies might
be explained by the division of labour that usually develops and takes place in
channels (Stern and El-Ansary, 1992; Stigler, 1951) and networks (Lambert
et al., 1998).
These time and functional dependencies lead to the necessity for
co-operation and co-ordination between companies in order to achieve
internal, and in some cases, mutual goals. Time and functional dependencies
between companies activities have been considered in both channels
(Alderson, 1957, 1965; Bucklin, 1965; Gattorna, 1978) and networks
(Hakansson and Snehota, 1995). In this research, a network refers to at least
one horizontal dependence and one vertical dependence between companies
activities, while a channel refers to the dependence between companies
activities in a vertical chain. Bowersox and Closs (1996, p. 90) define the
channel construct as:
. . . the structure of intercompany units and extracompany agents and dealers, wholesale and
retail, through which a commodity, product, or service is marketed . . ..

This research is limited to channel dependencies between companies activities.


Furthermore, this research is limited to the value chain (Porter, 1985) in terms
of companies inbound and outbound logistics flows. Value systems (Porter,
1985) and supply chain network structures (Lambert et al., 1998) are therefore
not considered.
The time and functional dependencies between two companies in a supply
chain might be studied through the interaction model (Hakansson, 1982). This
model identifies four groups of variables, i.e. the overall environment, the
atmosphere of interaction, the actors of interaction and the interaction process.
These groups describe and influence the interaction, as well as the dependence,
between buying and selling organisations. This research is limited to the
interaction process itself between two companies.

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Frame of reference
The time and functional dependencies between companies activities in supply
chains have in the last few decades been explored in the fields of supply chain
management (SCM), just-in-time (JIT), quick response (QR), and efficient
consumer response (ECR). SCM has been of interest for many years (Oliver and
Webber, 1982; Jones and Riley, 1985, 1987; Houlihan, 1985, 1987; Snowdon,
1988). The significance of SCM has been of substantial importance since the
early 1990s, although the approach, or rather the concept, was introduced back
in the early 1980s (Oliver and Webber, 1982). In todays literature and thinking
in the field of logistics, SCM is an influential component (Stock, 2000). In fact,
practitioners and consultants have striven to implement concepts, principles,
methodologies, and approaches of SCM in the business activities of firms, e.g.
in the automotive, textile, and retail industries. In the automotive industry the
term JIT (e.g. Sugimore et al., 1977; Toyoda, 1987) has been used, while in the
textile and retail industries the terms QR (e.g. Stern et al., 1996) and ECR (e.g.
Kurt Salmon Associates, 1993; Fernie, 1994) have been applied. These terms
may all be grouped under the umbrella of SCM.
The overall theoretical foundation of this research is specifically derived
from JIT and/or other lean business philosophies. JIT emerged in the research
literature in the 1970s (e.g. Sugimore et al., 1977) and has been of great interest
to scholars and managers ever since. The keen competition in the automotive
industry has forced vehicle manufacturers to search for different means of
reducing costs, increasing productivity and maintaining profitability. For
example, vehicle manufacturers have been striving to reduce, and in some
cases eliminate, inventories (e.g. sequence deliveries which almost lack
inventory buffers between the supplier and the car manufacturers assembly
plant, so-called just-in-sequence (JIS)), reducing the number of sub-contractors
used (e.g. from multiple sourcing to single sourcing per component or material),
and the sharing or diffusion, partly or totally, of manufacturing, assembling,
research and development of new materials and components (e.g. outsourcing).
These issues have to a certain extent contributed to increasing time and
functional dependencies between companies activities in supply chains in the
automotive industry. They have also initiated a movement of responsibility
upstream, where the different functions performed on the car manufacturers
assembly lines in the past have now been transmitted to sub-contractors.
Rainnie (1991) states that JIT is highly vulnerable to breakdown and relies to a
large extent on pushing responsibility for quality control down the line to
sub-contractors.
Disturbances in the supply chain are a common phenomenon (e.g. Bruk and
ElYanov, 1975; Drucker, 1990; Hammer, 1992; Hay, 1987). In the literature,
different studies exist that have focused on the presence of disturbances. For
example, Drucker (1990) states that the presence of disturbances usually
corresponds to 20 per cent of time available in manufacturing capacity and in

some cases it may correspond to as much as 50 per cent. Hammer (1992) shows
a frequency of disturbance that is 15 per cent in some companies. It has been
possible to reduce disturbances in manufacturing processes, from 37 per cent to
14 per cent in a year, through paying more attention to the lack of capacity
usage of machinery and equipment (Hansson, 1994). Jande (1989) presented a
reduction from 62 per cent to 42 per cent. Through the elimination of
disturbances and set-up times, the unused manufacturing potential may be
improved by 25 per cent to 60 per cent (Viktorsson, 1989). A study (Nord and
Johansson, 1997) discovered differences between industries and their capacity
to prevent and manage disturbances, for example from 20 per cent in the wood
and paper industry to 68 per cent in the electronics industry. Disrupting
activities may reduce the time usage to 75 per cent, if suitable and improved
methods are used (e.g. Hay, 1987; Bruk and ElYanov, 1975; Ljungberg and
Nilsson, 1997).
Consequently, an increased awareness of the potential occurence of
disturbances and their sources of origin in the supply chain may create
substantial improvements in order to handle or prevent them. Preventive
activities may strongly reduce the frequency of disturbances (Ericsson, 1997)
and, thus, one can be better prepared to confront the occurrence of disturbances
and to minimise ones inventories.
Methodology
This research was performed as a mail survey. In order to collect data
separately for the companies inbound and outbound logistics flows, two
independent representatives at each company initially were contacted. The
selection of the companies studied was based upon an identified population in
the Swedish vehicle industry (i.e. mostly sub-contractors in the industry).
Companies in the industry having more than 20 employees were included in
the final population. A pre-study showed that the smaller companies in the
initial population did not have the required information available or collected.
The population consisted of 251 companies and thus 502 executives were
selected for the survey. Two matched questionnaires (i.e. one each concerning
the inbound and outbound logistics flows) were developed. A questionnaire
was sent to each of the executives. The selected executives for the inbound
questionnaire, which contained items dealing with the inventory and
disturbance in the inbound logistics flows, were mainly the purchasing
manager or logistics manager. In the outbound logistics flows the manager in
charge of the production or sales in each company was primarily selected. Each
company and each respondent was initially contacted by phone in order to
select the two most suitable executives at each company for each questionnaire.
In a few companies (approximately 10 per cent) a single executive responded
to both questionnaires, due to the lack of availability of other suitable
executives. In these cases, the executives received the second questionnaire (i.e.

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the one regarding outbound logistics flows) after a delay of two to three weeks
in an attempt to have independent observations from these executives
regarding the inventory and disturbance in the companies inbound and
outbound logistics flows.
A substantial amount of work was performed in the preparation,
implementation and conclusion of the mail survey. For example, each
respondent was briefly introduced to the research project to stimulate his or her
interest and willingness to participate in the survey. In addition, a brief
telephone interview was performed with each of them (approximately five
minutes) in order to obtain a notion about each companys empirical context
(i.e. in terms of the inbound or outbound logistics flows). Those executives who
did not answer the questionnaire were contacted again by telephone in order to
stimulate their interest to fill in the required answers. The care taken in this
part of the research led to the achievement of a satisfactory response rate. Of
the companies, 93.2 per cent responded to at least one of the two questionnaires.
A total of 418 responses (total response rate: 83.2 per cent) were collected from
the identified population. The responses collected for the questionnaires of the
inbound logistics flows from sub-contractors were 214 units (response rate: 85.3
per cent). The responses collected for the questionnaires of the outbound
logistics flows to customers were 204 units (response rate: 81.3 per cent).
An analysis of non-response bias was performed in order to clarify if the
non-response bias in the survey might have affected the results of this study,
and also to determine if there were any differences between the companies who
answered or participated in the survey, and the few who did not. The analysis of
non-response bias included all non-response companies that did not answer
either of the two questionnaires used. The principal reasons why they did not
participate in the survey was either that they were too occupied at the time of
the research, that they had a policy to never participate in surveys, or simply
that they were not interested in participating. A non-parametric test (Chi-square
test: Pearson) was used for the analysis of non-response bias, using such
variables as the number of employees and the total company sales. There
existed no significant difference (significance , 5 per cent) between obtained
responses and non-responses. Therefore, it was reasonable to conclude that the
validity of responses was satisfactory since the study achieved a high response
rate and there was no identified bias between responses and non-responses.
Empirical findings
A selection of univariate, bivariate, and multivariate statistical techniques was
used to analyse the collected data (e.g. Norusis, 1993, 1994). A total of 27 items
in each questionnaire were used concerning the inventory and disturbance in
companies inbound and outbound logistics flows (see Appendix). A total of 13
items were used to measure and estimate the inventory (see Tables AI and
AIII). Initially, these items were structured according to three pre-specified

dimensions, namely inventory turnover (i.e. B1-B6), lead time (i.e. B7-B11) and
inventory trend (i.e. B12 and B13). Fourteen items were used to measure and
estimate the disturbance (see Tables AII and AIV). Initially, the items were
structured according to four pre-specified dimensions, namely service level (i.e.
A1-A4), disturbance deviation (i.e. A6 and A11), disturbance consequence (i.e.
A7-A9 and A12-A13) and disturbance trend (i.e. A5, A10 and A14).
A confirmatory approach and an R factor analysis were applied on the
collected data (e.g. Norusis, 1994). Factor loadings above 0.3 are interpreted as
significant in the tables (italic) (Hair et al., 1992, p. 239). Factor scores are
computed for each factor in order to be used in the section where the
association between the inventory and disturbance in companies inbound and
outbound logistics flows are tested. The factor scores that have been saved
from the factor analyses are used to test the associations between the inventory
and disturbance in companies inbound and outbound logistics flows (i.e. H1
and H2). The bivariate analyses consist of three correlation tests, namely: the
Pearson correlation coefficient, the Kendalls tau_b correlation coefficient and
the Spearmans rho correlation coefficient. The correlations of the coefficients
are shown within brackets in the text. Note that an asterisk (i.e. *) is used to
indicate a significance level of 5 per cent or less in terms of differences or
associations between variables. Two asterisks (i.e. **) are used to indicate a
significance level of 1 per cent or less.

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771

Factor analysis inventory items in the inbound logistics flows


The outcome of the factor analysis (see Table I) of the items in the inbound
questionnaire on the inventory turned out to be significant (KMO: 0.475;
Bartletts test: approx. Chi-square: 156.194: df 28: Sig: 0.000). Four factors were
identified:
(1) Factor 1 consists of the variables B1 and B3, which represent the
highest/lowest inventory turnovers in the inbound logistics flows from
sub-contractors, and is labelled inbound inventory turnover;
Factor
Item
(B3) Lowest inventory turnovers
(B1) Highest inventory turnovers
(B7) Shortest lead times
(B9) Longest lead times
(B8) Share of shortest lead times
(B2) Share of highest inventory turnovers
(B12) Lead time trend
(B13) Inventory level trend
Total explained variance per factor (%)
Cumulative explained total variance (%)

1
0.881
0.852
20.025
20.059
20.076
0.161
20.038
0.060
19.2
19.2

0.021
0.088 2 0.031
20.097 20.005
0.055
0.884
0.140
0.062
0.788 20.320
0.005
20.003
0.822 2 0.131
20.096
0.738
0.113
0.078
0.097
0.821
20.015 20.111
0.801
17.9
17.1
16.9
37.1
54.3
71.2

Communality
per variable
0.785
0.738
0.806
0.727
0.698
0.593
0.691
0.658

Table I.
Factor analysis of the
inventory items in the
inbound logistics flows

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(2) Factor 2 consists of the variables B7 and B9, which represent the
shortest/longest lead times from sub-contractors, and is labelled inbound
lead times;
(3) Factor 3 consists of the variables B2 and B8, which represent the highest
inventory turnovers and the shortest lead times. This factor is labelled
inbound turnover/lead time; and
(4) Factor 4 consists of the variables B12 and B13, which represent the
trends for the lead times and the inventory levels. This factor is labelled
inbound inventory level trends.
Factor analysis inventory items in outbound logistics flows
The outcome of the factor analysis (see Table II) of the items in the outbound
questionnaire on the inventory turned out to be significant (KMO: 0.556;
Bartletts test: approx. Chi-square: 152.192: df 28: Sig: 0.000). Four factors were
identified:
(1) Factor 1 consists of the variables B1 and B3, which represent the
highest/lowest inventory turnovers in the inbound logistics flows from
sub-contractors, and is labelled outbound inventory turnover.
(2) Factor 2 consists of the variables B7 and B9, which represent the
shortest/longest lead times from sub-contractors, and is labelled
outbound lead times.
(3) Factor 3 consists of the variables B2 and B10, which represent the
highest inventory turnovers and the longest lead times. This factor is
labelled outbound turnover/lead-time.
(4) Factor 4 consists of the variables B12 and B13, which represent the
trends for the lead times and the inventory levels. This factor is labelled
outbound inventory level trends.

Factor
Item

(B1) Highest inventory turnovers


0.876 20.043
0.063 2 0.154
(B3) Lowest inventory turnovers
0.876
0.037
0.142
0.100
(B9) Longest lead times
20.033
0.879 20.064
0.025
(B7) Shortest lead times
0.029
0.808
0.254
0.034
(B10) Share of longest lead times
0.003
0.183
0.787
0.169
(B2) Share of highest inventory turnovers
0.233 20.014
0.779 2 0.167
Table II.
(B13) Inventory level trend
20.007
0.083 20.210
0.820
Factor analysis of the
(B12) Lead time trend
20.045 20.022
0.221
0.796
inventory items in the
Total explained variance per factor (%)
19.9
18.4
17.7
17.5
outbound logistics flows Cumulative explained total variance (%)
19.9
38.3
56.0
73.4

Communality
per variable
0.798
0.799
0.778
0.719
0.682
0.689
0.723
0.685

Factor analysis disturbance items in the inbound logistics flows


The outcome of the factor analysis (see Table III) of the items in the inbound
questionnaire on the disturbance turned out to be significant (KMO: 0.621;
Bartletts test: approx. Chi-square: 613.435: df 78: Sig: 0.000). Four factors were
identified:
(1) Factor 1 consists of the variables A7, A8, A9, A12 and A13, which
represent the consequences of the disturbances that occur in the inbound
logistics flows from sub-contractors and it is labelled inbound
disturbance consequences.
(2) Factor 2 consists of the variables A1, A2 and A3, which represent the
sub-contractors service levels and is labelled inbound service levels.
(3) Factor 3 consists of the variables A5, A10 and A14, which represent the
trends for the service levels and the quantitative and qualitative
disturbances. This factor is labelled inbound disturbance trends.
(4) Factor 4 consists of the variables A6 and A11, which represent the
deviations in components and materials. It is labelled inbound
deviations.

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773

Factor analysis disturbance items in the outbound logistics flows


The outcome of the factor analysis (see Table IV) of the items in the outbound
questionnaire on the disturbance turned out to be significant (KMO: 0.595;
Bartletts test: approx. Chi-square: 730.143: df 78: Sig: 0.000). Four factors were
identified:
Factor
Item
(A13) Qualitative consequences
(A12) Qualitative deviations
(A9) Quantitative consequences
(A7) Down-times
(A8) Increased cycle times
(A1) Percentage service level
99 per cent
(A2) Percentage service level
90-98 per cent
(A3) Service level 99 per cent
(A10) Trend quantitative disturbances
(A14) Trend qualitative disturbances
(A5) Trend service levels
(A6) Quantitative deviations
(A11) Qualitative deviations
Total explained variance per factor (%)
Cumulative explained total
variance (%)

Communality
per variable

0.776
0.758
0.739
0.689
0.640

0.113
0.199
20.133
20.219
20.109

0.060
0.134
0.115
0.006
0.028
0.033
0.050 2 0.093
0.132 2 0.114

0.637
0.627
0.565
0.533
0.452

2 0.079

0.928

2 0.025 2 0.053

0.871

2 0.087
2 0.147
0.034
0.228
2 0.042
2 0.048
0.017
20.8
20.8

2 0.774 2 0.044
0.770
0.001
0.010
0.769
0.131
0.719
0.088 2 0.672
20.118
0.067
0.102 2 0.093
17.1
12.4
37.9

50.3

2 0.127
2 0.091
2 0.023
2 0.047
2 0.032
0.837
0.824
11.2
61.5

0.624
0.623
0.593
0.588
0.462
0.722
0.698

Table III.
Factor analysis of the
disturbance items in the
inbound logistics flows

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Factor
Item

(A8) Increased cycle times


(A9) Quantitative consequences
(A7) Down-times
774
(A13) Qualitative consequences
(A12) Qualitative deviations
(A1) Percentage service level
99 per cent
(A2) Percentage service level
90-98 per cent
(A3) Service level 99 per cent
(A14) Trend qualitative disturbances
(A10) Trend quantitative disturbances
(A5) Trend service levels
(A11) Qualitative deviations
Table IV.
(A6) Quantitative deviations
Factor analysis of the
Total explained variance per factor (%)
disturbance items in the Cumulative explained total
outbound logistics flows
variance (%)

Communality
per variable

0.811
0.705
0.703
0.650
0.644

20.067
0.089
20.104
0.017
20.059

0.047
0.191
0.000 2 0.072
0.070
0.122
0.036 2 0.144
0.209 2 0.068

0.701
0.510
0.524
0.445
0.467

2 0.002

0.968

0.017 2 0.061

0.941

2 0.905 2 0.097
0.098
0.779 2 0.117 2 0.100
20.114
0.776 2 0.068
0.033
0.750
0.194
20.058 2 0.713 2 0.097
20.075
0.023
0.790
20.136
0.163
0.773
18.7
13.7
10.6

0.839
0.639
0.666
0.647
0.530
0.631
0.642

2 0.012
2 0.090
0.215
0.214
0.096
2 0.020
0.002
20.0
20.0

38.7

52.3

62.9

(1) Factor 1 consists of the variables A7, A8, A9, A12 and A13, which
represent the consequences of the disturbances that occur in the
outbound logistics flows to customers and it is labelled outbound
disturbance consequences.
(2) Factor 2 consists of the variables A1, A2 and A3, which represent the
customers service levels and is labelled outbound service levels.
(3) Factor 3 consists of the variables A5, A10 and A14, which represent the
trends for the service levels and the disturbances. This factor is labelled
outbound disturbance trends.
(4) Factor 4 consists of the variables A6 and A11, which represent the
deviations in components and materials. It is labelled outbound
deviations.
Inventory and disturbances in companies inbound and outbound logistics flows
In the inbound logistics flows there are no significant associations between the
factors of consequences/service levels and the identified inventory factors, such
as inventory turnovers, lead times and inventory level trends. There is,
however, a significant negative association between the factor of deviations
and the factor of inventory level trends (Pearson; Kendalls tau_b2 0.117*;
Spearmans rho2 0.170*). This may signify that the deviations tend to increase
as the inventory level trends are downward. There is also a significant positive
association between the factor of disturbance trends and the factor of inventory
level trends (Pearson0.242**; Kendalls tau_b0.163**; Spearmans rho0.227**). This

may signify that the disturbance trends tend to increase as the inventory level
trends turn upward. In addition, there is a significant negative association
between the factor of disturbance trends and the factor of inventory turnovers
(Pearson; Kendalls tau_b2 0.136*; Spearmans rho2 0.204*). This may indicate
that the inventory turnovers tend to increase, as the disturbance trends turn
downward.
In the outbound logistics flows there are significant associations between all
of the factors of disturbances and the identified inventory factors, such as
inventory turnovers, lead times and inventory level trends. For example, there
is a significant negative association between the factor of deviations and the
factor of lead times (Pearson; Kendalls tau_b2 0.202**; Spearmans rho2 0.288**).
This may signify that the deviations tend to increase as the lead times decrease.
There is also a significant positive association between the factor of deviations
and the factor of inventory turnover (Pearson; Kendalls tau_b0.158**;
Spearmans rho0.235**). This may signify that the deviations tend to increase
as the inventory turnover increases. There is also a significant positive
association between the factor of disturbance trends and the factor of inventory
level trends (Pearson0.314**; Kendalls tau_b0.196**; Spearmans rho0.279**). This
may signify that the disturbance trends tend to increase as the inventory level
trends are upward. In addition, there is a significant negative association
between the factor of service levels and the factor of lead times (Pearson;
Kendalls tau_b2 0.156**; Spearmans rho2 0.223**). This may indicate that the
service levels tend to increase as the lead times decrease. This association may
appear counter intuitive, but as a suppliers service level improves the
increased reliability permits shorter lead times. Finally, there is a significant
positive association between the factor of consequences and the factor of the
highest inventory turnovers/the longest lead times (Pearson0.180**; Kendalls
tau_b0.127**; Spearmans rho0.191**). This may indicate that the consequences
tend to increase as the inventory turnovers and the lead times increase.
Consequently, there is in part an association between companies inventories
and disturbances in inbound and outbound logistics flows. Therefore, the null
hypotheses H1 and H2 are tentatively rejected. In the inbound logistics flows
there is a weaker overall association between inbound disturbance factors and
the inbound inventory factors than between the outbound disturbance factors
and the outbound inventory factors. The companies inbound and outbound
inventories may be a factor of importance that influences the occurrence of
disturbances in the companies logistics flows.
Theoretical and managerial implications
A set of theoretical and managerial implications of this research is provided.
Furthermore, the principle of balance between a companys inventories and
disturbances in inbound and outbound logistics flows is conceptualised
through the introduction of a principle, a process and a typology. The

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775

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776

conceptualisation may be applicable to describe and classify the balance and


the process between companies inventories and disturbances. Furthermore, it
may also be used for teaching and training purposes, as well as to position and
compare the outcome of other replicating studies.
Principle of balance
In this research, the inventory (i.e. in terms of inventory lead times, inventory
turnovers and inventory trends) is assumed to influence the disturbances (i.e.
the occurrence of quantitative and qualitative disturbances) in companies
inbound and outbound logistics flows. The empirical findings of this research
indicate that there is, in part, an association between companies policies of
inventory management and the occurrence of disturbances in inbound and
outbound logistics flows. This means that companies have to carefully manage
the search for balance between inventories and disturbances. The importance
of the principle of balance between a companys inventories and disturbances is
illustrated in Figure 1.
Generally, the principle of balance between inventories and disturbances
indicates that when the inventories increase then the disturbances decrease in
the inbound (or outbound) logistics flows, and vice versa. Specifically, the
principle stresses the importance of harmony between inventories and
disturbance in the inbound (or outbound) logistics flows.
Process of balance
The principle of balance reflects a static situation per se. Actually, it is based
upon a dynamic process between companies inventories and disturbances in
logistics flows. This means that the outcome of this interaction is dependent
upon a sequence of happenings that goes beyond an on-the-spot-account.
The association between inventories and disturbances (see Figure 2)
underpins the process of balance. The term inventory refers to the stock kept
in a companys inbound (or outbound) logistics flows. The term disturbance
refers to the occurrence of stockouts in a companys inbound (or outbound)
logistics flows. The term process refers to the association between a
companys inventories and its disturbances in inbound (or outbound) logistics
flows. The association per se is the actual process, which means that the
outcome of balance is serial and dependent upon the dynamic features in the
environment. Accordingly, it is not an on-the-spot-account and not dependent
only upon static features. The principle of balance may reflect just a static view
of the association between inventories and disturbances (as in the case of this
research). It may also reflect a dynamic view. Therefore, the principle of

Figure 1.
Principle of balance

balance in a companys inbound and outbound logistics flows should be seen as


function of process.
A typology of inventories and disturbances in logistics flows
The association between companies inventories and disturbances in inbound
and outbound logistics flows might also be described and classified into
different managerial situations. Based upon two dimensions, namely
companies inventories and disturbances, four principal situations are
distinguished. Each dimension is divided into two categories. These
categories refer to the fact that the company may have a low or high level of
inventory, and a low or high level of disturbances, in the inbound and outbound
logistics flows. The typology of four managerial situations is illustrated in
Figure 3.
On the one hand, an alls peace and quiet situation implies that both a
companys inventory and disturbances in inbound (or outbound) logistics flows
are relatively low, or lower, in relation to a selected, suitable or ideal point of
reference. This situation is beneficial in both a short- and a long-term
perspective in a managerial context, and is close or equal to a suitable balance
between inventory and disturbances. On the other hand, a devil and the deep
blue sea situation means that both a companys inventory and disturbances in
inbound (or outbound) logistics flows are relatively high, or higher, in relation
to a selected, suitable or ideal point of reference. This situation is troublesome,
and may threaten both the short- and long-term survival of a company in a
competitive business environment. Furthermore, the balance between a

Logistics flows

777

Figure 2.
Process of balance

Figure 3.
A typology of
companies inventories
and disturbances in
inbound or outbound
logistics flows

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778

companys inventory and its disturbances in this situation is distant. A trial


and error situation implies that a companys inventory and disturbances are
either relatively high or low in relation to each other in the inbound (or
outbound) logistics flows. This situation is less troublesome than the former
one in a short-term perspective, but it may still threaten the survival of a
company in the long-term perspective. In this situation, there is a mismatch
between inventory and disturbances that needs substantial correction to reach
a balance. It is a kind of hit and miss situation. This process may be described
as an act of trial and error in order to accomplish the underlying notion of the
principle of balance between a companys inventory and disturbances in
inbound (or outbound) logistics flows.
Conclusions and suggestion for further research
Some concluding thoughts are provided in this section. There is in part an
association between companies inventories and disturbances in inbound and
outbound logistics flows. Therefore, a companys inbound and outbound
inventories may be factors of importance that influence the occurrence of
disturbances in companies logistics flows. This knowledge should be
considered in the corporate strategic planning of supply chain management.
The ideal situation between the inventories and disturbances is characterised
by the alls peace and quiet situation, while the worst situation exposes a
company to choose between the devil and the deep blue sea situation, although
many companies belong to a trial and error situation. Companies have to
carefully consider the impact that their current policy of inventory
management might have on quantitative and qualitative disturbances in
inbound and outbound logistics flows. As a result of increased disturbances,
the financial benefits that may be achieved through being lean in the inventory
management areas of ones business, might negatively influence the financial
costs incurred. Therefore, it is a crucial task for a company to find the balance
between inventory and disturbances in inbound and outbound logistics flows
that generates the best managerial outcome in a competitive business setting.
This research has been limited to the association between companies
inventories and disturbances in inbound and outbound logistics flows. A
suggestion for further research is to develop a deeper set of hypotheses that
explore different areas of companies inventories and different kinds of
disturbances in inbound and outbound logistics flows. Furthermore, the
process of balance may be fruitful to explore following the evolutionary
association between companies inventories and disturbances in inbound and
outbound logistics flows.
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Appendix
The univariate outcome for each item for the inbound logistics flows is shown in Tables AI and
AII, and for each item for the outbound logistics flows in Tables AIII and AIV. The items have
been translated from Swedish into English. Therefore, minor bias of the significance of each item
may have appeared in the translation from one language to the other.
The following abbreviations are used to illustrate the distribution for each variable in the
mentioned tables: N: number of observations; Mn: mean; Me: median; Md: mode; Sk: skewness;
and Ku: kurtosis.
Item
(B1) Our companys highest inventory turnovers
in the inbound logistics flows are. . .
(B2) The highest inventory turnovers in the
inbound logistics flows from sub-contractors
correspond to approximately _____ per cent of
the total inventories in the inbound logistics
flows.
(B3) Our companys lowest inventory turnovers in
the inbound logistics flows are. . .
(B4) The lowest inventory turnovers in the
inbound logistics flows from sub-contractors
correspond to approximately _____ per cent of
the total inventories in the inbound logistics
flows.
(B5) How high or low is your companys average
inventory turnover in the inbound logistics flows?
(B6) The trend for our companys inventory
turnover in the inbound logistics flows is. . .
(B7) Our companys shortest lead times in the
inbound logistics flows from sub-contractors are
approximately _____ day(s).
(B8) The shortest lead times in the inbound
logistics flows from sub-contractors correspond to
approximately _____ per cent of total purchases.
(B9) Our companys longest lead times in the
inbound logistics flows from sub-contractors are
approximately _____ day(s).
(B10) The longest lead times in the inbound
logistics flows from sub-contractors correspond to
approximately _____ per cent of total purchases.
(B11) How short or long are your companys
average lead times in the inbound logistics flows
from sub-contractors?
(B12) The trend for our companys lead times in
the inbound logistics flows is. . .
(B13) The trend for our companys inventory level
in the inbound logistics flows is. . .

Mn

Me

Md

Sk

Ku

185

65.1

20

12

7.1

53.8

176

41.2

35

10

0.4

-1.0

178

15.0

13.0

171.6

169

14.7

10

10

2.8

8.5

208

4.3

-0.1

0.1

209

4.6

-0.5

0.3

191

4.5

3.7

16.2

187

23.3

15

10

1.4

1.2

191

73.8

50

90

3.7

19.5

188

17.9

10

10

1.9

4.2

211

3.8

0.2

0.3

212

3.5

0.1

211

3.6

-0.9

Logistics flows

781

Table AI.
The univariate outcome
of the inventory items in
-0.1 inbound logistics flows
0.7

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33,9

Item

(A1) Approximately _____ per cent of our


sub-contractors accomplish a service level of at
least 99 per cent in their deliveries.
(A2) Approximately _____ per cent of our
782
sub-contractors accomplish a service level
between 90-98 per cent in their deliveries.
(A3) How often or seldom do your companys
sub-contractors accomplish a service level of 99
per cent in their deliveries? (i.e. Seldom 1; and
Often 7)
(A4) How often or seldom do your companys
sub-contractors not accomplish a service level of
80 per cent in their deliveries? (i.e. Seldom 1;
and Often 7)
(A5) The trend for the service levels in our
companys inbound logistics flow is. . . (i.e.
Decreasing 1 and Increasing 7)
(A6) How often do quantitative deviations occur
in your companys inbound logistics flows from
sub-contractors? ______
(A7) How often or seldom do the disturbances in
your companys inbound logistics flows from
sub-contractors cause down times in the
manufacturing processes? (i.e. Seldom 1; and
Often 7)
(A8) How often or seldom do disturbances in your
companys inbound logistics flows from
sub-contractors cause increased cycle times in the
manufacturing processes? (i.e. Seldom 1; and
Often 7)
(A9) How often or seldom do quantitative
deviations in the inbound logistics flows cause
substantial negative economic consequences? (i.e.
Seldom 1; and Often 7)
(A10) The trend for the occurrence of quantitative
disturbances in our companys inbound logistics
flows is. . . (i.e. Decreasing 1 and
Increasing 7)
(A11) How often do qualitative deviations in your
companys inbound logistics flows from
sub-contractors occur? _____
(A12) How often do qualitative deviations in your
Table AII.
companys inbound logistics flows from
The univariate outcome sub-contractors occur? (i.e. Seldom 1; and
of the disturbance items Often 7)
in the inbound logistics
flows

Mn

Me

Md

Sk

Ku

188

38.3

20

0.4

-1.5

188

39.7

30

10

0.4

-1.3

210

4.1

-0.2

-1.3

209

2.8

0.2

-0.6

210

4.8

-0.2

0.9

181

466.6

60

104

12.6

165.0

211

2.4

1.0

0.3

212

3.3

0.2

-1.0

212

2.7

0.7

-0.3

212

3.5

-0.1

0.5

181

147.9

36

12

10.5

126.3

212

2.8

0.2
-0.5
(continued)

Item
(A13) How often or seldom do quantitative
deviations in the inbound logistics flows cause
substantial negative economic consequences? (i.e.
Seldom 1; and Often 7)
(A14) The trend for the occurrence of qualitative
disturbances in our companys inbound logistics
flows is. . . (i.e. Decreasing 1 and
Increasing 7)

Item
(B1) Our companys highest inventory turnovers
in the outbound logistics flows are. . .
(B2) The highest inventory turnovers in the
outbound logistics flows to customers correspond
to approximately _____ per cent of the total
inventories in the outbound logistics flows.
(B3) Our companys lowest inventory turnovers in
the outbound logistics flows are. . .
(B4) The lowest inventory turnovers in the
outbound logistics flows to customers correspond
to approximately _____ per cent of the total
inventories in the outbound logistics flows.
(B5) How high or low is your companys average
inventory turnover in the outbound logistics
flows?
(B6) The trend for our companys inventory
turnover in the outbound logistics flows is. . .
(B7) Our companys shortest lead times in the
outbound logistics flows to customers are
approximately _____ day(s).
(B8) The shortest lead times in the outbound
logistics flows to customers correspond to
approximately _____ per cent of total sales.
(B9) Our companys longest lead times in the
outbound logistics flows to customers are
approximately _____ day(s).
(B10) The longest lead times in the outbound
logistics flows to customers correspond to
approximately _____ per cent of total sales.
(B11) How short or long are your companys
average lead times in the outbound logistics flows
to customers?
(B12) The trend for our companys lead times in
the outbound logistics flows is. . .
(B13) The trend for our companys inventory level
in the outbound logistics flows is. . .

Mn

Me

Md

Sk

Ku

Logistics flows

212

2.8

0.6

-0.7

783

212

3.2

-0.3

-0.2

Table AII.

Mn

Me

Md

Sk

Ku

156

184.9

30

52

6.6

51.8

143

52.7

50

50

-0.1

-1.3

148

64.5

9.1

92.9

142

19.1

10

2.2

3.9

198

4.5

-0.0

-0.6

198

4.5

0.1

0.8

166

10.7

8.4

78.0

157

32.8

20

0.9

-0.5

163

53.4

30

30

3.8

15.7

155

29.1

20

1.1

-0.1

202

3.5

0.2

-0.6

202

3.2

-0.3

202

3.8

0.0

Table AIII.
The univariate outcome
of the inventory items in
0.3 outbound logistics flows
0.8

IJPDLM
33,9

Item

(A1) Approximately _____ per cent of our


deliveries to customers accomplish a service level
of at least 99 per cent.
(A2) Approximately _____ per cent of our
deliveries to customers accomplish a service level
784
between 90-98 per cent.
(A3) How often or seldom does your company
accomplish a service level of 99 per cent in the
deliveries to customers? (i.e. Seldom 1; and
Often 7)
(A4) How often or seldom does your company not
accomplish a service level of 80 per cent in the
deliveries to customers? (i.e. Seldom 1; and
Often 7)
(A5) The trend for the service levels in our
companys outbound logistics flow is. . . (i.e.
Decreasing 1 and Increasing 7)
(A6) How often do quantitative deviations in your
companys outbound logistics flows to customers
occur? _____
(A7) How often or seldom do the disturbances in
your companys outbound logistics flows to
customers cause down times in the manufacturing
processes? (i.e. Seldom 1; and Often 7)
(A8) How often or seldom do disturbances in your
companys outbound logistics flows to customers
cause increased cycle-times in the manufacturing
processes? (i.e. Seldom 1; and Often 7)
(A9) How often or seldom do quantitative
deviations in the outbound logistics flows cause
substantial negative economic consequences? (i.e.
Seldom 1; and Often 7)
(A10) The trend for the occurrence of quantitative
disturbances in our companys outbound logistics
flows is. . . (i.e. Decreasing 1 and
Increasing 7)
(A11) How often do qualitative deviations in your
companys outbound logistics flows to customers
occur? _____
(A12) How often do qualitative deviations in your
companys outbound logistics flows to customers
occur? (i.e. Seldom 1; and Often 7)
(A13) How often or seldom do quantitative
deviations in the outbound logistics flows cause
substantial negative economic consequences? (i.e.
Table AIV.
Seldom 1; and Often 7)
The univariate outcome (A14) The trend for the occurrence of qualitative
of the disturbance items disturbances in our companys outbound logistics
in the outbound
flows is. . . (i.e. Decreasing 1 and
logistics flows
Increasing 7)

Mn

Me

Md

Sk

Ku

167

63.1

80

80

-0.7

-1.0

167

27.7

19

10

1.0

-0.4

204

5.3

-1.0

0.2

202

2.1

1.3

0.9

204

-0.3

0.5

158

239.8

49

24

7.5

71.0

203

1.7

1.8

2.5

203

2.7

0.7

-0.6

204

2.5

1.1

0.2

204

3.2

-0.3

-0.5

162

74.4

24

12

6.9

61.2

203

2.5

0.5

-0.7

203

2.5

0.9

-0.0

203

3.1

-01

-0.3