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Supply Chain Responsiveness and the Inventory Illusion

This paper identifies the critical dimensions of supply chain responsiveness and analyzes and evaluates the role of inventory as a driver of responsiveness. Our analysis leads us to conclude that, far from being an unequivocal driver inventory is, in many cases, a net destroyer of supply chain responsiveness. The analysis leads us to conclude that more often than not, inventory represents dead-weight that slows down a company’s response to market demand and supply conditions, and this, for a broad range of the thirteen responsiveness dimensions. Even when inventory contributes to quick market demand and supply responsiveness, it does so in the short term, and these short-term advantage become a significant disadvantage in the long term. The paper establishes a direct link between inventory and quality responsiveness. The long term responsiveness disadvantage of inventory is particularly acute in the case of a company’s quality responsiveness. Because of the critical importance of quality to competitive performance in modern markets, this paper identifies the quality impact of supply chain decisions as a promising avenue for future research.