The impact of inventory component leanness on productivity

Purpose This study aims to demonstrate the impact of the inventory component leanness on productivity, with the market concentration and product competitiveness being moderators. Design/methodology/approach This study explores the relationship between the inventory component leanness and productivity. Furthermore, the moderating role of market concentration and the moderated moderating role of product competitiveness are demonstrated via two three-model systems. Findings At its core, productivity initially decreases with the inventory leanness of raw materials (RM) until a turning point at the end of the sample, beyond which the incremental effect of inventory leanness of RM on productivity becomes positive. That is, a U-shaped relationship between the inventory leanness of RM and productivity. Moreover, the relationship between inventory leanness of work-in-process (WIP) and finished goods (FG) and productivity is linear and positive. The moderated moderation analysis highlights that market concentration and product competitiveness are key moderators. Practical implications Managers should anticipate an initial productivity dip when adopting lean inventory practices, with improvements expected over time. Additionally, the impact of lean inventory is moderated by market concentration and product competitiveness, requiring adjustments to inventory strategies based on market conditions and competitive dynamics. Originality/value This paper advances the understanding of productivity by exploring the nonlinear effects of inventory component leanness and examining how market concentration and product competitiveness moderate the relationship between inventory component leanness and productivity.