Date of Graduation

8-2012

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Supply Chain Management

Advisor

Matthew Waller

Committee Member

John Ozment

Second Committee Member

Brent D. Williams

Keywords

Social sciences; Benchmarking; Inventory; Logistics; Management; Supply chain management; Transportation

Abstract

This dissertation examines the relationship between inventory cost (IC) and transportation cost (TC). The association of the two has been recognized for over a hundred years; accordingly, managers and academics have believed that these costs have offsetting properties such that combinations of inventory and transportation expenditures can be altered to fit different strategic objectives. However, the behavior of this relationship in practice has not been tested. The essays of this dissertation examine this relationship through multiple theoretical lenses and with multiple data sets. Essay 1 examines aggregate IC and TC in the United States from 1960-2009. This period coincides with the recognition of total cost management and the ensuing practice of inventory and transportation tradeoff. Essay 1 provides new insight into the macroeconomic relationship of IC and TC by providing a model of their relationship. Examination reveals distinct differences before and after transportation deregulation in the United States. Essay 2 continues the investigation of the relationship between IC and TC, this time using firm-specific, panel data that spans a five-year period from 2006-2011. Inventory theory is used to identify variables and build a model that forecasts firm inventory. To this base model, TC is added. Findings support the research in Essay 1 by confirming that firms do show indication of balancing IC and TC. Essay 3 examines the use of transportation benchmarking information and how it affects firm performance. Based on information processing theory, the impact of transportation benchmarking information on a firm's ability to reduce transportation cost (TC) is examined. A variable is created that is the ratio of a firm's transportation expenditure to the total transportation expenditure in the benchmarking consortium. Panel data is used to test the impact of this ratio on a firm's ability to reduce transportation costs. Empirical analysis shows that transportation costs are convex in the ratio, and the results support the efficacy of transportation expenditure benchmarking.

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