![]() ![]() We also find that under high demand uncertainty, being less lean is associated with higher operational efficiency, regardless of firm size. Our evidence suggests that when increasing inventory leanness, small retailers exhibit efficiency degradation whereas larger retailers are likely to exhibit efficiency improvement, with diminishing returns. The former reflects a retailer's abilities to exploit economies of scale and scope, whereas the latter reflects the unpredictability in a firm's operating environment. This relationship, however, is heavily moderated by firm size and demand uncertainty, which are reflective of retailers' internal resources and external dynamics. Via a stochastic frontier analysis that accounts for retailer heterogeneity and time parameters, we find support for the hypothesis that operational efficiency has an inverted U-shape relationship to inventory leanness, suggesting an optimal inventory leanness level beyond which retailer operational efficiency degrades. We empirically examine associations between inventory leanness and operational efficiency for a sample of public U.S. Whether these lean inventory developments translate to better retailer operational performance is still an open question. ![]() Lean retailing philosophy appears to be manifested in retail industry patterns showing decreasing and historically low retailer inventories. ![]()
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