Assessing the effects of operational processes and information systems on inventory performance

Abstract Over the past decade, manufacturing firms have implemented enterprise‐wide information systems in order to improve their performance. In many cases, the achieved results have been much less than anticipated. Previous research suggests that in order to realize maximum performance improvements it is necessary to access timely and informative customer demand data. While enterprise‐wide information systems may contribute to the realization of this objective, operational processes, such as inventory management and mass customization may also be effective in improving the firm’s inventory performance. This paper develops a structural equation model that evaluates the impact of enterprise‐wide information systems, along with four operational processes, on inventory performance. The results indicate that the use of operational processes, especially just‐in‐time (JIT), rather than the use of enterprise‐wide information systems, leads to improved performance as measured by inventory speculation, lead times, and turnover ratios.