Concentrating or dispersing? The impact of supplier concentration on lean inventory

Supplier concentration can enhance resource integration efficiency, but it may also increase dependency risks. Therefore, concerning inventory management, which supply chain structure is more advantageous: diversification or centralization? We utilize data from publicly listed firms in China from 2010 to 2024 to empirically examine the impact of supplier concentration on firms’ lean inventory and its potential mechanisms. The results indicate that supplier concentration generally has a positive effect on firms in promoting lean inventory, thereby supporting the theoretical assumptions dominated by transaction cost economics and embeddedness theory. In addition, from the perspectives of information flow, production flow, and capital flow, we verify that supplier concentration promotes lean inventory in firms by reducing coordination costs, alleviating financing constraints, and enhancing total factor productivity. Focusing on the resource dependence theory, we find that corporate strategy, R&D innovation, and regional marketization of firms amplify the positive effect of supplier concentration on lean inventory. Finally, analysis of segmented inventory type data indicates that supplier concentration significantly drives lean practices in raw materials and work-in-progress inventory, while its impact on lean practices related to finished goods inventory is limited.