Inventory dynamics, time lags, and efficiency measures

Standard measures employed to examine efficiency, such as production efficiency in manufacturing are static in nature. Standard methods typically employ a stock/flow approach to measure turnover and delay. This is a first estimate but an inadequate approach since production processes are time dependent and dynamic. This study examines theoretical issues concerning the standard method of measuring efficiency indices, and introduces a refined dynamic measurement methodology. The standard and proposed methodologies are applied to financial data for US Tire and Rubber Goods industry to demonstrate the empirical differences between the two measures.