Inventory Behaviour and the Stock-Order Distinction: An Analysis by Industry and Stage of Fabrication with Empirical Application to the Canadian Manufacturing Sector

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Abstract
“It appears that aggregation may be pushed much further in inventory analysis than has heretofore been generally felt justified.” Originating with P. G. Darling and confirmed by M. C. Lovell, this oft-quoted assertion has in large measure been responsible for what might be termed a “consensus” (albeit implicit) on the usefulness of aggregation in empirical inventory studies. Professors Eisner and Strotz carry this interpretation to its extreme by declaring that they “prefer, at the theoretical level, to disaggregate by motive rather than stage [of fabrication].”The purpose of this study is to take a closer look at the role of the inventory components (i.e., finished goods, goods in process, and raw materials) in aggregate inventory behaviour. Paramount among the issues addressed is the Eisner-Strotz assertion: is it meaningful to speak (on a theoretical or empirical level) of motives for holding inventories without reference to the stages of fabrication?

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