Working Paper: NBER ID: w2385
Authors: Kenneth D. West
Abstract: Empirical examination of some aggregate manufacturing data suggests that order backlogs may help explain two puzzling facts: (1) the variability of production appears to be greater than that of demand, and (2) inventories appear to be drawn down when demand is low, built up when demand is high.
Keywords: Order Backlogs; Production Smoothing; Inventory Management; Manufacturing
JEL Codes: E22; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| order backlogs (C69) | production smoothing (L23) |
| high demand (J23) | build up backlogs (D25) |
| low demand (R22) | draw down backlogs (D25) |
| backlogs (D25) | buffer production against demand shocks (E63) |
| positive shock to new orders (C69) | net inventories drawn down gradually (D25) |
| production (L23) | adjust to meet increased demand (J23) |