More Than Inventory – A Case Study of Capital Binding in Manufacturing Operations
(2026) MIOM05 20261Department of Industrial and Mechanical Sciences
Production Management
- Abstract
- Companies continuously seek to improve both operational efficiency and financial performance.
To support operations and enable investments, capital is required. An important consideration is
capital binding, which refers to the amount of capital tied up within the business and the duration
for which it remains tied up. While capital binding is often associated with inventory levels, it
emerges through a broader set of operational and organizational factors that influence how
materials, information, and resources flow through a production system.
The purpose of this study is to examine how capital binding emerges within a production system
through the interaction between physical production flows, information systems, management
... (More) - Companies continuously seek to improve both operational efficiency and financial performance.
To support operations and enable investments, capital is required. An important consideration is
capital binding, which refers to the amount of capital tied up within the business and the duration
for which it remains tied up. While capital binding is often associated with inventory levels, it
emerges through a broader set of operational and organizational factors that influence how
materials, information, and resources flow through a production system.
The purpose of this study is to examine how capital binding emerges within a production system
through the interaction between physical production flows, information systems, management
control systems, and decision-making processes. To explore these interactions in practice, a case
study was conducted at an injection moulding production site within an international plastics
manufacturing company. Data was collected through interviews, observations, internal documents,
and operational data related to inventory, production, and customer orders.
The findings show that capital binding emerges through activities related to procurement,
production planning and scheduling, shipment coordination, and customer payment arrangements.
These activities influence both the level and duration of capital binding throughout the production
system. The study further demonstrates how information systems support operational visibility
and performance monitoring, while management control systems communicate organizational
priorities and provide a basis for performance evaluation. These elements influence operational
decision-making, which in turn affects material flows, inventory levels, shipment timing, and
ultimately the duration of capital binding.
The study concludes that capital binding cannot be fully understood through inventory levels,
payment terms, or financial measures in isolation. Instead, it should be viewed as a system-level
outcome emerging from the interaction between production processes, information systems,
management controls, and decision-making. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/student-papers/record/9243690
- author
- Gajgau, Peter LU
- supervisor
- organization
- course
- MIOM05 20261
- year
- 2026
- type
- H3 - Professional qualifications (4 Years - )
- subject
- keywords
- Capital binding, Working capital, Operations Management, Production systems, Information systems, Management control systems, Decision-making
- other publication id
- 26/5362
- language
- English
- id
- 9243690
- date added to LUP
- 2026-06-24 16:23:05
- date last changed
- 2026-06-24 16:23:05
@misc{9243690,
abstract = {{Companies continuously seek to improve both operational efficiency and financial performance.
To support operations and enable investments, capital is required. An important consideration is
capital binding, which refers to the amount of capital tied up within the business and the duration
for which it remains tied up. While capital binding is often associated with inventory levels, it
emerges through a broader set of operational and organizational factors that influence how
materials, information, and resources flow through a production system.
The purpose of this study is to examine how capital binding emerges within a production system
through the interaction between physical production flows, information systems, management
control systems, and decision-making processes. To explore these interactions in practice, a case
study was conducted at an injection moulding production site within an international plastics
manufacturing company. Data was collected through interviews, observations, internal documents,
and operational data related to inventory, production, and customer orders.
The findings show that capital binding emerges through activities related to procurement,
production planning and scheduling, shipment coordination, and customer payment arrangements.
These activities influence both the level and duration of capital binding throughout the production
system. The study further demonstrates how information systems support operational visibility
and performance monitoring, while management control systems communicate organizational
priorities and provide a basis for performance evaluation. These elements influence operational
decision-making, which in turn affects material flows, inventory levels, shipment timing, and
ultimately the duration of capital binding.
The study concludes that capital binding cannot be fully understood through inventory levels,
payment terms, or financial measures in isolation. Instead, it should be viewed as a system-level
outcome emerging from the interaction between production processes, information systems,
management controls, and decision-making.}},
author = {{Gajgau, Peter}},
language = {{eng}},
note = {{Student Paper}},
title = {{More Than Inventory – A Case Study of Capital Binding in Manufacturing Operations}},
year = {{2026}},
}