Operations Management - Making Operational Decisions 2

Stock

• Items that firm need to produce, or supply to customers

Stock Control

• Management levels of raw materials, work-in-progress and finished goods in order to reduce storage costs while still meeting demand of customer
• Opportunity Cost = Next best alternative with your money
• Opportunity + Stock Control
  • Firm decides to hold higher stock levels, opportunity cost is the use to which firm would have put money
  • Using money to hold high stock could lead to reduction in marketing budget/Decision not to replace member of staff 

Low and High Stock Levels

• Difficult to know ideal level of stock
• Low  stock levels 
  • Sensible if company in area where rent is high 
  • Has perishable product
  • Suffers cash flow…