Operations Management - Making Operational Decisions 2

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  • 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


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