Unformatted text preview: ays. He or she also would
favor large production runs for the sake of lower unit production costs, which
would result in high finished goods inventories. CHAPTER 14 Working Capital and Current Assets Management 607 The purchasing manager is concerned solely with the raw materials inventories. He or she must have on hand, in the correct quantities at the desired times
and at a favorable price, whatever raw materials are required by production.
Without proper control, in order to get quantity discounts or in anticipation of
rising prices or a shortage of certain materials, the purchasing manager may purchase larger quantities of resources than are actually needed at the time. Common Techniques for Managing Inventory
Numerous techniques are available for effectively managing the firm’s inventory.
Here we briefly consider four commonly used techniques. The ABC System
ABC inventory system
Inventory management technique
that divides inventory into three
groups—A, B, and C, in descending order of importance and level
of monitoring, on the basis of the
dollar investment in each. two-bin method
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