Monitoring, Operational Manager Efforts and Inventory Policy
AbstractOperations managers are becoming more important in modern corporations. They do not only care on firms’ inventory management but also they are involved in firms’ strategic decisions. Within this setting we ask about the consequences in the inventory policy of this new role undertaken by these managers. To do so, we develop a model where a firm’s Operations Manager can devote some efforts to develop non-inventory related activities. These efforts, although non-verifiable, may be known with a certain probability if the owner monitors them. Interestingly, by monitoring these efforts, a firm’s owner may end up stimulating Operations Manager to achieve steep inventory cost reductions in the short-term. Basic idea is that Operations Manager, in general, avoids reducing inventory costs significantly in one period because this makes additional cost cuts difficult which, in turn, reduce expected future inventory-related retribution. However, by compensating those non-inventory-related efforts may offset these losses. Thus, although Operations Managers in modern corporations carry out non-inventory related responsibilities, this may bring about some benefits on inventory costs reduction.
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Bibliographic InfoPaper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 11/03.
Length: 23 pages pages
Date of creation: Jul 2003
Date of revision:
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Web page: http://www.unav.es/facultad/econom
Find related papers by JEL classification:
- M11 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Production Management
- M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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