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Impact of the Operations Manager's dual role on inventory policy

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2007-09
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In modern corporations, the Operations Manager’s role in defining of firm’s strategy is becoming more important. In this paper we describe how firms can use this tendency for Operations Managers to make strategic decisions as a mechanism to prevent inventory mismanagement. These managers have incentives to speculate with inventory cost reductions, thereby avoiding sharp reductions in a single period, because it would hinder further reductions in the future. Remarkably, firms may prevent such behavior by stimulating the Operations Managers’ strategic orientation, without losing sight of inventory-efficient management.
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Operations Manager behavior, Compensation model, Inventory policy
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