COMMERCE 4OB3 Chapter 5: 2OC3 - Chapter 5.docx

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Introductory phase: negative cash flow, may warrant unusual expenditures for: research, product development, process modification, supplier development, growth phase, negative cash flow turns into positive cash flow, product design has begun to stabilize, forecasting of capacity requirements is necessary, adding capacity may be necessary to accommodate increase in demand, maturity phase, rising positive cash flows, competitors is established, improved cost control, reduction in options, paring down of product line may be necessary, decline phase, should not reinvest resources into dying products, products should be terminated, start to make a loss on them. Product by value analysis: operations manager selects items that show the greatest promise to invest resources in, product by value analysis lists products in descending order of their, individual dollar contribution to the firm and their, total annual dollar contribution, low contribution per unit may not be bad if represent large portion of company"s sales.

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