One Electronics Manufacturer Manages Risk by Making Agreements with Factories

One electronics manufacturer manages risk by making agreements with factories well in advance to guarantee productive capacity at an agreed price. If their product is popular, then they can use that productive capacity during an otherwise busy season at a lower cost. Such an agreement could best be described as:

A) a futures contract.
B) low-cost hopping.
C) theory of constraints management.
D) the bullwhip effect.

Correct Answer:

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