From a supply chain perspective, numerous definitions are
used to explain opportunity cost, which predominantly
focus on the cost of capital tied up in inventory, as follows:
Lambert, Stock and Ellram (1998:153) explained opportunity
cost as ‘the rate of return that could be realised from some
other use of money’. Coyle, Bardi and Langley (2003:198)
used the term opportunity cost as part of their inventory
carrying cost calculation and define it by asking ‘what is the
implicit value of having capital tied up in inventory, instead
of using it for some other worthwhile project?’ Anupindi,
Chopra et al. (2006:140) defined opportunity cost as ‘the
foregone return on the funds invested in inventory which
could have been invested in alternate projects’. Gattorna and
Walters (1996:128) explained that opportunity cost arises
when too much capital is invested in one aspect of a business
resulting in a lack of capital available to invest in alternatives.