Chase Strategy in Aggregate Planning

Chase Strategy in Aggregate Planning

When production meets the demand and volume of a product from one cycle to the next is known as the chase strategy. This strategy is mainly used when demand is not predictable and there is not any inventory. In most cases using this strategy can result in a higher employee turnover rate which often leads to apprehensive and displeased employees. A top advantage of using the strategy is that inventory is permitted at its lowest level which can result in a savings for most companies. There are numerous companies that favor the use of a combination of both the chase and the level strategy. The mixture enables effectiveness of goals and lowers the cost more so than using each strategy alone.

Where can Chase Strategy be used?

The chase strategy is a common practice used in careers fields that can easily train new employees to begin work quickly.

This strategy can be used in the restaurant and auto industry. In the restaurant industry the meals are made when ordered to match the production with the demand. Employees are hourly and easily trained; also the restaurants can adjust the employees work schedules to meet customer demand.

In the auto industry the turnover rate for employees in usually high because of the nature of the business. The automobiles can cost companies money if not purchased; taxes are incurred the longer it sits on the lot. Employees in this industry are normally hourly as well and can been trained up quickly too.

Major challenged while using the Chase Strategy

Multiple challenges are associated with the chase strategy when it is used in production planning. Because chase strategy matches the production rate with the order rate by laying off and hiring employees as the order rate increases and decreases the success depends on being able to source employees that are easily trainable. The employees not only have to be easily trainable, but the jobs would also have to be simple enough to be able to train the employees fast. If they were not simple enough processes it could cause disruptions to production and cause orders to be completed late.

Another challenge of the chase strategy is the moral and productivity of the employees. According to Jacobs and Chase (2011), “When order backlogs are low, employees may feel compelled to slow down out of fear of being laid off as soon as existing orders are completed” (p. 534). The morale of the employees is lowered which causes lower productivity and a disruptive environment. Employees start to slow down production to lengthen orders and prolong their jobs out of fear of being laid off. If productivity is slowed down, orders could be late, affecting the organization’s ability to acquire future orders.

Advantages of Chase Strategy

Chase strategy, also known as matching strategy, reduces inventory costs and at times it is used when the demand is fluctuating during the year. With this strategy, production capacity decreases and increases making it equivalent to the demand.

With the chase strategy there are numerous things to reflect on.

(1) The chase production plan implies that the demand varies.

(2) Any business that uses this strategy will have to be flexible and be able to change the capacity on a frequent basis.

(3) The base level of inventory will have to be held at a low level. (4) Has the highest peak capacity requirement.

(5) Financial implications will include increase cost like hiring, training, startup cost and equipment installation. Trying to force this strategy into a business that does not have flexibility will be extremely expensive. However, for those businesses with flexibility this would be an excellent strategy that will result in outstanding performance.

Companies that use the chase strategy produce just enough goods to meet the demand for goods. The chase strategy has several advantages including keeping inventories low. By keeping inventories low the company has cash that would otherwise be used to purchase raw materials or parts. The chase strategy reduces inventory costs that are related to holding inventory in stock.

Resources

Hung, Rudy. "Annualized Hours and Aggregate Planning." Production and Inventory Management Journal 38, no. 4 (1997).

Jacobs, F.R., & Chase, R. (2011). Operations and Supply Chain Management [University of Phoenix Custom Edition eBook]. Boston, MA: McGraw-Hill Irwin. Retrieved from University of Phoenix, OPS571 website