Level capacity strategy vs chase demand strategy 182695

Assume 0 units of initial inventory Extra capacity may be obtained by subcontracting at an additional cost of $15 per unit over and above the company's producing them itself on regular time Provide a detailed cost breakdown for using a level vs a chase strategy to meet the increased demand Which strategy do you recommend? Chase demand strategy can be defined as a strategy where the changes are made to the output according to the demand Here, the changes are in terms of increasing or decreasing the output in line with the rising or falling demand It involves matching the demand by hiring or firing the workers or by controlling the level of production and usingCapacity is the maximum amount of work an accounting practice is capable of completing in a given period of time Capacity planning is the process of determining the resources (time, people, etc) that the firm needs to meet changing demands for its services – in other words, how it will meet its current and future client needs

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Level capacity strategy vs chase demand strategy

Level capacity strategy vs chase demand strategy- The major advantage of a chase strategy is that it allows inventory to be held to the lowest level possible, and for some firms this is a considerable savings Most firms embracing the justintime production concept utilize a chase strategy approach to aggregate planning 10 11Calculating level strategy and chase strategy Following is the information about demand forecast and working days for the next six months The work time is 8

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 Chase strategy is common in companies that don't have a lot of expendable income, a typical small manufacturer, or those that deal in perishable items 4) Infinite Capacity Planning With infinite capacity planning, you attempt to manually match the volume you're able to produce with the demand, so your production line contains no downtimeA level capacity strategy is also known as a chase demand strategy FALSE Level and chase strategies are opposite approaches In using the chase strategy, variations in demand could be met by A varying output during regular time without changing employment levelsThe chase strategy should be used when the cost of carrying inventory is very high and the costs to change levels of machine and labor capacity are low Chopra/Meindl 3/e Industries with these characteristics include aircraft and other high dollar products and producers of highly perishable products The flexibility strategy should be used when

Capacity planning is a strategic process whereby a company determines what level of capacity it will need to satisfy the level of demand for its products or services over a period of time ThreeUse chase and level strategy and compute the total cost Forecasted demand (Number of parttime workers 6 12 18 15 13 14 Example 1 Chase strategy Level strategy Chase strategy Hiring and laying off workers, depending on the demand Work undertime and overtime to keep workers An essential disadvantage of level strategy is building up inventory costs during the lean period when the demand is low 2 Chase strategy The chase strategy of aggregate planning puts its onus on reducing inventory It keeps pace with demand fluctuations by varying either actual level of output or the workforce number

Negative results of the level strategy would include the cost of excess inventory, subcontracting or overtime costs, and backorder costs, which typically are the cost of expediting orders and the loss of customer goodwill CHASE STRATEGY A chase strategy implies matching demand and capacity period by periodReactive Strategy Strategies that alter capacity to match demand are known as Reactive Strategy Mixed Strategies that make use of qualities Under the chase strategy, production is varied as demand varies With the level strategy, production remains at a constant level in spite of demand variations In companies that produce to stock, this means that finished goods inventory levels will grow during low demand periods and decrease during high demand periods

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{ The Justintime production plan, also known as the chase plan, consists in changing the production rate to exactly satisfy demand The idea is consistent with the JIT production philosophy and results in low holding costs but may result in high cost of adjusting the production rate, ie, high flring and hiring costs or high idle times The chase strategy refers to the notion that you are chasing the demand set by the market Production is set to match demand and doesn't carry any leftover products This is a lean production strategy, saving on costs until the demand – the order – is placed Inventory costs are low, and the cost of goods for products sold is kept to aThe idea here is that a level schedule is used during consistent periods and the chase strategy is used during months with fluctuating demand This can be helpful in seasonal business For example, a company that made Halloween chocolates, may maintain a level schedule for 9 months of the year and then use a chase strategy during the weeks

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 Units Capacity Time Demand 13 Capacity lag strategy Capacity is increased after an increase in demand has been documented This conservative strategy produces a higher return on investment but may lose customers in the process It is used in industries with standard products and costbased or weak competition The strategy assumes that lost4 Select an appropriate unit of aggregate capacity 5 Determine the relevant cost structures 6 Develop an aggregate planning model Develop alternative aggregate plans and select the best plan Aggregate Planning Strategies Pure chase strategy – match demand period by period Pure level strategy – maintain a level workforce or a steadyThe chase strategy is one method organizations use to maintain a level inventory while producing at varying rates in order to support demand The chase strategy is sometimes referred to as demand matching because the strategy varies production to meet demand lower inventory levels (free capital resources) When you go to a restaurant for food

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The strategic business plan is the longterm strategy in terms of revenue, cost and profit objectives Compare and contrast the level and chase aggregate plans These objectives influence the master scheduling decisions in terms of how the demand is satisfied and how capacity is dealt with– swim wear 14 Matching the Demand U s e i n v e n t o r y Use delivery time U s e c a p a c i t y Demand Demand Demand 15Summer, 12,000 Inventory at the beginning of fall is 500 units At the beginning of fall you currently have 30 workers, but you plan to hire temporary workers at the

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Chase (the demand) strategy;Chase Strategy Level Strategy Optimization Develop a production plan and calculate the annual cost for a firm whose demand forecast is fall, 10, 000;Level capacity strategy In this type of strategy, a constant regular time output rate is maintained while meeting the demand variations by a different combination of options b Chase demand strategy In this type of strategy the capacity is matched to the level of demand A period's planned quantity of output is equal to that period's

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Pure level strategies are concerned with maintaining workforce orChase vs Level Summary To summarize, aggregate planning is a mediumterm operations decision to determine periodic production and inventory levels while resolving the tradeoff between costs of changing capacity and inventoryrelated Costs Chase and Level are two ways to resolve this tradeoff Chase Approach AdvantagesT/F A level capacity strategy attempts to keep capacity level with demand FALSE Feedback That is the goal of a chase strategy roughcut capacity planning D) a chase strategy The term availabletopromise is most closely associated with A) sales and operations planning B) roughcut capacity planning

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A Level strategy B Chase strategy C Subcontracting strategy D Material requirements production strategy E It depends on other factors A A Her e is the forecasted demand for all bearing types Month Demand May 800 Jun 650 JulyWith 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 3 Types of Capacity Management Capacity management is the process of planning the resources required to meet business demands This includes capacity forecasting, planning, monitoring and performance analysis This can happen at three levels in an organization

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3 Types Of Capacity Planning Strategies Valq

 Seasonal Demand One of the most important advantages of a level production schedule is that it keeps the finished product rolling off the assembly line at the same rate throughout the production cycle During periods in which there is a lull in demand for the product, a surplus accumulates, allowing the manufacturer or retailers to store up an An approach to aggregate planning that attempts to match supply and output with fluctuating demand Depending on the product or service involved, the approach can incur costs by the ineffective use of capacity at periods of low demand, by the need to recruit or lay off staff, by learningcurve effects, and by a possible loss of quality The advantages include low storageAggregate capacity is the total amount of capacity required or available to carry out a function It also tells about the 3 best strategies for aggregate planningThey are level strategy, Chase strategy and hybrid strategy

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 Capacity planning strategy involves the process used to determine the resources manufacturers need to meet the demand for their products or services The level of capacity directly relates to the amount of output in the form of goods and services manufacturers can produce to satisfy customer demandThe Extremes Level Strategy Chase Strategy Production equals demand Production rate is constant Types of Aggregate Plans (Cont) • Hybrid Aggregate Plans – Uses a combination of options – Options should be limited to facilitate execution – May use a level workforce with overtime & temps – May allow inventory buildup and some– fast food restaurants Time flexibility from workforce or capacity;

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 Align capacity with demand fluctuations This basic strategy is sometimes known as a "chase demand" strategy By adjusting service resources creatively, organizations can in effect chase the demand curves to match capacity with customer demand patternsIn other words, Manager A is tied to the "chase demand" strategy, and his counterpart, Manager B in the adjacent office, is locked into the "level capacity" strategy The purpose of the pure chase strategy is to match or chase demands by minimizing final inventory It absorbs demand fluctuations effectively for successful aggregate planning Organizations can either maintain workforce level or output rate to match demand Pure Level Strategy;

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A level strategy seeks to produce an aggregate plan that maintains a steady production rate and/or a steady employment level In the context of the problem posted by you following the level strategy means incurring additional subcontracting costs at least twice This is to offset the shortfall in production because of the level strategy There are two main aggregate planning methods and strategies the chase strategy and level strategy The chase strategy sets production equal to forecasted demand Many service organizations such as schools, hospitality businesses and hospitals, use the chase strategy The level strategy is mainly focused on maintaining a constant output rate– machining shops, army Level strategy;

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 Capacity strategy is an approach to increasing and decreasing business capacity to meet demand Capacity includes things like labor and equipment that can be scaled to increase business output The following are common types of capacity strategyAn aggregate plan gets its name from the fact that it must include demand forecasts, resources and capacity and express these as an aggregate, or combined, strategy This type of planning covers a period of two to 12 months sometimes as much as 18 months, depending on your company's ability to project demand

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