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            This week the topic I will discuss is production planning strategies: chase strategy versus level strategy. The strategy a company decides to use for production can have a huge impact on success and will influence their work force greatly. The strategy a company uses can influence many things including production rate, hiring/firing actions, and the behavior of your employees. I found an article on smallbusiness.chron.com that talks about the different production planning strategies and some of the pros and cons of these strategies.

            For the chase strategy, which is when production rate is matched with order rate, involves a high level of employee turnover. The main benefits of this is that the company will not be paying for labor that is not producing or is producing less efficiently as well as reduced inventory costs. However, there are definitely downfalls to this strategy. As summarized in the article I read, this strategy may result in a large amount of hiring, firing, or laying off employees, employees who are insecure about their position with the company, and issues with labor unions. (Inman, AGGREGATE PLANNING) Depending on the complexity of the production, having to train new employees on a frequent basis can cost a lot of money. Additionally, employees who have been working with the company for a longer period of time will be familiar with operations and often times work more efficiently.

            As for the level strategy, the goal is to have a steady production rate and employment level. As stated in the article, “the firm maintains a level workforce and a steady rate of output when demand is somewhat low. This allows the firm to establish higher inventory levels than are currently needed. As demand increases, the firm is able to continue a steady production rate/steady employment level, while allowing the inventory surplus to absorb the increased demand.” (Inman, AGGREGATE PLANNING) The benefits of this plan are that the relationship with the employees will be a lot better as they will not have to worry about being laid off if demand drops. The negatives on this approach will be that when demand does fall, the firm will have to maintain a higher level of inventory. Additionally, there is the possibility of overtime and subcontracting costs.

            The strategy will definitely depend on the nature of the business. If the business normally has a steady level of demand, then a level strategy may be best. If demand shifts seasonally, then the chase strategy may be best. There is also the possibility that a mix between each strategy is needed.  

Reference:

Inman, A. (n.d.). AGGREGATE PLANNING. Retrieved July 09, 2020, from https://www.referenceforbusiness.com/management/A-Bud/Aggregate-Planning.html