Aggregate Production Planning Strategies:

There are essentially three production planning strategies. These strategies include trade-offs among the inventory, work hours, workforce size, and backlogs.

Chase Strategy

Chase strategy match the production rate to the order rate by hiring and laying off employees as the order rate varies. The success of this strategy based on having a pool of easily trained applicants to draw on as order volumes increase. There are clear motivational impacts. While 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.

Stable Workforce-Variable Work Hours

Stable workforce-variable work hours vary the output by varying the number of hours worked through flexible work schedules or overtime. Through varying the number the work hours, we can match the production quantities to orders. This strategy gives workforce continuity and avoids many emotional and tangible costs of hiring and firing associated with the chase strategy.

Level Strategy

Level strategy maintains a stable workforce working at a constant output rate. Shortages and surplus are absolved by fluctuating inventory levels, order backlogs, and lost sales. Workers benefit from stable work hours at the costs of potentially reduced customer service levels and raised inventory costs. Another issue is the possibility of inventoried products becoming obsolete.

While just one of these variables is utilized to absorb demand fluctuations, this is termed a pure strategy; two or more utilized in combination constitute a mixed strategy. As we might suspect, mixed strategies are more widely applied in industry.