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Lead, Lag, and Match Strategy for Capacity Planning

In your role as Manychip's production planning staff member, one of your tasks is to help the supply chain team focus on capacity planning. One of the key production plants in the supply chain currently uses a lead capacity strategy in which they make enough chips to offset demand even when this means excess inventory levels at times.

1. Define the lead, lag, and match strategy for capacity planning.
2. Recommend a better strategy for the Manychip's production strategy, outlining the advantages of your proposal. Should they change from the lead strategy or not?

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1. Define the lead, lag, and match strategy for capacity planning.
Capacity planning is a part of supply chain. “A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm” (2).

It is a part of Supply Planning—The objective of the Supply Planning process is to optimally position enterprise resources to meet demand. This is a planning-level sub-process that spans the strategic and tactical supply-planning processes. Long-term planning, inventory planning, distribution planning, collaborative procurement, transportation planning and supply allocation are all part of this sub-process.

Capacity is the work that the system is capable of doing in a period of time.
It must be determined at different levels:
- Plant
- Department
- Work center.
It is normally stated in standard hours of work.
Capacity planning involves matching of available capacity to demand or making certain capacity available to meet the demand variation.
Thus it is a tool for:
- ...

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