Strategic use of Resources
Provide a detailed cost breakdown for using a level vs. a chase strategy to meet the increased demand. Which strategy do you recommend? How much savings would result from the plan you recommend?
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First here is a good site for you to look at for further information although on specific number examples on specific strategies:
http://www.aug.edu/~sbajmg/quan3600/Planning/aggreg%20plng%20rev5.pdf
Basically a level strategy is one with all the implementations in place that would provide for a level output regardless demand and a chase strategy is one which would only provide resources for output when the demand was there for the product. Thus, the chase demand usually has poorer resources in place since it is only used on per demand basis. So for example, the labor force is only put into place and trained when the need is there making their performance poorer than that of the level strategy.
The cost breakdown for increased demand is as follows:
Hiring costs generally: Low for level strategy and high for chase strategy.
Why? Level- It is an investment in the employee to provide high quality work for the growth and sustainability of the company.
Chase- It is a short term hire meaning the employee needs to be trained in a short amount of time and then after the demand is over, will no longer be with the company and the process would be repeated on the next demand cycle. However, since there is increased demand, the chase strategy is equipped to dealing with this since this is basically the point of what the strategy does so it does not cost them any more than what would be usual. However, for the level ...