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lead, lag, and match strategy

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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.
Using course materials and other research:

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?
3. Comment on other postings by critiquing the other proposals and suggesting aspects of your classmates' plans that may have been overlooked.

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Solution Preview

Let us first define all these capacity planning strategies one by one:

Lead Strategy: The lead capacity strategy is adding capacity in anticipation of an increase in demand. Lead strategy is an aggressive strategy with the goal of luring customers away from the company's competitors. The possible disadvantage to this strategy is that it often results in excess inventory, which is costly and often wasteful. This strategy is being currently followed by Manychip.

Lag strategy: It refers to adding capacity only after the company is running at full capacity or beyond due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy that decreases the risk of waste but may result in the loss of possible customers.

The match strategy (also known as the tracking strategy): It is adding capacity in small amounts in response to changing demand in the market. This is a more moderate ...

Solution Summary

Define the lead, lag, and match strategy for capacity planning.

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