How do you evaluate and compare different production planning strategies, such as chase, level, or mixed?

1 Chase strategy

A chase strategy is one that adjusts production output to match demand fluctuations. This means that the production capacity and workforce are increased or decreased as needed, depending on the demand forecast. A chase strategy minimizes inventory costs and avoids overproduction or underproduction. However, it also entails high costs of hiring, training, and laying off workers, as well as frequent changes in production rates and equipment settings. A chase strategy is suitable for products or services that have high demand variability, low inventory holding costs, and high flexibility in production.

2 Level strategy

A level strategy is one that maintains a constant production output regardless of demand fluctuations. This means that the production capacity and workforce are fixed and do not change with demand. A level strategy reduces the costs of changing production levels and workforce, as well as the risk of equipment breakdowns or quality issues. However, it also requires high inventory costs and may result in excess inventory or stockouts. A level strategy is suitable for products or services that have low demand variability, high inventory holding costs, and low flexibility in production.

3 Mixed strategy

A mixed strategy is one that combines elements of both chase and level strategies. This means that the production output is partly adjusted to match demand fluctuations and partly kept constant. A mixed strategy balances the trade-offs between inventory costs and production costs, as well as the benefits of flexibility and stability. However, it also requires more complex planning and coordination, as well as the ability to switch between different production modes. A mixed strategy is suitable for products or services that have moderate demand variability, moderate inventory holding costs, and moderate flexibility in production.

4 Evaluation criteria

When evaluating and comparing different production planning strategies, it is essential to consider various criteria that reflect your business objectives and constraints. Common criteria include inventory costs, such as warehousing, insurance, obsolescence, and spoilage; production costs, such as labor, equipment, materials, energy, and quality; customer service, including delivery time, availability, reliability, and responsiveness; flexibility in adapting to changes in demand, technology, or environment; and risk factors related to demand forecast errors, supply disruptions or production failures.

5 Comparison methods

To compare different production planning strategies, you need to use methods that can quantify and compare the performance of each strategy based on the evaluation criteria. Cost analysis calculates the total cost of each strategy based on the inventory costs and production costs, while service level analysis computes the service level of each strategy based on the probability of meeting demand without stockouts. Linear programming uses mathematical models and algorithms to find the optimal solution for a given objective function and a set of constraints. Simulation is a method that relies on computer software to mimic the behavior of a real system and test the outcomes of different scenarios.

6 Best practices

In order to select the most suitable production planning strategy for your business, it is important to follow some best practices. This includes understanding your product, market, and production characteristics, such as demand patterns, customer preferences, and competitive advantages. Additionally, you should use reliable and accurate data and methods to forecast demand and plan production. Moreover, you should consider multiple production planning strategies and compare them using relevant criteria and methods. Furthermore, evaluate the trade-offs and risks of each strategy and choose the one that aligns with your business goals. Lastly, monitor and review your production planning performance and make adjustments as needed.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?