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A company has traditionally used a level strategy for planning for several years. Discuss the potential...

A company has traditionally used a level strategy for planning for several years. Discuss the potential changes in their environment that could make them consider using more chase tactics.

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Answer #1

Level strategy is a demand based option

Demand based options: In demand based option companies produced at constant production rates. During periods of low demand, overproduction is stored as inventory, to be depleted in periods of high demand. There are three types of demand based options that a company uses in aggregate planning:

  • Inventories
  • Back orders
  • Shifting Demand – use of marketing tactics to influence/direct customers to change their buying patterns

Example: Many toys making companies uses demand based options to store inventory for peak seasons such as Christmas.

However, if the invetory carrying cost increases too much or the factuation in the demand becomes too high or the customer do not agree to backorder and the unfullfilled demand becomes lost sales . In such cases a company can use chase strategy.

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