This paper is about Chase Strategy, which typically relates to the cycle of demand and production. Service organizations, automobile industry, and fast food industry are few of the significant arenas that usually use the chase strategy, as their focus is primarily on meeting the demand patterns, which is unstable and varies from time to time. This is beneficial to numerous organizations since it minimizes the cost of inventory. However, this unstable demand pattern also creates challenges like low employee morale, high employment and training cost.This paper is about Chase Strategy, which typically relates to the cycle of demand and production. Service organizations, automobile industry, and fast food industry are few of the significant arenas that usually use the chase strategy, as their focus is primarily on meeting the demand patterns, which is unstable and varies from time to time. This is beneficial to numerous organizations since it minimizes the cost of inventory. However, this unstable demand pattern also creates challenges like low employee morale, high employment and training cost.
Chase Strategy
Planning is one of the integral building blocks for a business in order to maintain and sustain its position in the marketplace. In fact, workforce level, production rate, and inventory level are the three fundamental components involved in the planning process. These elements enable the organization to fulfill the market demands. In other words, the planning process of the enterprise is executed to match the supply to the demand pattern. However, the organization aims to achieve it at minimum costs with maximum profits and customer satisfaction (Kachru, 2009).
At many instances, it has been observed that the organizations face exigent challenges and difficulties in their planning process of production when matching up to the demands. This usually is experienced by the manufacturers and service providers because the demand pattern for certain products or services (especially that are seasonal products such as snow blowers) has been monitored to be fluctuating throughout the year (Kachru, 2009).
Therefore, in order to meet the demands of the customers, different organizations use different planning strategies so that their production can match to the demands. Few enterprises opt for preparing or manufacturing a product according to the demand of the customers, while, other organizations manufacture in bulk quantities and have a great deal of inventory with them for their customers (Kachru, 2009).
Considering the case where the demand is not constant, 'chase strategy' has been observed to be used as an effective production planning approach by numerous organizations in diverse industries. Organizations particularly adopt and employ chase strategy when the demand pattern of their product all over the year is fluctuating and unstable. In other words, the unpredictable forecasted demand pattern is the key area of focus for the organizations which needs to be matched to the production capacity. Due to this reason, the production pattern is also varied (is increased as well as decreased) according to the fluctuations in demand. This is very much dissimilar to other strategies, where the variations in the demand pattern do not impact the production capacity levels (Swamidass, 2000).
Chase strategy has also been referred to as a demand matching strategy. This means that the organizations produce or prepare products to the exact quantity that are needed to fulfill the market demands. One of the benefits of using chase strategy exhibits that the organizations would incur low investments to inventory and minimizes the inventory levels, since the production capacity is to match the demands. As an outcome of it, the organizations are not likely to encounter product shortages from their inventory. In addition, the low costs of inventory also lead the organizations to economize their capital that is usually associated with the holding of stockpile such as purchasing of raw materials or warehousing (Swamidass, 2000).
Chase strategy applies various methods (with respect to workforce) to meet the demand to the production and to control the output. The organizations usually hire part-time workers, subcontractors, overtime intervals, and hire and layoff employees' from time to time in order to manipulate the capacity with the demand. Therefore, this strategy would prove to be effective, beneficial, and cost effective for the industries during the time when unemployment rate is high or the industry requirement is for low-skilled labors (Swamidass, 2000).
Moreover, the chase strategy is also beneficial to the organizations because the matching demand and supply approach of the strategy leaves a lesser chance of supplying obsolete merchandize to the customers. Furthermore, the organizations using the chase strategy are also not backlogged with orders because they match the production capacity as soon as they are loaded with the demand, and hence, backorder levels are also minimized (Swamidass, 2000).
Numerous organizations in the current epoch has adopted and implemented chase strategy with the prime objective to lower overall costs of production and meet the forecasted demand. In this regard, chase strategy is widely and mainly used by the service organizations such as schools, hospitality businesses, hospitals, and so forth. Indeed, numerous sources of information have revealed the fact that that chase strategy is mostly used by companies in the service sector, as the demand pattern fluctuates and does not remain stable all round the year. Nevertheless, various other industries that include manufacturing, automobile, fast food industry, and so on also adopt this strategy (Gaspar, 2005).
Considering the automobile industry, the automobiles cannot be hoarded for a very long time because they have a low depreciation time, high cost of warehousing, low obsolete time, constant change in design, and so on. Therefore, companies like Ford, GM, and Hyundai (Gaspar, 2005) are extensively using chase strategy that focuses on manufacturing the products (automobile) to meet the demand levels of the customers. Taking into account, the fast food industry, Chik-Fil -- A is one of the restaurants (Gaspar, 2005) that apply the chase strategy, where they only produce/prepare a meal only after they receive an order from their customers. This evidently indicates the idea that chase strategy is demand matching strategy, where the core focus is to meet the demand of the customer with actual production (Gaspar, 2005).
Another example is of chocolate companies like Hershey's that particularly uses the chase strategy. This predominantly happens due to the reason that the demand varies from season to season, which is normally increased in the winter seasons (Gaspar, 2005).
It is prudent to note that chase strategy is crowded with numerous benefits; yet, few of the challenges are also associated with the utilization of chase strategy. One of the leading pitfalls of using this strategy is that it significantly lowers the employee morale, because of high employee turnover rate, which also increases the costs of hiring employees. Moreover, the industries where the highly skilled labor or competition for labor is a necessity, this strategy is not a feasible option, because it requires constant hiring and firing of employees based on the demand pattern (Wisner, 2011).
As it has already been mentioned that chase strategy is adopted in order to meet the demand patterns with the production, hence, subcontracting, hourly employees, and part-time workers are typically employed, which generally leads to insecure, unhappy and dissatisfied employees and creates a negative motivational factor for them. This means that workers are laid off when the demand pattern is decreased, and employees are hired at the time of high demand (Wisner, 2011).
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