Question

A firm uses the chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at​ 800, and demand over the next six periods​ (its aggregate planning​ horizon) is estimated to average 900 units. Which of the following tactics would be most representative of following a chase​ strategy?A. add 200 units to inventory in the next period B. implement a lower price point to increase demand C. add 100 units to inventory in the next period D. lay off workers to match the 200-unit difference E. hire workers to match the 100-unit difference

Answer 1

Option E is correct.

Explanation:

Case strategy focuses on to produce only such amount of goods that is ordered by the customers. In the chase strategy of aggregate planning, demand and capacity are matched for every period, one by one. In the given problem, since the firm is using the chase strategy, it would first match demand and capacity for the next period.

Since the demand for the next period is 1100 units, and the firm produced 1000 units in the last period, it would require more workers to cater to the additional requirement of 100 units.

By hiring workers, the firm would be able to match the demand and supply for the next period.