In-line Industries Case Study

Level capacity strategy is the best suitable to meet average demand. Although it offers company stability and more skilled workers, its main disadvantages are higher inventory and overtime costs and, most importantly, lower overall income. On the other hand, chase demand strategy is applied when the demand is changeable and there is no need to invest much in inventories. The amount of the workforce and working time is altered depending on demand rate (Greasley, 1999).

In case of level capacity strategy, it was evaluated that total production costs is $1,302,720 with total expenses being $1,710,029. The income from using this strategy will be $721,811. In case of chase demand strategy total costs are much lower in comparison with the level production – $1,219,200 – and the overall revenue is higher – $1,212,800.

Chase demand strategy is more flexible, profitable and safe in current situation. Using this strategy, the company will change the number of workers in order to meet the needs of customers. As a result, the company will have to spend much on hiring and training new staff, as well as on using services of subcontractors, especially in the spheres where highly skilled workforce is required (Wisner, Keong &, Keah-Choon, 2011). Furthermore, the company will not have excess of production and will not run the risk that products may be discarded because of lower demand rate.

Level production strategy will be less efficient and profitable to solve current task. Negative impact of this strategy would include excess of inventory when demand is lower and backorders when demand rate is higher. As a result, it leads to the loss of customer’s satisfaction and trust. However, this strategy is friendlier from the point of view of employees as it develops the feeling of certainty and devotion.

Therefore, taking into consideration all the above mentioned information, chase demand strategy will be the best for the company if the priority is the overall profit. However, this strategy will result in dissatisfaction of employees with possible misunderstandings between administration and average workers.