Different companies use different strategies to plan and schedule manufacturing production to meet demand. Some companies will make goods only after receiving an order from a customer while others will produce and distribute the commodities to retailers where customers can purchase them at their discretion (Maravelias, & Sung, 2009). The strategy that a company uses often has a direct impact on the amount of inventory it has which translates to the amount of cash that is available for other needs. Among the commonly used production strategies include chase, level, and mixed-combination production to meet seasonal demand. There is no one aggregate strategy that is always more preferable than the other. The effectiveness of the strategy depends on the distribution of demand, the competitive position of the company, and the cost structure of the firm or product line. Companies have to examine the demand pattern before choosing a production strategy critically, or when there is need to change from one strategy to another. This essay aims to discuss these production strategies and how they are applied in the field of logistics.
Chase Production Strategy
The Chase production strategy matches the production plan to the demand pattern. The strategy hires and fires workers to absorb variations in demand (Nahmias & Cheng, 2009). This means that during periods when demand is high, production is increased and more workers are hired. When demand falls, production is cut back, and some workers are laid off. The cost associated with this strategy is the cost of hiring and firing employees. The strategy is considered to be cost-effective especially in periods of high unemployment or for companies that hire low-skilled workers. However, this strategy cannot be used in industries whose worker skills are limited or competition for labor is intense. In the field of logistics, chase strategy could be applied in a case where large quantities of goods need to be loaded in trucks. The company can hire casual workers for the sole purpose of loading the goods after which they are laid off.
Level Production Strategy
Level production strategy sets the production plan at a constant rate, usually to meet average demand. The strategy uses inventory in absorbing demand variations. There is overproduction during periods of low demand with the goods being stored as inventory to be utilized in periods of high demand (Nahmias & Cheng, 2009). The cost associated with this strategy is that of holding inventory, including the cost of perishable items and goods that will turn obsolete and will have to be discarded. In logistics, level production would be applicable in a case where a distributor would purchase more of a certain product when the demand is low and store it in bulk for sale during periods of high demand. For example, shoe polish which has a high demand when schools are opening. The distributor will, however, incur storage costs in the period when demand is low.
Mixed-Combination Production Strategy
A company is said to be using a mixed production strategy when two or more strategies are being utilized to meet demand. When only one strategy is in operation, the company is said to have a pure strategy. The mixed strategy will be preferable when there are more than one factors to be considered such as maintaining the demand level while regulating costs (Figueroa-Garcia, Kalenatic, & Lopez-Bello, (2012). For instance, a company may choose to combine chase and level production strategies when the demand is relatively constant for a long period. This will require that the company maintains a relative number of workers who can be used in production for the given period. This will ensure that products are always available when needed and the cost of inventory and possible loss due to damages is minimized. The mixed strategy could also be applied in logistics. This would be for the products whose demand stretches throughout the year such as foodstuffs. Distribution of such items needs to be constant, with minimal adjustments. This will mean that the logistics company maintains their employees and inventory to match the demand throughout the year.
Time Fencing in Master Production Schedule
A Master Production Schedule (MPS) is a process that assists manufacturers in planning which products and related quantities need to be produced in each period such as production, staffing, and inventory. The plan quantifies significant processes and other resources to optimize production, identify bottlenecks, and anticipate needs and completed goods (Proud, 2012). Since the MPS drives much of the factory activities, its accuracy and viability significantly affect profitability. In MPS, a time fence refers to a series of time intervals that specifies the types of order changes allowed. Time fences are categorized into three; Demand Time Fence (DTF), Planning Time Fence (PTF), and Release Time Fence (RTF). In DTF, there is a designated period when the MPS is frozen. Freezing means not allowing any changes to the existing schedule. DTF has relatively few periods which start with the present and extend into the future. PTF starts where DTF ends and extends into the future. It involves a designated period in which the master scheduler is allowed to make changes. RTF defines the period between the present time and the date within which the planning process will automatically release planned orders to MRP as discrete jobs or purchase requisitions.
In MPS, time fencing is shown as an extension of the freeze concept. The three time fences mentioned above are applied in the production of items. These time fences are defined when the item to be produced is defined (Powell, Sahin, & Gao, 2008). For instance, in the manufacture of bicycles, DTF in the master schedule will only consider actual demand. Outside this demand, the planning process can only consider forecast demand. In the manufacture of bicycles, DTF will ensure that there is a period when the schedule does not allow any other activity other than the manufacture of bicycles. The Planning Time Fence, adjustments can be made either on order due dates or create new planned orders. In this period, changes that need to be made on the bicycles can be implemented. However, they have to remain within the scheduled timeframe. The Release Time Fence will be marked by that period when the bicycles will be released as complete items from the production schedule.
In summary, production of items is dictated by strategies and planning processes that ensure efficiency in quality, time, and cost. Different companies utilize different aggregative strategies to meet demand. Among these strategies are the chase, level, and mixed production. Chase production strategy is concerned with hiring and firing workers to meet demand. Level production strategy is concerned with a constant rate of production while using inventory to absorb demand variations. A mixed strategy is considered when applying two or more aggregate strategies. In production, Master Production Schedule assists in the manufacturing process to determine the items to be produced at a particular time. Production is stretched over time fences that determine the period within which an item is produced.
Figueroa-Garcia, J. C., Kalenatic, D., & Lopez-Bello, C. A. (2012). Multi-period mixed production planning with uncertain demands: fuzzy and interval fuzzy sets approach. Fuzzy Sets and Systems, 206, 21-38.
Maravelias, C. T., & Sung, C. (2009). Integration of production planning and scheduling: Overview, challenges, and opportunities. Computers & Chemical Engineering, 33(12), 1919-1930.
Nahmias, S., & Cheng, Y. (2009). Production and operations analysis (Vol. 4). New York: McGraw-Hill/Irwin.
Powell Robinson Jr, E., Sahin, F., & Gao, L. L. (2008). Master production schedule time interval strategies in make-to-order supply chains. International Journal of Production Research, 46(7), 1933-1954.
Proud, J. F. (2012). Master scheduling: a practical guide to competitive manufacturing (Vol. 16). John Wiley & Sons.
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