Companies that use the chase strategy, or demand matching strategy, produce only enough goods to meet or exactly match the demand for goods(Hamlett, 2015). Think of this strategy in terms of a restaurant, which produces meals only when a customer orders, therefore matching the actual production with customer demand. Depending on the product or service involved, the approach can incur costs by the ineffective use of capacity at periods of low demand, by the need to recruit of lay off staff, by learning-curve effects, and by a possible loss of quality(Oxford Index, 2015). The chase strategy has several advantages, it keeps inventories low, which frees up cash that otherwise can be used to buy raw materials or components, and reduces inventory carrying costs that are associated with holding inventory in stock.
This strategy is mainly used when demand is not predictable and there is not any to minimal inventory. This strategy can lead to apprehensive and displeased employees. There are numerous companies that favor the use of a combination of both the chase and the level strategy. The mixture enables effectiveness of goals and lowers the cost more so than using each strategy alone. One of the reasons that this practice is used because new employees can be easily trained.
Chase Demand Strategy, 2015. Oxford Index, http://oxfordindex.oup.com/view/10.1093/oi/authority.20110803095604919 Hamlett, K., 2015. What Are the Strategies Used in Production Planning & Scheduling? http://smallbusiness.chron.com/strategies-used-production-planning-scheduling-1808.html