How Chase Strategy Boosts Cost Efficiency


How Chase Strategy Boosts Cost Efficiency
By Reinaldo Ragil Rompas

It can be difficult to keep up with changing demand in the fast-paced world of business. While stock outs during busy times annoy customers and harm the brand, inventory builds up during slow times and ties up capital. A compelling solution is provided by the chase strategy approach, which enables companies to dynamically modify their resources to match changing demand.

What Is the Chase Strategy?

The chase strategy is all about flexibility, in contrast to a level production strategy, which keeps output constant regardless of demand. To put it another way, companies are following consumer demand. There is no excess inventory held over because production is in line with demand. This waits until there is an order to save money as part of a larger lean production strategy. Imagine a company that adjusts its production or service levels in response to forecasts and real-time data, thereby “chasing” after demand.

Benefits of the Chase Strategy 

The chase strategy offers a significant financial advantage by cutting waste and allocating resources as efficiently as possible. One significant benefit is lower inventory costs. By producing more in response to demand, a company can hold less inventory and free up money for other business expenses like debt repayment or marketing campaigns. Improved cash flow will result directly from fewer finished goods remaining unsold and tying up valuable resources. Customer satisfaction is another top priority in the chase strategy. By dynamically adjusting production or service levels, a company can ensure that its customers have what they need at the right time, reducing the likelihood of stockouts and maintaining customer satisfaction. Lastly but not least, the pursuit approach promotes greater flexibility, which is necessary in today’s fast-paced market to respond to changing customer demands. Through adjustments to staffing, stock levels, and scheduling, the chase strategy helps the business seize opportunities and respond quickly to market shifts. 

Drawbacks of the Chase Strategy 

If a business uses a chase strategy in aggregate planning, there are several drawbacks, including increased operating costs from hiring and firing employees or working overtime. Frequent hiring and firing incidents can negatively impact worker morale and ultimately lead to decreased productivity. Poor product quality frequently leads to subpar outcomes; this is the result of inexperienced staff. Demand spikes can also cause problems for the supply chain, leading to delays, exorbitant supplier prices, or faster raw material procurement at poor quality.

The chase strategy works especially well for companies whose demand fluctuates seasonally or cyclically. Additionally, it’s a smart option for businesses like restaurants or consulting firms that provide non-storable services or have short product life cycles. Businesses looking to maximize production and service levels in response to demand can benefit greatly from the chase strategy. It can increase customer satisfaction, cut expenses, and streamline operations by carefully modifying organization scheduling, inventory, and workforce. However, before putting this strategy into practice, it’s important to consider any potential negatives, such as the effect on staff morale.