Chase strategy is when production meets the demand and capacity from one period to the next. This strategy is mostly used when demand is unpredictable and there is no inventory. Many cases when using this strategy result in a hire turnover rate when it comes to employment which can lead to insecure and unhappy employees. Problems with labor unions may arise as well. Other results of this strategy include increased inventory costs and erratic use of factories and equipment. This allows factories to have a large amount of flexibility.
A major advantage of the strategy is that inventory is allowed at its lowest level which can provide a savings to some companies. The just-in concept firms utilize the chase strategy to aggregate planning. There are many companies that prefer to use a combination of the level and chase strategy. The combination enables optimization of goals and lower costs more so than independently. Companies and businesses within the service industry that use this strategy are demand matching which means that the workforce must match the demand.
Another example of an industry that uses the chase strategy is the auto industry. Companies like Ford, GM, and Hyundai have automobiles that depreciate quickly and the cost of warehousing, insurance, and taxes are high. Automobiles cannot be stockpiled for too long so therefore, only so many are made based on demand of the consumer. Another example would be the fast food industry. For example, Chik-Fil-A would only produce a meal once an order is taken which meets the demand of the customer.
When companies in the service industry use Chase Strategy, they tend to hire hourly employees, part time employees and allow overtime in order to meet the demand of customers. Some disadvantages of using the Chase Strategy would be a high turnover rate which can cause low employee morale as well as problems with labor unions and a possible increase in labor costs. The use of the Chase Strategy could also mean higher hiring and training costs.