Question 7 Which of following statements are true when comparing aggregate plann

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Question 7 Which of following statements are true when comparing aggregate planning strategies? I. "Chase" aggregate plans generally require more inventory stock-piling than "Level" aggregate plans Il. "Level" aggregate plans generally yield better utilization of resources, and thus are associated with greater workforce stability. IlI. "Chase" aggregate plans would be more attractive to make-to-order firms because they tend to minimize finished goods inventory. O Il only O I and II OIl and III O I, Il and Ill O Ill only

Explanation / Answer

A level strategy focuses on aggregate plan that help to maintain production at a steady level and employment also at a steady level. The firm maintains a steady workforce and output even when the demand is low and this makes the inventory levels higher than what is actually needed in level strategy. But Chase strategy try to match the demand with production and involves hiring, firing or lay off of employees as per the demand and production rate. The chase strategy allows the inventory to be held to the lowest level possible. Chase strategy is suitable for make to order firms as they start manufacturing only when the customer order is received and reduce finished goods inventory.

Hence the statements II and III are correct as the level strategy leads to workforce stability and chase strategy is suitable for make to order firms. But statement 1 is wrong as more inventory stock piling is required in Level strategy than chase strategy.

Answer is third option, II and III.

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