Question

Consider the following short cases. Connect one of the three capacity strategies (level, outsourcing or chase) to each. Why did you draw this connection?

1. XYZ Music is a long standing firm in tiny Hickville, TN. The firm employees highly skilled crafts people that make custom instruments. Most employees have been with the firm for decades. Demand varies over time, but the firm is highly committed to keeping a consistent work force and can work ahead if needed to meet seasonal need. Training new employees takes years.
2. Andy’s Sports Memories is a maker of t-shirts and other items associated with sporting events. They frequently need to “gear up” for championship events (like the Predators winning the Stanley Cup) and “gear down” with little lead time. Training time of employees is minimal and there is a significant population of local residents to draw from. Given the nature of the events they support, Andy’s can’t count on shipping product in from far distances. They need to be able to make items in their own shop quickly.
3. Steve’s Promotional Items is a maker of small gift items for company promotional purposes. For example, they either make or add logos to small flashlights, pen sets, coffee mugs, etc. Lead times are long, often 2-3 months. Low cost is paramount. Steve’s real competence is in marketing and selling products, not in making them.

Answer 1

1. Level strategy

This is because XYZ Music is highly committed to keeping a consistent work force and training new employees takes years. This means that they keep their production capacity almost constant irrespective of the demand and hence level strategy is being followed by the firm.

2. Chase

Andy’s Sports Memories frequently need to “gear up” for championship events and “gear down” with little lead time. Training time of employees is minimal and there is a significant population of local residents to draw from. Hence it means that the firm has the capability to change its production capacity in accordance with the demand and follows chase strategy.

3. Outsourcing

Steve’s Promotional Items' real competence is in marketing and selling products, not in making them. Hence they must outsource the production activities to other firm anf concentrate on marketing and selling initiatives only and must follow outsourcing strategy.