Page 600 - Introduction to Business

574 PART 6 Managing Business Operations, Management Information Systems, and the Digital Enterprise

EXHIBIT 16.9
Example of a Chase Strategy

Regular Time
Demand Workforce Production
Month (units) (workers) (units)

1 200 10 200
2 200 10 200
3 300 15 300
4 500 25 500
5 400 20 400
6 200 10 200

In the chase strategy, the workforce varies from a low of 10 workers to a high of
25 workers. In the level strategy, the workforce stays at 10 workers, and the produc-
tion rate is increased by asking workers to work overtime in months 3 to 5 and by
subcontracting the production of 200 units in month 4 and 100 units in month 5.

Material Requirements
Once the production rate strategy has been decided, it is time to estimate the mate-
rials that are required to support the strategy. For example, if the units being pro-
duced are automobiles and we are planning to produce 20 automobiles next
month, then we need to estimate all the materials that would be required by such a
production plan. Such estimation is not easy, especially when one considers the
number of components that go into a car, which can easily run in the tens of thou-
material requirements planning (MRP) sands. Fortunately, in the 1960s, a computer-based technique called material
A computer-based technique for requirements planning (MRP) was developed to perform such a complex estima-
calculating the materials required by a tion task.
production plan
MRP has been used successfully in manufacturing and service systems. To illus-
trate the logic of MRP, consider a company that produces an office chair. The
bill of material A graphical sequence in which the chair is assembled is called the bill of material. Exhibit 16.11
representation of the sequence in contains the bill of material with three levels for the office chair.
which products are assembled
Suppose that the production rate strategy calls for the production of 100 office
chairs in month 1 and 200 chairs in month 2, and that months 1 and 2 comprise

EXHIBIT 16.10

Example of a Level Strategy

Regular Time Overtime Subcontracted Total
Demand Workforce Production Production Production Production
Month (units) (workers) (units) (units) (units) (units)
1 200 10 200 0 0 200
2 200 10 200 0 0 200
3 300 10 200 100 0 300
4 500 10 200 100 200 500
5 400 10 200 100 100 400
6 200 10 200 0 0 200

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