What are the two common aggregate production planning strategies?

• A. Level production and chase demand
• B. Stop-and-go and maintain-high inventory
• C. Just-in-time and push manufacturing
• D. Assemble-to-order and make-to-stock

Answer: (A)

Aggregate production planning looks at how to balance capacity and demand over several periods by choosing a production rate strategy. The two common strategies are level production and chase demand.

Level production means keeping the same production rate in every period. You run a steady workforce and output level, using inventory to absorb differences between demand and this constant rate. If demand is higher than the steady rate in some periods, you stock up in earlier periods; if demand drops, you draw from inventory. The upside is stable staffing and smoother operations, but it adds inventory carrying costs and potential obsolescence.

Chase demand means adjusting production to match forecast demand in each period. Production rises when demand is high and falls when demand is low, which keeps inventory and backlogs low. This approach minimizes inventory costs and backorders but requires more flexible labor and possible hiring, firing, or overtime, which can raise other costs and lead to workforce instability.

The other options mix different production ideas that aren’t the standard aggregate planning strategies at this level. They describe lean or process choices (like just-in-time or push manufacturing) or product-structure decisions (assemble-to-order, make-to-stock), which operate at different layers of planning and execution than the classic level vs. chase approaches.