Supply Chain Concepts

Sales & Operations Planning (S&OP) Production Strategies

When S&OP family level plans are created, one of three production strategies is typically utilized. They are:

The following table summarizes these plans:

Strategy	Description
Level	Production is set to a fixed rate for the S&OP horizon
Chase	Production is synchronized to demand
Hybrid/Combination	Production is level during the S&OP periods that experience low demand. That rate is raised to a larger rate and maintained at the level during peak demand periods.

The following table lists the major advantages and disadvantages of these strategies:

Strategy	Advantage	Disadvantage
Level	Minimize supply chain costs. In particular, manufacturing costs should be optimized	Requires a reasonably accurate forecasting system. During low demand periods, inventory levels increase to support the periods with a larger demand forecast. Inventory carrying costs can be high.
Chase	Provides for level inventory performance throughout the planning horizon. Product is fresher when inventory builds are avoided. Inventory carrying cost is also lower.	Higher production costs are created from adding/removing capacity.
Hybrid	To a smaller degree all of the advantages of the previous strategies	To a smaller degree all of the disadvantages of the previous strategies

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