What strategy can companies use to effectively manage demand spikes?

Implementing flexible manufacturing systems is an effective strategy for managing demand spikes because such systems are designed to be adaptable to changes in production requirements. Flexible manufacturing allows companies to quickly respond to varying levels of demand without the need for significant lead time or changeover in production processes. By utilizing automation, modular equipment, and skilled workforce practices, organizations can ramp up production when demand surges and scale down when it declines, aligning their output efficiently with market needs.

In contrast, increasing fixed production capacity is a more rigid and longer-term solution that may involve substantial investment and time, making it less suitable for managing short-term demand fluctuations. Reducing product variety might simplify production and inventory management but could also limit market competitiveness and responsiveness to consumer preferences. Outsourcing production to third parties could help manage demand spikes, yet it often involves complexities such as dependence on suppliers, quality control challenges, and longer lead times. Thus, while all these strategies can have their merits, flexible manufacturing systems stand out for their agility and responsiveness to fluctuating demand.