When a reactive strategy is adopted plant capacity is not added until all of the planned output from the facility can be sold. Thus with this strategy the plant is not brought on line until demand equals 100 percent of its capacity as shown in Exhibit 7.7C.
Operating costs are minimized with this approach, as the plant is producing at its desired optimal output beginning with its first day of operation. This strategy is most conducive to process-oriented operations that have very high fixed costs regardless of the volume produced and low variable costs. Examples include paper mills breweries, and refineries. The main problem with this strategy as with the neutral strategy is how best to meet the unfilled demand before the plant is in operation. One approach if the firm has other plants that produce the same product(s) is to manufacture the products temporarily (albeit inefficiently) at these other locations utilizing additional shifts and overtime as necessary.