Description
Managing Demand and Capacity
Managing demand and capacity
Demand & Capacity Imbalance
Demand > capacity lost customers
Capacity
Tight Capacity Good Balance
Demand
Wasted Capacity
time
Understanding Capacity Constraints and Demand Patterns
Capacity Constraints
• •
Demand Patterns
• • • •
Time, labour, equipment and facilities Optimal versus maximal use of capacity
Charting demand patterns Predictable cycles Random demand fluctuations Demand patterns by market segment
Strategies for Shifting Demand to Match Capacity
Demand Too High
•
•
• •
•
Use signage to communicate busy days and times Offer incentives to customers for usage during non-peak times Take care of loyal or regular customers first Advertise peak usage times and benefits of non-peak use Charge full price for the service--no discounts
Shift Demand
Demand Too Low
•
•
• • •
Use sales and advertising to increase business from current market segments Modify the service offering to appeal to new market segments Offer discounts or price reductions Modify hours of operation Bring the service to the customer
Strategies for Flexing Capacity to Match Demand
Demand Too High
•
• • • • • •
Stretch time, labor, facilities and equipment Cross-train employees Hire part-time employees Request overtime work from employees Rent or share facilities Rent or share equipment Subcontract or outsource activities
Shift Demand
Demand Too Low
• • •
•
Perform maintenance renovations Schedule vacations Schedule employee training Lay off employees
What is the Nature of Demand Relative to Supply?
Extent of Demand fluctuations over time
Wide Narrow
What is the Constraint on Capacity?
Nature of the constraint Time Type of service ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Legal Consulting Accounting Medical Law firm Accounting firm Consulting firm Health clinic Delivery services Telecommunication Utilities Health club Hotels Restaurants Hospitals Airlines Schools Theaters Churches
Labor
Equipment
Facilities
Waiting Line Issues and Strategies
? Unoccupied
time feels longer ? Preprocess waits feel longer ? Anxiety makes waits seem longer ? Uncertain waits seem longer than finite waits ? Unexplained waits seem longer ? Unfair waits feel longer ? Longer waits are more acceptable for “valuable” services ? Solo waits feel longer
Managing Demand
? Product
Variations over time ? Modifying Timing and Location of Delivery ? Pricing ? Communication with Customers
Managing Demand
? Pricing.
? Advertising
and Promotion. ? Reservations. ? Change the Nature of Demand.
Managing Demand
? Perishability ? Services can not be stored. ? When demand fluctuates, service firms have problems.
Strategies can be formulated for producing better match between demand and supply.
Managing Demand
? Tailor Capacity ? (Strategy leverage to manage peaks and falls) ? Manage Demand Level ? (Productive capacity constituents and constraints)
Strategies on the demand side
? Differential pricing
? Noon shows in theatres are priced low
? Non-peak demand
? Off-season holiday packages
? Complementary services
? Benihana Tokyo
? Reservation systems
? Airlines, Hotels
Managing Capacity
? Schedule
employees and equipment intelligently. ? “Stretch” the capacity:
? Squeeze more people in. ? Speed up service.
? Schedule
downtime during periods of low demand (repair, maintenance, vacations) ? Employ part-timers, flex-timers, call-in workers, seasonal workers. ? Rent/share extra facilities equipment. ? Cross-train employees
Patterns and Determinants of Demand
? Demand
cycle - Predictable / Duration ? Cause behind cyclic variation ? Any “random” change symptom. ? Disaggregation by segmentation
Using Market Mix to shape Demand patterns
? Product
variations ? Pricing strategies ? Delivery system/Time modification ? Communication efforts
Strategies on the supply side
• • • • •
Part time employees
? Extra assistant in polyclinic or part-time teachers in colleges
Peak-time efficiency routine
? Kitchen staff working as waiters in crowded restaurants.
Increased customer participation
? Customers picking their own grocery.
Shared services
? Banks working with DSAs for selling loans and credit cards.
Facilities for future expansion
? College building buys surrounding land for later developments.
Questions
doc_530204229.ppt
Managing Demand and Capacity
Managing demand and capacity
Demand & Capacity Imbalance
Demand > capacity lost customers
Capacity
Tight Capacity Good Balance
Demand
Wasted Capacity
time
Understanding Capacity Constraints and Demand Patterns
Capacity Constraints
• •
Demand Patterns
• • • •
Time, labour, equipment and facilities Optimal versus maximal use of capacity
Charting demand patterns Predictable cycles Random demand fluctuations Demand patterns by market segment
Strategies for Shifting Demand to Match Capacity
Demand Too High
•
•
• •
•
Use signage to communicate busy days and times Offer incentives to customers for usage during non-peak times Take care of loyal or regular customers first Advertise peak usage times and benefits of non-peak use Charge full price for the service--no discounts
Shift Demand
Demand Too Low
•
•
• • •
Use sales and advertising to increase business from current market segments Modify the service offering to appeal to new market segments Offer discounts or price reductions Modify hours of operation Bring the service to the customer
Strategies for Flexing Capacity to Match Demand
Demand Too High
•
• • • • • •
Stretch time, labor, facilities and equipment Cross-train employees Hire part-time employees Request overtime work from employees Rent or share facilities Rent or share equipment Subcontract or outsource activities
Shift Demand
Demand Too Low
• • •
•
Perform maintenance renovations Schedule vacations Schedule employee training Lay off employees
What is the Nature of Demand Relative to Supply?
Extent of Demand fluctuations over time
Wide Narrow
What is the Constraint on Capacity?
Nature of the constraint Time Type of service ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Legal Consulting Accounting Medical Law firm Accounting firm Consulting firm Health clinic Delivery services Telecommunication Utilities Health club Hotels Restaurants Hospitals Airlines Schools Theaters Churches
Labor
Equipment
Facilities
Waiting Line Issues and Strategies
? Unoccupied
time feels longer ? Preprocess waits feel longer ? Anxiety makes waits seem longer ? Uncertain waits seem longer than finite waits ? Unexplained waits seem longer ? Unfair waits feel longer ? Longer waits are more acceptable for “valuable” services ? Solo waits feel longer
Managing Demand
? Product
Variations over time ? Modifying Timing and Location of Delivery ? Pricing ? Communication with Customers
Managing Demand
? Pricing.
? Advertising
and Promotion. ? Reservations. ? Change the Nature of Demand.
Managing Demand
? Perishability ? Services can not be stored. ? When demand fluctuates, service firms have problems.
Strategies can be formulated for producing better match between demand and supply.
Managing Demand
? Tailor Capacity ? (Strategy leverage to manage peaks and falls) ? Manage Demand Level ? (Productive capacity constituents and constraints)
Strategies on the demand side
? Differential pricing
? Noon shows in theatres are priced low
? Non-peak demand
? Off-season holiday packages
? Complementary services
? Benihana Tokyo
? Reservation systems
? Airlines, Hotels
Managing Capacity
? Schedule
employees and equipment intelligently. ? “Stretch” the capacity:
? Squeeze more people in. ? Speed up service.
? Schedule
downtime during periods of low demand (repair, maintenance, vacations) ? Employ part-timers, flex-timers, call-in workers, seasonal workers. ? Rent/share extra facilities equipment. ? Cross-train employees
Patterns and Determinants of Demand
? Demand
cycle - Predictable / Duration ? Cause behind cyclic variation ? Any “random” change symptom. ? Disaggregation by segmentation
Using Market Mix to shape Demand patterns
? Product
variations ? Pricing strategies ? Delivery system/Time modification ? Communication efforts
Strategies on the supply side
• • • • •
Part time employees
? Extra assistant in polyclinic or part-time teachers in colleges
Peak-time efficiency routine
? Kitchen staff working as waiters in crowded restaurants.
Increased customer participation
? Customers picking their own grocery.
Shared services
? Banks working with DSAs for selling loans and credit cards.
Facilities for future expansion
? College building buys surrounding land for later developments.
Questions
doc_530204229.ppt