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McGraw-Hill

S. M. Chapter 14. MANAGING DEMAND AND CAPACITY. © 2000 The McGraw-Hill Companies. McGraw-Hill. Objectives for Chapter 14: Managing Demand and Capacity. Explain: the underlying issue for capacity-constrained services the implications of capacity constraints

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  1. S M Chapter 14 MANAGING DEMAND AND CAPACITY © 2000 The McGraw-Hill Companies McGraw-Hill

  2. Objectives for Chapter 14:Managing Demand and Capacity • Explain: • the underlying issue for capacity-constrained services • the implications of capacity constraints • the implications of different types of demand patterns on matching supply and demand • Lay out strategies for matching supply and demand through: • shifting demand to match capacity or • flexing capacity to meet demand • Demonstrate the benefits and risks of yield management strategies • Provide strategies for managing waiting lines

  3. Time, labor, equipment and facilities Optimal versus maximal use of capacity Understanding Capacity Constraints and Demand Patterns Demand Patterns Capacity Constraints • Charting demand patterns • Predictable cycles • Random demand fluctuations • Demand patterns by market segment

  4. 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 Figure 14-3Strategies for Shifting Demand to Match Capacity Demand Too High Demand Too Low Shift Demand • 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

  5. 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 Figure 14-4 Strategies for Flexing Capacity to Match Demand Demand Too High Demand Too Low Flex Capacity • Perform maintenance renovations • Schedule vacations • Schedule employee training • Lay off employees

  6. Table 14-1 What is the Nature of Demand Relative to Supply? Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.

  7. Table 14-2 What is the Constraint on Capacity?

  8. 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

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