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Managing Demand and Capacity (Chapter 15)

Managing Demand and Capacity (Chapter 15). Gap 3 – Service Performance Gap Lack of Inventory Capacity Capacity Constraints/Demand Patterns Strategies for Matching Capacity and Demand Waiting Issues/Strategies. Key Factors Leading to Provider Gap 3. Service Delivery. GAP 3.

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Managing Demand and Capacity (Chapter 15)

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  1. Managing Demand and Capacity (Chapter 15) • Gap 3 – Service Performance Gap • Lack of Inventory Capacity • Capacity Constraints/Demand Patterns • Strategies for Matching Capacity and Demand • Waiting Issues/Strategies ã 2005 - Dwayne D. Gremler

  2. Key Factors Leading to Provider Gap 3 Service Delivery GAP 3 • Key Factors Related to Demand and Capacity: • Failure to • Overuse of • Attracting inappropriate • Relying too much on Customer-Driven Service Designs and Standards ã 2005 - Dwayne D. Gremler

  3. Lack of Inventory Capacity • leads to four possible scenarios: • (at the level of optimum capacity) ã 2005 - Dwayne D. Gremler

  4. Service Supply and Demand Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17. ã 2005 - Dwayne D. Gremler

  5. Service Demand Patterns • predictable cycles: • random demand fluctuations • demand patterns by ã 2005 - Dwayne D. Gremler

  6. Constraint: Service Capacity Constraints • Examples of Services Affected by Constraint: ã 2005 - Dwayne D. Gremler

  7. Strategies for Matching Capacity and Demand • Shifting Demand to Match Capacity • Adjusting Capacity to Meet Demand ã 2005 - Dwayne D. Gremler

  8. 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 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 Shifting Demandto Match Capacity Demand Too High Demand Too Low Shift Demand ã 2005 - Dwayne D. Gremler

  9. 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 Perform maintenance renovations Schedule vacations Schedule employee training Lay off employees Strategies for Adjusting Capacityto Match Demand Demand Too High Demand Too Low Adjust Capacity ã 2005 - Dwayne D. Gremler

  10. Waiting Issues • unoccupied time • preprocess waits • anxiety makes waits • uncertain waits seem • unexplained waits seem • unfair waits feel longer • the more valuable the service, the • solo waits feel ã 2005 - Dwayne D. Gremler

  11. Strategies to Address Waiting • importance of customer • urgency of job • duration of the service transaction • payment of a premium price • consider addressing waiting issues in a manner that creates a more positive customer experience ã 2005 - Dwayne D. Gremler

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