Managing Demand & Capacity

Objectives
Reasons for frequent imbalance between the demand and the supply The means of demand measurement and forecasting Short term measures to improve the supply situation Using 4Ps to improve the supply Queuing, its inevitability, modeling, consumer behavior linked with it Using queuing model for service decisions

Services
Inseparability of production and consumption Perishable nature of services Where capacity exceeds demand Where the capacity and demand are well balanced Demand at a level higher than the optimum capacity Demand far exceeds the service capacity

Disparity between demand and supply

Queue formation if demand is higher; leads to dissatisfaction and loss of opportunity to add revenues If demand is lower, investment in capacity is wasted. Might create a unfavorable impression

Balance demand and supply

Prediction or forecasting of demand accurately Ability to vary the service capacity in line with the demand pattern to keep the level of service at the desired level Tempering the demand to keep it in line with the supply capacity. These can be achieved only if the forecast is accurate.

Demand measurement
Use of historic data Time series analysis
Long term or secular movement Cyclical variations Seasonal movements or seasonal variations Irregular or random movements

Customer intentions surveys

Respond to Changes in Demand

Flexible capacity Adjusting the down time Flexible end use Coping through employee response
Employment of part time employees Cross train employees

Increase in capacity through customer participation Use of sub-contracting to increase capacity Sharing capacity Opening and closing hour changes

Reshaping the demand

Use of reservations and appointments Time based tariff or prices

Queues
Avoidance of negative aspects of queues Delivery of customer satisfaction despite the queues Optimization of facilities for benefits to all concerned

Behavioral aspects of Queues

Unoccupied time feels longer than the occupied time Pre-process wait feels longer than in-process wait Anxiety makes the wait seem longer Uncertain waits feel longer than known finite wait Unexplained waits are longer than explained waits Unfair waits are longer than equitable waits The more valuable the service, the longer the customer will wait Solo wait feel longer than group wait

Different types of Queues

Single line and single service facility queue Multiple queues for same service facilities Variation of multiple service facilities with a single queue

Decision regarding the number of facilities to be offered

Queue length System length Waiting time in the queue Total time in the system Server idle time