Managing Demand and Supply A Service Perspective.

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Presentation transcript:

Managing Demand and Supply A Service Perspective

No inventory No SCM? What is the supply to be monitored What are the influencers on Demand What is capacity utilization What is demand optimization

Situation A flight has 180 seats Flies one route non stop thrice daily Avg occupancy of 75% economy 20% premium class at 250% pr pricing Peak demand for fri nights/ mon morning flights Low demand – mid morning and mid week

How to manage Demand and Supply to max revenue and Service quality

Time Vol Demand Maximum demand: Excess Demand (Opp Lost) Optimum capacity :Above which Service Quality declines Ideal demand Scene Low Utilization :Resource wastage

Managing Supply What are the constraints on Supply Each service has a key factor which determines the constraint –Time:Doctor offers his expert “Time” for diagnosis –Labor :Outsourcing, accounting firms –Equipment :Gym,transport cos –Facilities: Hospitals,theatre etc

Is operating at Optimum Supply capacity right or Maximum capacity beneficial? Impact on Pricing Optimal Pricing

Managing Demand Charting Demand patterns Predictable cycles Random Demand patterns Demand patterns by Mkt segment

Strategies Shifting Demand to manage capacity –HOW ? Offering diff kind of low demand times Providing information to customers and shifting Modifying location and delivery of service, Differential pricing

Strategize for the airline case Click here for case

Managing Supply Flexing capacity High DemandLow Demand Part timemaintenance Outsourceoperational wk Cross traintraining Rent/sharelay offs reservation

YIELD Management What is Yield –The land yield is 100 tonnes of rice per harvest. –Is it the maximum capacity –Or the actual produce –Or the actual produce in relation to its potential.

In service industry yield is Yield = Actual Revenue -> Act cap* X Act price Potential revenue-> Potential cap X Maximum price Helps you determine Optimum capacity to work on Optimum Price Alternate Capacity utilization Alternate Price *Cap=Capacity

Yield affected by Pricing And capacity utilized at the price above

Price elasticity for services - Quagmire Booking high prices Booking low prices –Fashion goods,technology, entertainment Booking prices Booking high prices –Hotels airlines What is the difference ( refer to supply constraints)

Demand Supply non alignment Waiting for Customers Customers Waiting

Waiting Time management -Excess demand /Low supply Impact Service quality falters Pressure on scarce resources Competitive factors

Strategies for waiting time Employ operational logic to reduce waiting time Making waiting time tolerable –Zone of tolerance Establish reservation process Prior information Differentiate waiting customers

Queuing Single line Multi Line Token

Situational Analysis Queues at tirupathi ( any place of worship) At banks At railway booking counters At doctors At airports when Flights cancelled /rescheduled

Analyze What are capacity constraints Demand constraints How can waiting time be managed