Managing Customer Satisfaction Week 8 Resource Utilization

Chapter objectives: Explain how service operations can get the most our of their fixed resources — capacity management Explain how service operations can get the most our of their fixed resources — capacity management Explain how operations try to ensure that each customer gets why they want, when they want it — operations planning & control Explain how operations try to ensure that each customer gets why they want, when they want it — operations planning & control

Resource Utilization Describe how to manage bottlenecks and queues Describe how to manage bottlenecks and queues Show how operations can deal withn capacity peaks — when they enter the ‘ coping zone ’ Show how operations can deal withn capacity peaks — when they enter the ‘ coping zone ’ Suggest ways in which operations can improve their resource utilization. Suggest ways in which operations can improve their resource utilization.

Capacity management Managers are concerned that service process has sufficient resources to deal with the anticipated levels of customer demand avoiding: Managers are concerned that service process has sufficient resources to deal with the anticipated levels of customer demand avoiding: Underutilization Underutilization Expensive resources not earning revenue (ROA).Expensive resources not earning revenue (ROA). Customers are suspicious of services that do not appear busy.Customers are suspicious of services that do not appear busy. Underutilization may demotivate employeesUnderutilization may demotivate employees

Capacity management Over utilization of resources Over utilization of resources Many aspects of delivery service sufferMany aspects of delivery service suffer Overload may result in staff mistakesOverload may result in staff mistakes Staff may be recruited to perform tasks they are unfamiliar with = mistakesStaff may be recruited to perform tasks they are unfamiliar with = mistakes

Service capacity Service capacity is defined as the maximum level of value-added activity over a period of time that the service process can consistently achieve under normal operating conditions (Slack et al. 2004) Service capacity is defined as the maximum level of value-added activity over a period of time that the service process can consistently achieve under normal operating conditions (Slack et al. 2004)

Measuring Capacity What influences capacity? Service product mix — simple, routine, complex, etc. Service product mix — simple, routine, complex, etc. Location — travel times Location — travel times Intangibility of the service — the lower the degree of intangibility the easier. E.g., fast-food restaurant Intangibility of the service — the lower the degree of intangibility the easier. E.g., fast-food restaurant The ease of identifying the resource constraint (bottleneck) The ease of identifying the resource constraint (bottleneck)

Short-term capacity strategies Level capacity — scarce or expensive resources are kept at a constant level (airlines fly full airplanes) Level capacity — scarce or expensive resources are kept at a constant level (airlines fly full airplanes) Promote off-peak demand Promote off-peak demand Queue management Queue management Booking systems — forward booking allows scheduling capacity ahead Booking systems — forward booking allows scheduling capacity ahead

Short-term capacity strategies Chase capacity — match supply to demand (flexibility) Chase capacity — match supply to demand (flexibility) High volume consumer services High volume consumer services Maintain short queue lengths (staffing) Maintain short queue lengths (staffing) Fully utilize premises Fully utilize premises These service organizations are category and are price sensitive therefore costs are a concern (theme park) These service organizations are category and are price sensitive therefore costs are a concern (theme park) Flexible staffing levels, temporary staff, utilizing customers (clearing tables) Flexible staffing levels, temporary staff, utilizing customers (clearing tables)

Short-term capacity strategies Demand management — influence the demand profile to ‘ smooth ’ the load on resources Demand management — influence the demand profile to ‘ smooth ’ the load on resources Pricing (Happy hour) Pricing (Happy hour) Restricted service at peak times Restricted service at peak times Specialist service channels (special times for special needs — US Embassy Citizen Services Specialist service channels (special times for special needs — US Embassy Citizen Services Advertising — special offers (release of Harry Potter books at midnight ‘ parties ’ ) Advertising — special offers (release of Harry Potter books at midnight ‘ parties ’ ) Table 8.1, pg. 266 Table 8.1, pg. 266

Capacity management summary It is essential to be able to define the capacity of each service process, identifying the expected output for customers in the relevant service period. It is essential to be able to define the capacity of each service process, identifying the expected output for customers in the relevant service period. Capacity is influenced by a range of factors including product mix, location, intangibility and resource constraints. Capacity is influenced by a range of factors including product mix, location, intangibility and resource constraints. Most organizations adopt a mixture of capacity strategies: level, chase and demand management. The mixture should reflect the strategy of the operation. Most organizations adopt a mixture of capacity strategies: level, chase and demand management. The mixture should reflect the strategy of the operation.