1. OPSM 405 Service Management Class 18: Managing capacity Koç University Zeynep Aksin zaksin@ku.edu.tr

2. Announcement  Motherland Air group case report due Monday  Submit policies to me in provided format 2 hours before class

3. Service Delivery System Customer Demand Limited Capacity Fundamental Problem: Variable Usage Services cannot be produced in advance and stored for later consumption; they must be produced at the time of consumption.

4. Managing capacity  manage the supply side  add staff or other resources  cross-train employees  change processes  co-production  manage the demand side  do nothing proactive  reservation systems  yield management systems

5. Specifications of a Service Provider Service Provider Leaving Customers Waiting Customers Demand Pattern Resources Human resources Information system other... Arriving Customers Satisfaction Measures Reneges or abandonments Waiting Pattern Served Customers Service Time

6. Strategies for capacity management Managing service capacity altering demand controlling supply cross- training sharing capacity create flexible capacity increase customer participation part- timers schedule shifts reservation systems price incentives complementary services partition demand promote off-peak

7. Number of calls Time Example: Staffing in a call center How many representatives should be planned to meet the demand ? Demand Pattern

8. Number of calls Average time to answer a call = 5 minutes Staffing Number of Agents in a time period = Number of calls during the period  Average time to answer a call / time period Number of agents

9. Staffing: schedule shifts

10. Where the Time Goes 6 months waiting at stoplights 8 months opening junk mail In a life time, average American will spend -- 1 year looking for misplaced objects 2 years for unsuccessfully returning phone calls 4 years doing housework 5 years waiting in line 6 years eating

11. Waiting as a fact of life  According to this estimate, we wait five years of our lives (if we live in the US!)  Bangkok loses as much as one third of its potential output because of overcrowded roads (Japan’s international cooperation agency)  Cost of road congestion in Europe estimated at 2% of GDP (EU transport directorate, 1995)  Road congestion wastes 1.5 billion hours of British motorist’ time a year

12. Cycle Times in White Collar Processes

13. Why?  the perpetual queue: insufficient capacity  the predictable queue: peaks and rush-hours  the stochastic queue: due to randomness-whenever customers come faster than they are served

14. The psychology of waiting  waiting as psychological punishment  keep the customer busy  keep them entertained  keep them informed  break the wait up into stages  in multi-stages, its the end that matters

15. The psychology of waiting  waiting as a ritual insult  sensitivity training  make initial contact  waiting as a social interaction  prevent injustice  improve surroundings  design to minimize crowding  get rid of the line whenever possible

16. Reducing perceived wait  Understand psychological thresholds  Distract customers (mirrors, music, information)  Get customers out of line (numbers, call-back)  Inform customers of wait (over-estimate)  Keep idle servers out of sight  Maintain fairness (FCFS)  Keep customers comfortable

17. Is a queue always bad?  queues as a signal for quality  doctors  business schools  restaurants  other people demand similar things  the advantage of being in

18. A solution: Add capacity to remove a persistent line?  You want others to be there to signal quality  Risks of being in versus out: its an unstable proposition!  Don’t want to relate everything to price