1. “MANAGING DEMAND & CAPACITY AND WAITING LINE STRATEGIES”
Presented By:
Anubhav (07)
Vipasana(40)

2. CONTENTS Variation In Demand Relative to Demand
Combinations of Demand & Supply
Capacity constraints
Demand Patterns
Shifting Demand to Match Capacity
Adjusting Capacity to Match Demand
Yield Management
Implementing Yield Management System
Waiting Line Strategies

3. FACTORS LEADING TO GAP3 Organizations fail to smooth the peaks
SERVICE PROVIDER
Organizations fail to smooth the peaks
and valleys of demand.
2. Overuse of capacities
3. Attract an inappropriate customer mix in
their effort to build
4. Relying too much on price on smoothing
demand
GAP 3
CUSTOMER

4. VARIATION IN DEMAND RELATIVE TO DEMAND

5. COMBINATIONS OF DEMAND AND SUPPLY
Excess demand:
Supply: Greater than maximum supply.
Issues: 1. Customers turned away
2. Lost business opportunities.
3. Resources under greater pressure.
4. Service Quality suffers.
5. Crowding.
6. Staff and facilities overtaxed.
7.Customers seek competitor's offerings

6. COMBINATIONS OF DEMAND AND SUPPLY
Demand Exceeds Optimum Capacity:
Supply: Maximum supply
Issues: 1. All customers serviced.
2.Excess pressure on all resources- facilities and staff.
3. Queuing and long waits.
4. Crowding.
5. Service quality suffers.

7. COMBINATIONS OF DEMAND AND SUPPLY
Demand and Supply are Well Balanced:
Supply: Optimum supply.
Issues: 1. Resources utilized at an ideal rate.
2. Productivity ideal
3. Service quality delivered.
4. No delays.
5. Pleasant amount of crowding.

8. COMBINATIONS OF DEMAND AND SUPPLY
Demand Less Than Optimum Supply:
Supply: Less than optimum supply.
Issues: 1.Resources under-utilized.
2. Productivity decreases.
3. Customers receive excellent individual service.
4. Customers have full use of facilities.
5. No waiting.
6. Lack of customers could creative negative image or atmosphere.

9. CAPACITY CONSTRAINTS Time Labor Equipment Facilities
Optimal versus Maximum use of capacity

10. CONSTRAINTS ON CAPACITY
Nature of Constraints
Type of Service
Time
Legal
Consulting
Accounting
Medical
Labor
Law firm
Accounting firm
Consulting firm
Health Clinic
Equipment
Delivery service
Telecommunications
Network services
Facilities
Hotels
Hospitals
Airlines
Schools

11. DEMAND PATTERNS Charting of demand patterns Predictable cycles
Random demand fluctuations
Demand patterns by market segment

12. STRATEGIES FOR MATCHING CAPACITY & DEMAND
Shifting demand to match capacity
Adjusting capacity to meet demand

13. SHIFTING DEMAND TO MATCH CAPACITY
Demand too low
Use sales and advertising to increase business from current market segment.
Modify the service offering to appeal to new market segments.
Offer discounts or price reduction.
Modify hours of operation.
Bring the service to the customer.
Demand too high
Use signage to communicate busy days and time.
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.
SHIFT DEMAND

14. SHIFTING DEMAND TO MATCH CAPACITY
Strategy: Vary the service offering.
Tactics for high demand:
Modify service offering to help facilitate extra demand.
Reduce augmented service element.
Tactics for low demand:
Modify the service offering to appeal to different market segment.
Increase augmented service elements- value add by developing complementary products.

15. SHIFTING DEMAND TO MATCH CAPACITY
Strategy: Modify timing & location of service delivery.
Tactics of high demand:
Get consumers to come to service facility.
Tactics for low demand:
Bring the service to consumer.

16. SHIFTING DEMAND TO MATCH CAPACITY
Strategy: Differentiation on price.
Tactics of high demand:
Increase price to match demand.
Charge full rice.
Tactics for low demand:
Offer discount & price reduction.

17. SHIFTING DEMAND TO MATCH CAPACITY
Strategy: Communicate with customers.
Tactics for high demand:
Letting the customers know of peak demand so that they can choose to use the service at alternative times and avoid crowding or delays.
Tactics for low demand:
Communicate the various promotional schemes and emphasize on various benefits during slow periods.

18. ADJUSTING CAPACITY TO MATCH DEMAND
Demand too low
Perform maintenance, renovation.
Schedule vacations
Schedule employee training.
Lay off employees.
Demand too high
Stretch time, labor, facilities & equipment.
Cross-train employees.
Hire part-time employees.
Request overtime work for employees.
Rent or share facilities.
Rent or share equipment.
Subcontract or outsource activities.
ADJUST CAPACITY

19. ADJUSTING CAPACITY TO MATCH DEMAND
Stretch Existing Capacity: in such cases no new resources are added; rather the people, facilities and equipment are asked to work harder and longer to meet demand.
Stretch time.
Stretch labor.
Stretch facilities.
Stretch equipment.

20. ADJUSTING CAPACITY TO MATCH DEMAND
Align Capacity with Demand Fluctuations: by adjusting service resources creatively, organizations can in effect chase the demand curves to match capacity with customer demand patterns. Also called Chase Demand.
Use Part-Time Employees.
Outsourcing.
Rent or Share Facilities or Equipment.
Schedule Downtime during Periods of Low Demand.
Cross-Train Employees.
Modify or Move Facilities and Equipment.

21. YIELD MANAGEMENT
It is the process of allocating the right type of capacity to the right kind of customer at the right price so as to maximize revenue or yield.
Yield=Actual revenue/Potential revenue
Actual revenue=actual capacity used*average actual price
Potential revenue=total capacity*maximum price

22. IMPLEMENTING YIELD MANAGEMENT SYSTEM
Identification of a customer base using a segmentation process
Develop awareness among managers of changing customer needs & expectations
Estimating price elasticity of demand for each market segment
Make managers responsive to changing market conditions – demand seasonality/variations
Reliable demand forecasting methods and historical demand data

23. CHALLENGES & RISK Loss of competitive focus. Customer alienation.
Employee morale problem.
Incompatible incentive and reward systems.
Lack of employee training.
Inappropriate organization of the yield management function.

24. WAITING LINE STRATEGIES
Employ operational logic
modify operations
adjust queuing system
Establish a reservation process
Differentiate waiting customers
importance of the customer
urgency of the job
duration of the service transaction
payment of a premium price

25. WAITING LINE CONFIGURATIONS

26. WAITING LINE STRATEGIES
Make waiting fun, or at least tolerable
unoccupied time feels longer than occupied time
preprocess waits feel longer than in-process waits
anxiety makes waits seem longer
uncertain waits seem longer than known, finite waits
unexplained waits seem longer than explained waits
unfair waits feel longer than equitable waits
the more valuable the service, the longer the customer will wait
solo waits feel longer than group waits

27. Thanks