“MANAGING DEMAND & CAPACITY AND WAITING LINE STRATEGIES” Presented By: Anubhav (07) Vipasana(40)
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Transcript of “MANAGING DEMAND & CAPACITY AND WAITING LINE STRATEGIES” Presented By: Anubhav (07) Vipasana(40)
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““MANAGING DEMAND & CAPACITY MANAGING DEMAND & CAPACITY ANDAND
WAITING LINE STRATEGIES”WAITING LINE STRATEGIES”
Presented By:
Anubhav (07)
Vipasana(40)
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CONTENTSCONTENTS
Variation In Demand Relative to Variation In Demand Relative to DemandDemand
Combinations of Demand & SupplyCombinations of Demand & Supply Capacity constraintsCapacity constraints Demand PatternsDemand Patterns Shifting Demand to Match CapacityShifting Demand to Match Capacity Adjusting Capacity to Match DemandAdjusting Capacity to Match Demand Yield ManagementYield Management Implementing Yield Management Implementing Yield Management
SystemSystem Waiting Line StrategiesWaiting Line Strategies
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FACTORS LEADING TO FACTORS LEADING TO GAP3GAP3
SERVICE PROVIDER
CUSTOMER
GA
P 3
1.Organizations fail to smooth the peaks
and valleys of demand.2. Overuse of capacities3. Attract an inappropriate
customer mix in their effort to build4. Relying too much on
price on smoothing demand
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VARIATION IN DEMAND VARIATION IN DEMAND RELATIVE TO DEMANDRELATIVE TO DEMAND
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COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY
Excess demand:Excess demand: Supply:Supply: Greater than maximum supply. Issues: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
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COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY
Demand Exceeds Optimum Demand Exceeds Optimum Capacity:Capacity: Supply:Supply: Maximum supply Issues: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.
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COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY
Demand and Supply are Well Demand and Supply are Well Balanced:Balanced: Supply:Supply: Optimum supply. Issues:Issues: 1. Resources utilized at an
ideal rate.2. Productivity ideal3. Service quality delivered.4. No delays.5. Pleasant amount of crowding.
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COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY
Demand Less Than Optimum Supply:Demand Less Than Optimum Supply: Supply:Supply: Less than optimum supply. Issues: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.
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CAPACITY CONSTRAINTSCAPACITY CONSTRAINTS
Time Labor Equipment Facilities Optimal versus Maximum use
of capacity
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CONSTRAINTS ON CAPACITYCONSTRAINTS ON CAPACITYNature of
ConstraintsType of Service
Time LegalConsultingAccounting
Medical
Labor Law firmAccounting firmConsulting firm
Health Clinic
Equipment Delivery serviceTelecommunications
Network services
Facilities HotelsHospitalsAirlinesSchools
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DEMAND PATTERNSDEMAND PATTERNS
Charting of demand patterns Predictable cycles Random demand fluctuations Demand patterns by market
segment
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STRATEGIES FOR MATCHING STRATEGIES FOR MATCHING CAPACITY & DEMANDCAPACITY & DEMAND
Shifting demand to match capacity
Adjusting capacity to meet demand
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SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY
Demand too highDemand 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.
Demand too lowDemand 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.
SHIFT DEMAND
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SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY
Strategy: Strategy: Vary the service offering.
Tactics for high demand:Tactics for high demand: Modify service offering to help
facilitate extra demand. Reduce augmented service element.
Tactics for low demand:Tactics for low demand: Modify the service offering to appeal
to different market segment. Increase augmented service
elements- value add by developing complementary products.
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SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY
Strategy:Strategy: Modify timing & location of service delivery.
Tactics of high demand: Tactics of high demand: Get consumers to come to
service facility. Tactics for low demand:Tactics for low demand:
Bring the service to consumer.
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SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY
Strategy:Strategy: Differentiation on price.
Tactics of high demand:Tactics of high demand: Increase price to match
demand. Charge full rice.
Tactics for low demand:Tactics for low demand: Offer discount & price reduction.
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SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY
Strategy:Strategy: Communicate with customers.
Tactics for high demand: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:Tactics for low demand: Communicate the various promotional
schemes and emphasize on various benefits during slow periods.
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ADJUSTING CAPACITY TO ADJUSTING CAPACITY TO MATCH DEMANDMATCH DEMAND
Demand too highDemand 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.
Demand too Demand too lowlow
Perform maintenance, renovation.
Schedule vacations
Schedule employee training.
Lay off employees.
ADJUST CAPACITY
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ADJUSTING CAPACITY TO ADJUSTING CAPACITY TO MATCH DEMANDMATCH DEMAND
Stretch Existing Capacity: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.
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ADJUSTING CAPACITY TO ADJUSTING CAPACITY TO MATCH DEMANDMATCH DEMAND
Align Capacity with Demand Align Capacity with Demand Fluctuations: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.
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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
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IMPLEMENTING YIELD MANAGEMENT SYSTEM
1. Identification of a customer base using a segmentation process
2. Develop awareness among managers of changing customer needs & expectations
3. Estimating price elasticity of demand for each market segment
4. Make managers responsive to changing market conditions – demand seasonality/variations
5. Reliable demand forecasting methods and historical demand data
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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.
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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
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WAITING LINE CONFIGURATIONS
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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
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