Transcript Managing Supply and Demand

12
Managing Capacity and
Demand
Chapter - 12
12-2
Learning Objectives
 Describe
the strategies for matching capacity and demand
for services.
 Recommend
an overbooking strategy.
 Use
Linear Programming to prepare a weekly workshift
schedule.
 Prepare
 Use
a work schedule for part-time employees.
yield management.
12-3
Strategies for Matching Supply and
Demand for Services, fig. 12.1
SUPPLY
STRATEGIES
DEMAND
STRATEGIES
Developing
complementary
services
Developing
reservation
systems
Partitioning
demand
Sharing
capacity
Establishing
price
incentives
Crosstraining
employees
Promoting
off-peak
demand
Using
part-time
employees
Yield
management
Increasing
customer
participation
Scheduling
work shifts
Creating
adjustable
capacity
12-4
Segmenting Demand
 Demand
often can be grouped into:
arrivals – ex. Weekday business travelers for airlines;
walk-in patients in health clinic
 planned arrivals – ex. Weekend pleasure travelers for airlines;
appointments for health clinic
 random
 Random
arrivals are not controllable, but planned arrivals
are controllable
 Using
data you can forecast for random arrivals on any
given day and any given time.
 Subtracting
these walk-in patients from daily (or hourly) physician
capacity gives the number of appointment patients needed each
day to smooth demand
12-5
Offering Price Incentives
 The
price incentives pushes the casual demand and helps in
smoothening the demand. For example:
 Weekend
and night rates for cell-phone plans
 Off-season
 Peak-load
hotel rates at resort locations
pricing by utility companies
12-6
Promoting off-peak demand
 Do
specials to attract demand during off-peak
 Use
of resort hotels to do off-season specials, like free breakfast
or tickets
12-7
Reservation System and Overbooking
reservations pre-sells the potential service – allowing
better planning.
 Taking
 Reservation
allows you to deflect additional demand to other time slots
at the same facility or other facility within the same organization –
example, Hotel chains
 Customer
benefits from reservation that they do not have to wait
in lines and are guaranteed service availability
 What

if customer decides not to honor their reservation?
Potential problem for the service provider
 Service
providers have started overbooking (that is, book more
than capacity) to overcome the problem of no-shows.
 What
if all customers show-up?
 Train
your frontline workers to handle overbooking problem graciously.
12-8
Strategies for Managing Capacity
 Daily
work-shift scheduling
 By
scheduling work-shifts appropriately, the service capacity can
be made available to meet demand
 We
forecast demand for every hour, which is used to create hourly
service staffing requirements
the service level you want to provide – for example, what
percentage of calls should be picked within 4 rings will decide the
number of operators to schedule.
 Decide
12-9
Increasing Customer participation
 Design
service in such a way that you can involve customers
in service delivery – example fast food places
 This
allows the capacity to vary along with the demand, that is,
customers not only increase demand but also increase capacity
 Incentive
should be built in for customers to participate as a
co-producer– example price break, faster check-out
 Problems

what if the customers gets hurt
 No
control on service quality provided by the customer, example
table may not be cleaned properly after eating
and spillage – in bulk stores the customer can use
dirty hands or can spill
 Contamination
12-10
Creating Adjustable Capacity
 By
design the capacity can be made variable
 In
Benihana restaurant, they can change the number of
tables depending on the number of chefs; because a chef is
assigned to a table
 Capacity
at peak periods can be increased and at off-peak
time the workers are used effectively to perform supportive
tasks and have higher level of preparedness
 Requires
 no
cross trained employees
union problems in job classifications
12-11
Other Strategies
 Sharing
capacity
 Airlines
cooperate in sharing same gates, ramps, baggagehandling equipment, and ground personnel
 Cross-trained
employees
 Creates
flexible capacity and also increases capacity, example
Hy-Vee where the workers stock at off-peak time unless called by
the manager to operate a register.
 Using
part-time employees
 They
can supplement regular employees
12-12
Yield Management
 Yield
management model attempts to allocate the fixed
capacity of seats on an aircraft to match the potential
demand in various market segments in the most profitable
manner.
12-13
Ideal Characteristics for Yield Management
 Relatively
Fixed Capacity – ex. Hotels and Airlines
to Segment Markets – airlines can discriminate
between time-sensitive business traveler and price-sensitive
customer
 Ability
 Perishable
Inventory – revenue for unsold seat is lost forever
Sold in Advance – reservations and booking ,
sometimes at discount price instead of the uncertainty of
selling at higher price later
 Product
Demand – you can give price discounts in slow
season to increase utilization; and increase price during high
season
 Fluctuating
 Low
Marginal Sales Cost and High Capacity Change Cost