Service Management: Balancing Demand Against Productive Capacity
CHAPTER 9 BALANCING DEMAND AGAINST PRODUCTIVE CAPACITY
FLUCTUATING DEMAND • A major challenge for many types of capacity-constrained service organizations • Play havoc with efficient use of productive assets, thus eroding profitability • 2 basic approaches: (1) adjust the level of capacity to meet variations in demand (2)manage the level of demand using marketing strategies
➢ Services are perishable; ➢ Most acute among services are process people or physical possessions ➢ These services affects labor-intensive, information-processing, services that face cyclical shifts in demand ➢ Effective use of productive capacity is one of the secrets of success in such businesses ➢ The search for productivity must not be allowed to undermine service quality and degrade the customer experience
4 CONDITIONS IN A FIXED-CAPACITY SERVICE: 1. Excess Demand - Level of demand exceeds maximum available capacity - Customers are denied and business is lost 2. Demand Exceeds Optimum Capacity - Conditions are crowded - Customers are likely to perceive a deterioration in service quality and may feel dissatisfied 3. Demand and Supply are well-balanced at the level of optimum - Staff and facilities are busy without being overworked - Customers receive good service without delays 4. Excess Capacity - Demand is below optimum capacity; - Productive resources are underutilized - Low usage; customers may find the experience disappointing
• Organizations that engage in physical processes such as people or possession processing are more likely to face capacity constraints than those engage in information-based processes
Defining Productive Capacity: a) Physical facilities designed to contain customers- used for delivering people processing services or mental stimulus-processing services b) Physical facilities designed for storing or processing goods- either
FLUCTUATING DEMAND • A major challenge for many types of capacity-constrained service organizations • Play havoc with efficient use of productive assets, thus eroding profitability • 2 basic approaches: (1) adjust the level of capacity to meet variations in demand (2)manage the level of demand using marketing strategies
➢ Services are perishable; ➢ Most acute among services are process people or physical possessions ➢ These services affects labor-intensive, information-processing, services that face cyclical shifts in demand ➢ Effective use of productive capacity is one of the secrets of success in such businesses ➢ The search for productivity must not be allowed to undermine service quality and degrade the customer experience
4 CONDITIONS IN A FIXED-CAPACITY SERVICE: 1. Excess Demand - Level of demand exceeds maximum available capacity - Customers are denied and business is lost 2. Demand Exceeds Optimum Capacity - Conditions are crowded - Customers are likely to perceive a deterioration in service quality and may feel dissatisfied 3. Demand and Supply are well-balanced at the level of optimum - Staff and facilities are busy without being overworked - Customers receive good service without delays 4. Excess Capacity - Demand is below optimum capacity; - Productive resources are underutilized - Low usage; customers may find the experience disappointing
• Organizations that engage in physical processes such as people or possession processing are more likely to face capacity constraints than those engage in information-based processes
Defining Productive Capacity: a) Physical facilities designed to contain customers- used for delivering people processing services or mental stimulus-processing services b) Physical facilities designed for storing or processing goods- either