Managing demand and cpacity


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Managing demand and cpacity

  1. 1. Chapter 14 Managing Demand and Capacity <ul><li>The Underlying Issue: Lack of Inventory Capability </li></ul><ul><li>Understanding Capacity Constraints </li></ul><ul><li>Understanding Demand Patterns </li></ul><ul><li>Strategies for Matching Capacity and Demand </li></ul><ul><li>Yield Management </li></ul><ul><li>Waiting Line Strategies </li></ul>
  2. 2. Objectives for Chapter 14: Managing Demand and Capacity <ul><li>Explain the underlying issue for capacity-constrained services: lack of inventory capacity. </li></ul><ul><li>Present the implications of time, labor, equipment, and facilities constraints combined with variations in demand patterns. </li></ul><ul><li>Lay out strategies for matching supply and demand through (a) shifting demand to match capacity or (b) flexing capacity to meet demand. </li></ul><ul><li>Demonstrate the benefits and risks of yield management strategies. </li></ul><ul><li>Provide strategies for managing waiting lines. </li></ul>
  3. 3. Figure 14.1 Variations in Demand Relative to Capacity
  4. 4. Understanding Capacity Constraints and Demand Patterns <ul><li>Time, labor, equipment, and facilities </li></ul><ul><li>Optimal versus maximal use of capacity </li></ul><ul><li>Charting demand patterns </li></ul><ul><li>Predictable cycles </li></ul><ul><li>Random demand fluctuations </li></ul><ul><li>Demand patterns by market segment </li></ul>Capacity Constraints Demand Patterns
  5. 5. Table 14.1 Demand vs. Supply
  6. 6. Table 14.2 Constraints on Capacity
  7. 7. Figure 14.3 Strategies for Shifting Demand to Match Capacity <ul><li>Use signage to communicate busy days and times. </li></ul><ul><li>Offer incentives to customers for usage during non-peak times. </li></ul><ul><li>Take care of loyal or “regular” customers first. </li></ul><ul><li>Advertise peak usage times and benefits of non-peak use. </li></ul><ul><li>Charge full price for the service--no discounts. </li></ul><ul><li>Use sales and advertising to increase business from current market segments. </li></ul><ul><li>Modify the service offering to appeal to new market segments. </li></ul><ul><li>Offer discounts or price reductions. </li></ul><ul><li>Modify hours of operation. </li></ul><ul><li>Bring the service to the customer. </li></ul>Demand Too High Demand Too Low Shift Demand
  8. 8. Figure 14.4 Strategies for Flexing Capacity to Match Demand <ul><li>Stretch time, labor, facilities and equipment. </li></ul><ul><li>Cross-train employees. </li></ul><ul><li>Hire part-time employees. </li></ul><ul><li>Request overtime work from employees. </li></ul><ul><li>Rent or share facilities. </li></ul><ul><li>Rent or share equipment. </li></ul><ul><li>Subcontract or outsource activities. </li></ul><ul><li>Outsource. </li></ul><ul><li>Perform maintenance, renovations. </li></ul><ul><li>Schedule vacations. </li></ul><ul><li>Schedule employee training. </li></ul><ul><li>Lay off employees. </li></ul>Demand Too High Demand Too Low Flex Capacity
  9. 9. Waiting Issues <ul><li>unoccupied time feels longer </li></ul><ul><li>preprocess waits feel longer </li></ul><ul><li>anxiety makes waits seem longer </li></ul><ul><li>uncertain waits seem longer than finite waits </li></ul><ul><li>unexplained waits seem longer </li></ul><ul><li>unfair waits feel longer </li></ul><ul><li>longer waits are more acceptable for “valuable” services </li></ul><ul><li>solo waits feel longer </li></ul>
  10. 10. Waiting Strategies <ul><li>Employ operational logic to reduce wait </li></ul><ul><li>Establish a reservation process </li></ul><ul><li>Differentiate waiting customers </li></ul><ul><li>Make waiting fun, or at least tolerable </li></ul>
  11. 11. Figure 14.5 Waiting Line Strategies
  12. 12. Figure 14.6 Waiting Line Configurations
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