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  • 1. Chap. 14 – Coping with Fluctuating Demand for Services
    Services Demand Problem: Two circumstances
    Demand cycles – Services face fluctuating demand.
    Perishability – Services usually exist only for the time during which they are performed.
  • 2. Balance Capacity and Demand
    Successful service organizations must strike a balance between capacity and demand.
    There must be enough capacity to accommodate customers when demand is high, yet not so much that it goes to waste when demand is low.
  • 3. Variations in Demand Relative to Capacity
  • 4. The Nature of Service Demand
    Random fluctuation occurs without warning and is hard to accommodate.
    Severe Weather
    Predictable fluctuation occurs when customer demand follows a pattern that repeats itself over time.
  • 5. Predictable Fluctuation
    See Table 14.1
    Hotel: day of the week and calendar year (holidays, events)
    Restaurants: time of day, day of the week
    Movie Theaters: time of day, day of the week
  • 6. Predictable Fluctuation
    Sometimes it is nearly impossible to shift customer demand because of factors beyond the customers’ and organizations’ control.
    Business travelers in the U.S. most often conduct business between 8:00 am and 5:00 pm, Monday through Friday. Airlines and hotels that cater to businesspeople can do little to change their demand cycle.
    A service’s demand cycle can be more flexible in other cases: restaurants
  • 7. Service Capacity
    Most service organizations are capacity constrained
    Service capacity has three aspects:
    The physical facility in which the service is performed or rendered.
    The personnel whose labor and skill level create the service.
    The equipment that enables the service to occur.
  • 8. Capacity Constraints for Service Firms
    Physical facility: number of rooms in a hotel; number of seats on a flight.
    Personnel: number of people available to serve at a point in time: health clinic, car repair
    Services sell time; more time cannot be produced, nor saved in inventory: Lawyers, consultants, doctors, accountants
  • 9. Capacity Constraints for Service Firms
    Equipment: computer hardware and software; equipment at the health club.
    Unless equipment is used to capacity, revenue is severely affected.
  • 10. Chasing Demand
    Chase demand is stretching or shrinking the organization’s productive capacity to meet fluctuating demand;
    In other words, adjusting capacity to meet demand.
  • 11. Adjusting Capacity to Meet Demand
    Stretch Existing Capacity: people, facilities, and equipment are asked to work longer to meet demand:
    library hours during finals; standing room only
    Align Capacity with Demand Fluctuations: use part-time employees, outsource, rent or share facilities, etc.
  • 12. Smoothing Demand toFill Service Capacity
    Smoothing demand means shifting patronage to times when a service's productive capacity is underused and deflecting or discouraging patronage when it is oversubscribed.
  • 13. Smoothing Demand
    Increase Demand to Match Capacity
    Reduce prices during slow demand
    Vary How the Facility is Used: ski resorts in winter - executivetraining facility insummer
    Promotion: sales promotions: coupons, sweepstakes, contests, ads, to increase demand
  • 14. Smoothing Demand
    Reduce Demand during Peak Times
    Charge higher prices
    Communicate with customers to use service at other times
    Modify timing and location of service delivery: longer banking hours; online banking; restrict hours of operation
    Set priorities: emergency centers
  • 15. Inventory Demand
    Establish a Reservation Process: spread demand; reduce long waits
    Formal queuing system:
    First come, first served
    Accommodate most desirable customers first
  • 16. Maximum VersusOptimum Capacity
    Optimum capacity is the number of customers that can be effectively handled under ideal conditions
    Sometimes maximum capacity is not optimum capacity
    Creating demand greater than maximum capacity may result in negative experiences
    Maximum capacity does not always mean maximum profits
  • 17. Waiting Line Strategies: When Demand and Capacity Cannot be Matched
    Employ operational logic: analyze operational processes to remove any efficiencies
    Installing ticket vending machines in train stations to expedite the purchase of train tickets
  • 18. Queuing Configuration
    Queuing Configuration: refers to the number of queues, their locations, spatial requirement, and their effect on customer behavior
  • 19. Queuing Configuration
    Multiple Queue: customer must decide which queue to join and whether to switch later if the wait appears to be shorter in another line
  • 20. Queuing Configuration
    Single Queue: fairness of waiting time is ensured in that the first come, first-served rule applies to everyone; the system can also reduce the average time customers spend overall.
  • 21. Queuing Configuration
    Take-a-number option: arriving customers take a number to indicate line position
  • 22. Differentiate Waiting Customers
    Differentiate waiting customers: not all customers need to wait the same length of time for the service. EX: Express checkout lanes for customers purchasing 10 items or less
  • 23. Differentiate Waiting Customers
    Payment of a premium price: Customers who pay extra (eg, first-class on an airline) given priority via separate check-in lines or express systems.
    Urgency of the job: Those with the most urgent need may be served first.
    EX: emergency healthcare; air-conditioning service: priority for repair vs. routine maintenance.
  • 24. Differentiate Waiting Customers
    Duration of the service transaction: shorter service jobs get priority through “express lanes.”
    If service requires extra time, customer is referred to designated provider dealing with special cases.
  • 25. Make Waiting Pleasurable, or at Least Tolerable
    Make waiting fun, or at least tolerable: it is not the actual time waiting that impacts customer satisfaction - it is how customers feel about the wait and their perceptions of it.
    Unoccupied Time Feels Longer Than Occupied Time
    Give customers menus to look at while waiting in the restaurant; reading material in the dentist’s office; music over the phone
  • 26. Make Waiting Pleasurable, or at Least Tolerable
    Unoccupied Time Feels Longer Than Occupied Time
    Give customers menus to look at while waiting in the restaurant.
  • 27. Make Waiting Pleasurable, or at Least Tolerable
    Preprocess Waits Feel Longer Than In-Process Waits
    If wait time is occupied with activities that relate to the upcoming service, customers may perceive that the service has already started and they are no longer actually waiting.
    Filling out medical information while waiting to see a physician; watching a videotape of the upcoming service event can educate the customer and reduce the perception of waiting
  • 28. Make Waiting Pleasurable, or at Least Tolerable
    Uncertain Waits are Longer than Known, Finite Waits
    Anxiety is heightened when customers do not know how long they have to wait.
    Appointment Syndrome: customers who arrive early for an appointment will wait patiently until the scheduled time, even if they arrive very early. However once the expected appointment has passed, customers grow increasingly anxious.
  • 29. Make Waiting Pleasurable, or at Least Tolerable
    Unexplained Waits Are Longer Than Explained Waits
    When people understand the causes of waiting, they frequently have greater patience and are less anxious, particularly when the wait is justifiable
  • 30. Make Waiting Pleasurable, or at Least Tolerable
    Unfair Waits Are Longer Than Equitable Waits
    When customers perceive that they are waiting while others who arrived after them have already been served, the apparent wait will make the wait seem even longer.
    May occur when there is no apparent waiting in the waiting area and many customers are trying to be served.
  • 31. Make Waiting Pleasurable, or at Least Tolerable
    The More Valuable the Service, the Longer the Customer Will Wait
    15 minute wait: Lawyer vs. Convenience Store
    Full cart of groceries vs. Few items
    Expensive restaurant vs. Fast Food
    Solo Waits Feel Longer Than Group Waits
    People are more accepting of a longer wait in a group because of distractions provided by other members of the group.