Managing demand and capacity, Waiting line strategies integrated.

1. 1
Managing demand and capacity
Waiting line strategies integrated
Services Marketing
Course Instructor: Sneha Sharma (PhD*, MBA, Dip T & D)

2. Fundamental Issue:
Lack of Inventory Capability
• Lack of inventory
Perishability
(cannot store up)
Simultaneous product
and consumption
(cannot be transported
from one place to
another)
Services can not be
transported from on
place to another

3. Lack of Inventory Capability
Excess Demand
TIME CYCLE 1 TIME CYCLE 2
Maximum Available
Capacity
Optimum Capacity
(Demand and Supply
Well Balanced)
Low Utilization
(May Send Bad Signals)
Demand exceeds capacity
(business is lost)
Demand exceeds optimum capacity
(quality declines)
Excess capacity
(wasted resources)
CAPACITY UTILIZED
Ideal Use

4. Types of Fluctuation
• From Excess demand to excess capacity
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Excess demand
Demand exceeds
optimum
capacity
Optimum
capacity
Excess capacity

5. From Excess Demand To Excess
Capacity

6. What is the Nature of Demand
Relative to Supply?
Extent of demand fluctuations over time
Extent to which
supply is
constrained
Wide Narrow
Peak demand can
usually be met
without a major
delay
1
Electricity
Natural gas
Telephone
Hospital maternity unit
Police and fire
emergencies
2
Insurance
Legal services
Banking
Laundry and dry cleaning
Peak demand
regularly exceeds
capacity
4
Accounting and tax
preparation
Passenger transportation
Hotels and motels
Restaurants
Theaters
3
Services similar to those in
2 but which have
insufficient capacity for
their base level of business

7. Understanding Capacity Constraints
Time
• Lawyer
• Consultant
• Counselor
Labor
• Law Firm
• University
• Repair and
Maintenance
Equipment
• Delivery
services
• Health club
Facilities
• Hotels
• Restaurants
• Hospitals
• Airlines
• Schools
• Theaters
• Churches

8. Optimal versus Maximal Use of
capacity
Optimal Capacity
• Resources are fully employed but not overused
• Customers are receiving quality service in timely manner
Maximal Capacity
• Absolute limit of service availability
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9. Understanding Demand Patterns
• Chart the level of demand over relevant periods
• Daily, weekly, monthly demand levels should be
followed
Charting demand
patterns
• Look out for daily, weekly, monthly or yearly variation
• Understand the underlying causes for predictive cyclesPredictable cycles
• E.g. Health industry fluctuations
Random demand
fluctuations
• Detailed records of customer transactions may be able
to disaggregate demand by market segment
Demand patterns
by market segment
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10. Strategies for Matching Capacity
and Demand
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11. Shifting Demand to Match
Capacity
• Change the nature of service offering
based on season
Vary the Service
Offering
• Letting customer know the peak
demands and use service at alternative
times
Communicate with
customers
• Renting facilities like schools/theatreModify Timing and
Location of service
delivery
• Understand customer price
sensitiveness
Differentiate on
price
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12. Flexing Capacity to Meet
Demand
• Stretch Time
• Stretch Labor
• Stretch Facilities
• Stretch Equipment
Stretch Existing
capacity
• Use Part-time Employees
• Outsourcing
• Rent or Share Facilities or equipment
• Schedule downtime during Periods of low
demands
• Cross train employees
• Modify or move facilities and equipment
Align capacity
with demand
fluctuations
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13. Waiting Line Strategies
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14. Why Do Waiting Lines Occur?
Number of arrivals exceeds capacity of system
Queues are basically a symptom of unresolved
capacity management problems
Not all queues take form of a physical waiting line in
a single location

15. Saving Customers from
Burdensome Waits
Add extra capacity so that demand can be met at most times
Rethink design of queuing system to give priority to certain
customers or transactions
Redesign processes to shorten transaction time
Manage customer behavior and perceptions of wait
Install a reservation system

16. Elements of a Queuing System
Customer
Population
Arrival
process
Balking
Queue
Configuration
Reneging
Customer
Selection
Policies
Service
Process

17. Elements of a Queuing System
Customer Population
• From which
demand for
services originate.
Arrival Process
• The rate at which
customers arrive
over time- relative
to capacity of the
serving process-and
the extent to which
they arrive
individually or in
clusters will
determine whether
or not a queue
starts to form.
Balking
• Decision by an
arriving customer
not to join queue.

18. Alternative Queuing Configurations
Single line, single server, single stage
Single line, single servers, sequential stages
Parallel lines to multiple servers
Designated lines to designated servers
Single line to multiple servers (“snake”)
“Take a number” (single or multiple servers)
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30 25
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19. Elements of a Queuing System
Reneging
• Decision by a
customer
already in the
queue who
has yet not
been served,
to leave the
line rather
than wait
Service Process
• Physical
design
• Role of
customers and
service
personnel
Customer
Selection Police
• Procedure for
customer
selection
during queue

20. Criteria for Allocating Different Market
Segments to Designated Queues
• Emergency or Non EmergencyUrgency of job
• Number of items to transact
• Complexity of task
Duration of service
transaction
• First class versus economy
Payment of
premium price
• Frequent users/ high volume purchasers
versus others
Importance of
customer

21. Minimize Perceptions
of Waiting Time

22. Ten Propositions on Psychology of
Waiting Lines
Unoccupied time
feels longer than
occupied time
Pre- and post-
process waits feel
longer than in-
process waits
Anxiety makes
waits seem
longer
Uncertain waits
are longer than
known, finite
waits
Unexplained
waits are longer
than explained
waits
Unfair waits are
longer than
equitable waiting
People will wait
longer for more
valuable services
Waiting alone
feels longer than
waiting in groups
Physically
uncomfortable
waits feel longer
Waits seem
longer to new or
occasional users

23. Creating An
Effective Reservation
System

24. Characteristics of Well-Designed
Reservations System
Fast and user-friendly for customers and staff
Answers customer questions
Offers options for self service (e.g., the Web)
Accommodates preferences (e.g., room with view)
Deflects demand from unavailable first choices to alternative times and
locations
Includes strategies for no-shows and overbooking
• Requiring deposits to discourage no-shows
• Canceling unpaid bookings after designated time
• Compensating victims of over-booking

25. Setting Hotel Room Sales Targets by
Segment and Time Period
Out of commission for renovation
Loyalty Program
Members
Transient guests
Weekend
package
Groups and conventions
Airline contracts
100%
50%
Week 7
(Low Season)
MNights: TuTime W Th F S Su
Loyalty Program Members
Transient guests
W/E
package
Groups (no conventions)
Airline contracts
Week 36
(High Season)
M Tu W Th F S Su
Capacity
(% rooms)

26. Information Needed for Demand and
Capacity Management Strategies
Historical data on demand level and composition, noting responses to
marketing variables
Demand forecasts by segment under specified conditions
Segment-by-segment data
Fixed and variable cost data, profitability of incremental sales
Meaningful location-by-location demand variations
Customer attitudes toward queuing
Customer opinions of quality at different levels of capacity utilization