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- 2. OUTLINE
- 3. CAPACITY DEMAND • Total No. of Seats in • Total No. of seats an Aircraft booked • No. of Tables in the • No. of tables dining hall occupied • No. of rooms in a • No. of rooms hotel occupied
- 4. MANAGING C D A E P M A A C N I D T Y
- 5. SERVICE CAPACITY 10 EXCESS CAPACITY 5 DEMAND 5 10 FOR EXCESS DEMAND FOR SERVICE SERVICE
- 6. DEMAND SUPPLY STRATEGIES STRATEGIES Partitioning Increasing demand customer Developing participation Sharing complementary capacity services Establishing Scheduling price Developing Cross- work shifts incentives reservation training systems employees Promoting Creating off-peak adjustable Using demand capacity part-time employees Yield management
- 7. 1- Segmenting Demand at a Health Clinic Smoothing Demand by Appointment Scheduling Day Walk-In Appointments Monday 60-70 84 Tuesday 55-65 89 Wednesday 25-30 124 Thursday 15-25 129 Friday 30-40 114
- 8. Smoothing Demand through segmenting 140 • 13.4 % increase in no. of patients; Before P e rc en t ag e o f av e ra g e d ai ly 130 smoothing 120 • 5% increase in time physician p h ys ic ia n v is it s 110 spent with patients because of 100 increased appointments; 90 After 80 smoothing • Average waiting time for patients 70 remained the same; 60 1 2 3 4 5 Day o f w e e k •Increased morale of physician
- 9. 2- Offering Price Incentives Demand can be segmented by offering price incentives: Price discrimination Price discrimination: Sale of output units at different prices. Objective: Maximization of profit (different customers are willing to pay different prices) by smoothing demand.
- 10. Hotel X with 50 rooms @ Rs.5000 per day. Peak Season - Rs. 5000* 50 = Rs. 2,50,000per day (Average) Off Season - Rs. 5000 * 10= Rs. 50,000 per day. - Rs. 3500* 35= Rs. 1,22,500 per day
- 11. 3- Promoting Off Peak Demand Seeking different sources of demand for creative use of “off-peak capacity” Use of hotel resort as retreat location for business or professional groups. Lower rates to encourage long distance dialing at night or on weekends, when switching equipments are underutilized.
- 12. Natural way to expand market and helpful in achieving uniform aggregate demand.
- 13. • Taking reservations presells the potential service. • And additional demand is deflected to other time slots at the same facility or to other facilities within the same organization. • Benefit consumers by reducing waiting and guaranteeing service availability.
- 14. Problem Measures • Customers may not take the • Nonrefundable tickets reserved service (“no-shows”) (airlines) • Service expires: Not storable • Cancellation deadlines, e.g., 6 • No turnover, but high fixed pm (hotel) costs for company • Overbooking of capacity E.g., hotel room stays empty without a guest, but employees are paid • Company needs to know some time in advance if reservation is cancelled: Empty seats otherwise
- 15. Problems Of Overbooking Strategies for overbooking • Customers with reservation • Minimization of must be turned away opportunity costs of empty capacity • Angry customers: Might • Minimization of costs of switch to competitor passengers with • Damaged image of reservation being turned company away • Costs of overbooking: • Training of employees Reimbursement of denied dealing with passengers customers being turned away
- 17. 1- Work shift Scheduling By scheduling work shifts carefully during the day/week, the profile of service supply can be made to approximate demand. An important staffing problem for many service organization facing cyclical demand, such as telephone companies, hospitals, banks, and police departments. Convert to Service Forecast Demand staffing Requirement Assign Service Schedule Shifts Personnel to Shifts
- 18. 2- Increasing Customer Participation For Faster & less-expensive Meals • Customer 2 • Clears table acts as a co- • Places order after meals. producer directly from limited menu 1 3 Capacity directly varies Requirement Saves cost of the with the demand. for lesser staff. service provider. Customer as co- producer provide labor, the moment required.
- 19. 3- Creating Adjustable Capacity
- 20. 4- Sharing Capacity A service delivery system often requires a large investment in equipment and facilities. During periods of underutilization, it may be possible to find other uses for this capacity. Example: Airlines Sharing Baggage handling equipments, ground staff etc on small airports.
- 21. 5- Using Part Time Employees when peaks of activities are persistent and predictable.
- 22. A new approach to revenue maximization. A comprehensive system incorporating all strategies relating to demand for & supply of services.
- 23. Service firms with following features: • Relatively fixed capacity. Ex: Airlines and hotels. • Ability to segment market into different service classes • Perishable inventory. Ex: revenue from an unsold seat is lost forever • Product sold in advance through reservations • Fluctuating demand
- 25. Queuing System Queue: Line of waiting customers who require service from one or more servers. A queue is formed when current demand exceeds the existing capacity to serve. Inevitability of Waiting
- 26. • 1- Customer perception must exceed customer expectation beacause a happy customer enables positive trickle-down effect. • 2- First impression influence the rest of the service expectation. Make waiting period pleasant experience.
- 27. • The Old Empty Feeling: Empty or unoccupied time feels awful. Service organization require to make waiting times productive as well as pleasurable. • A foot In The Door: Diversions fill time so that the waiting doesn’t seems long. Convey that the service has began & thus can tolerate longer waiting time.
- 28. • The Light At The End Of The Tunnel: Recognize anxieties (Did you get my order? Will I ever get served?) & develop strategies to alleviate them. Ex-telling customer how long will they need to wait..
- 29. • Excuse me, But I Was Next: Anxieties created when a customer sees a later arrival being served first. Resolved by Single queue or take a token number arrangement facility to ensure first come first serve policy..
- 30. For Awaited Economic cost of For firm, Awaited external waiting : two way employee customer perspective ( internal customer) Foregone alternative use Unproductive of that time Wages Boredom, anxiety & other So Make waiting productive or psychological profitable distresses
- 31. Renege Queue Departure Calling Queue discipline Service population configuration process Balk No future need for service
- 32. 1. Subpopulation ( Walk-in patients, patients with appointments and emergency patients) with different waiting expectations. 2. Homogeneous Groups
- 33. Arrival Process Arrival process Static Dynamic Random Random arrival Customer- Facility- exercised arrivals with rate varying controlled control constant rate with time Accept/Reject Price Appointments Reneging Balking
- 34. Classification of Queue Configuration Take a number Queue Single queue Configuration Multiple Queue
- 35. Queue discipline Static Dynamic (FCFS rule) selection Selection based based on status on individual of queue customer attributes Number of Processing time customers Round robin Priority Preemptive of customers waiting (SPT rule)
- 37. Capacity Planning • Decision involves a Combined Costs trade off between the cost of providing Cost of service a service( Cost determined by no. of servers on duty) and the cost or Cost of inconvenience of waiting customer waiting(measured in Capacity to serve terms of waiting time)
- 38. Queuing System Cost Tradeoff Let: Cw = Cost of one customer waiting in queue for an hour Lq = mean number of customers Cs = Hourly cost per server C = Number of servers Total Cost/hour = Hourly Service Cost + Hourly Customer Waiting Cost Total Cost/hour = Cs C + Cw Lq
- 39. • Using long range capacity as a preemptive strike where market is too small for two competitors (e.g. building a luxury hotel in a mid-sized city) • Lack of short-term capacity planning can generate customers for competition (e.g. restaurant staffing) • Capacity decisions balance costs of lost sales if capacity is inadequate against operating losses if demand does not reach expectations. • Strategy of building ahead of demand is often taken to avoid losing customers.
- 40. Queuing Model Standard Finite Infinite Queue Queue Exponential Exponential General Service Service Service Times Times Times Single Self Single Multiple Single Multiple Server Service Server server Server Server
- 41. • Excessive waiting lines by customer must result in some reneging and, thus, in some reduction of demand • Excessive waiting if known or observed by potential customers, will cause them to reconsider their need for service and, thus reduces demand; • Under the pressure of waiting lines, server may speed up; • Sustained pressure to hurry may result in eliminating time- consuming features and performing the bare minimum and, thus, service capacity is increased.
- 42. Reference • Capacity Planning: A Tactical Decision with Strategic Impact by Manager, Business Solutions, INSIGHT • Service Management, James A. Fitzsimmons & Mona J. Fitzsimmons • Google.com
Editor's Notes
- Wats Capacity?Wats Demand?Managing these two is what we are concerned about..
- Matching supply and demand in services by capacity management has a direct influence on the ability of the service delivery system to achieve service quality and resource productivity targets. Coping is necessary for all organizations at some time. if the capacity is not great enough to meet peak demand periods, customer demand will go unfilled. But capacity is a difficult concept to quantify. Demand is forever changing so as the capacity.
- Deciding upon what service capacity should be maintained to meet the service demand, is a herculine task but equally important. A service is produced and consumed simultaneously. Whenever demand for a service falls short of the capacity to serve, the results are idle servers and facilities. And when capacity to serve fall short of the demand, it results in waiting customers and sometimes unserved customers. Friends, our culture and habits contribute to these fluctuations to a great extent. For example, most of us eat our meals at the same hours and take our vacations in July and August, and studies of hospitals indicate low utilization in the summer and fall months. Busy banks on Monday & Saturday.. Examples which are more friendly with us..Payment of fee and taxes, on the last date. Even submitting forms for admission etc on the last date. These are the natural variations in service demand.
- Weekends & night rates for long distance calls.Off season hotel rates at resort locationLower prices for morning & matinee shows in movie theatre.
- Hotel chains with national reservation systems regularly book customers in nearby hotels owned by their chain when the customer's first choice is not available.
- Problems do arise, however, when customers fail to honor their reservations. These customers are referred to as no-shows.
- The objective of strategic capacity planning is to determine the appropriate level of service capacity by specifying the proper mix of facilities, equipments and labor that is required to meet anticipated demand.
- It is evident that various queuing model exists. This is digramatic representation of classification of queuing model.
- Queuing theory indicates that in the long run capacity to serve must exceed the demand. If this criterion is not met, one of the following adjustments must occur.