special topics chap 13

excess demand

level of demand exceeds maximum capacity

as a result of maximum capacity,

some customers will be turned away, resulting in lost business opportunities; if customers do receieve service, quality will be lacking because of crowding staff

demand exceeds optimal capacity

no one is turned away, but quality may still suffer because of overuse, crowding, or staff being pushed beyond their abilities to deliver consistent quality

demand and supply are balanced at optimal capacity

staff and facility are occuppied at ideal use level, no one is overworked, facilities can be maintained, customers are receiving quality

excess capacity: demand is below optimal capacity

resources are underutilized resulting in lower profits

as a result of excess capacity,

some customers may receieve high-quality service, but if quality depends on the presence of other customers, customers may be dissappointed or worry that they have chosen an inferior service provider

four constraints on capacity

time, labor , equipment, facilities

strategies for shifting demand to match capacity

• reduce demandduring peak times

• increase demand to match capacity

reduce demand during peak times

• communicate busy days and times to customers

• charge full price

• set priorities

increase demand to match capacity

• educate customers about peak times and benefits of nonpeak times

• vary the service offering

• differentiate on price

increase capacity temporarily

• stretch people, facilities, and equipment temporarily

• use part-time employees

• cross-train employees

decrease capacity temporarily

• schedule vacations and employee hiring/training strategically

• schedule downtime during periods of low demand

yield management

also called revenue management, attempts to relocate the fixed capacity of a service provider to match the potnetial demand in various market segments so as to maximize tevenue or yield

yield formula

actual revenue/potential revenue

actual revenue

actual capacity multipled by average actual price

potential revenue

equal to total capacity multipled by maximum price

yield management is appropriate when service firms…

1. have relatively fixed capacity

2. have perishable inventory

3. sell the product in advance

4. have fluctuating demand

challenges and risks in using yield management

• loss of competitive focus

• customer alienation

• overbooking

• incompatible incentive and reward systems

waiting line strategies

employ operational logic, multiple queue, single queue, take a number

customer satisfaction is heavily dependent on?

the amount of time customers spend waiting for a service

how to differentiate waiting customers ?

• importance of customer

• urgency of the job

• duration of the service transaction

• payment of a premium price

multiple queues

customers line up in a queue at each individual counter and remain in the same queue

single queue

people follow a single large queue, leading up to a series of counters, with each customer moving to the nearest empty counter

take a number queue system

each counter is assigned a number and people are directed to their respective counters based on the number assigned to them