Understanding Gap 3: Failure to match demand and supply in services
Identifying challenges and strategies for managing capacity constrained services.
Definition: Discrepancy between service standards set by an organization and the actual performance delivered by employees.
Relationships: The interplay between customer demand and the capacity of service providers
Issues: Lack of inventory capability leads to challenges in matching demand with service availability.
Types of Constraints:
Time: Critical for time-selling organizations (e.g. consulting)
Labour: Important in labour-intensive service sectors
Equipment: Services highly reliant on specialized equipment (e.g. airfreight)
Facilities: Common constraints in hotels, restaurants, schools, etc.
Understanding and recording demand patterns:
Predictable Cycles: Daily, weekly, yearly trends
Random Fluctuations: Unpredictable variables affecting demand (e.g. weather)
Market Segment Patterns: Analyzing customer transactions for insights
When demand and capacity cannot be matched:
Establish a reservation process to manage customer flow
Differentiate waiting customers based on urgency and other factors
Strategies:
Use time occupation tactics: occupied waits feel shorter
Mitigate anxiety and uncertainty during waits
Manage perception of fairness and equity in waiting times
Recognize customer value correlation with waiting time
Service organizations cannot inventory their services, making capacity planning crucial.
Two strategic approaches: demand management strategies and capacity management strategies.