Summary Lecture 8 Notes

Key Focus

• Understanding Gap 3: Failure to match demand and supply in services

• Identifying challenges and strategies for managing capacity constrained services.

Provider Gap 3: Delivery Gap

• Definition: Discrepancy between service standards set by an organization and the actual performance delivered by employees.

Key Concepts

Demand and Capacity

• 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.

Capacity Constraints

• 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.

Strategies for Matching Capacity and Demand

• 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

Operational Strategies

• When demand and capacity cannot be matched:

  • Establish a reservation process to manage customer flow

  • Differentiate waiting customers based on urgency and other factors

Enhancing the Waiting Experience

• 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

Summary

• Service organizations cannot inventory their services, making capacity planning crucial.

• Two strategic approaches: demand management strategies and capacity management strategies.