Topic 4: Managing Capacity
Hospitality and Events Operations
Course Information
Course Code: BBAH4001
Institution: GLION, Institute of Higher Education
Learning Outcomes
**Define and Measure Capacity: **
Understand the definition of capacity.
Appreciate the factors influencing capacity.
Assess Difficulties:
Analyze challenges in matching capacity to demand.
Evaluate Strategies:
Apply strategies for aligning capacity with demand.
Analyze Constraints:
Assess the impact of various constraints on operations.
Case Study: Waitrose and the Delia Effect
Key Highlights:
Demonstrates unpredictability of demand and challenges of managing it.
Difficulty in matching demand to supply of goods/services while maintaining efficient operations.
Complexities in meeting customer shopping patterns versus supplier capabilities.
Forecasting Importance: Critical for timing supply accurately.
Necessity of careful planning and investment decisions to provide the right amount of goods at the right time.
Laws of Supply and Demand
Law of Supply: The higher the demand for a product, the more it will be produced by sellers.
Law of Demand: The higher the price of a product, the less of it will be wanted by buyers.
Capacity Considerations
Three Key Operational Considerations:
Capacity: Quantitable ability to produce.
How much can they produce?
Demand: Market requirements.
How much is required by the market?
Forecasting: Aligning production with market demand efficiently.
How to match requirements without resource wastage?
Capacity Definition
Definition: Capacity measures the rate at which an operation can transform inputs into outputs, concerned with quantity produced in a specific timeframe.
Examples of Capacity Measurement:
Air Transportation: Number of passengers per flight.
Healthcare: Number of patients seen in a surgery session.
Manufacturing: Number of mobile phones produced weekly.
Time Horizons in Capacity Planning
Time Horizons Overview:
Long-Range Planning: Design new processes, acquire long-lead-time equipment, facilities, or competitors.
Intermediate-Range Planning (Aggregate Planning): Adjust shifts, equipment, or staff to respond to medium-term needs.
Short-Range Planning (Scheduling): Schedule jobs and personnel, allocate machinery, adjust immediate operational needs.
Capacity Constraints
Definition of Capacity Constraints: Resources that limit throughput more than other operational components.
Key Principle: Capacity is constrained by the slowest component in the process.
Analogy: An operation runs at the pace of the slowest walker.
Solution to Improve Capacity: Identify and improve the restrictive part of the process by adding resources.
Types of Resources Creating Capacity Constraints
Staffing and Skills: Adequate training and personnel levels critical.
Technology: IT resources and facilities must meet operational needs.
Material Availability: Consistent access to materials is essential.
Product/Service Mix: Variety in offerings can impact capacity.
Storage: Adequate storage capacity is fundamental.
Access to Facilities: Scheduling and accessibility constraints must be managed.
Facility Size: Physical footprint impacts operation capabilities.
Measuring Capacity
Unit of Measurement: Can either be inputs or outputs but must remain consistent throughout analysis.
Importance of Managing Capacity in Event Organization
Key Reasons:
Ticket Sales: Influences revenue management and sales strategy.
Crowd Management: Essential for operational safety and customer experience.
Safety Considerations: Adherence to legal requirements and safety standards is crucial.
Resource Efficiency: Optimizes operational resources for maximum productivity.
Service Industry Capacity Calculation Example
Formula for Capacity:
Example Scenario:
Fitness Instructor Case:
70 minutes per client.
Workday: 8 hours with breaks (2 x 15 min and 1 x 30 min).
Effective hourly work: 7 hours (420 minutes).
Managing Demand for Hospitality & EventsScenarios:
When Demand Exceeds Capacity:
Options include limiting demand by increasing prices and extending lead times.
Long-term solutions entail increasing capacity.
When Capacity Exceeds Demand:
Stimulate market demand through product changes or promotions.
Seasonal Demand Adjustments:
Utilize products with complementary demand patterns to effectively manage variations.
Anticipating Demand Changes
Diagram Overview: External factors influencing demand:
Tastes changing.
Substitutes and complementary products/services.
Competitors' actions.
Changes in government policy.
Seasonality or cyclical products based on economic changes.
Complementary Demand Patterns
Integration of Products: Combining products that align seasonally helps maximize capacity utilization.
Increasing Capacity Considerations
Socioeconomic Factors Influencing Development:
Access to labor availability.
Competition levels affecting market entry.
Public policies impacting incentives and barriers (in line with Porter’s Five Forces).
Customer preferences for specific locations or amenities.
Porter’s Five Forces Analysis
Framework Overview:
Threat of New Entrants
Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry Among Existing Competitors
Tactics for Matching Capacity to Demand
Staffing Adjustments: Changes to accommodate demand.
Equipment Management: Decisions to purchase, sell, or lease machinery.
Process Improvement: Enhance processes to boost throughput.
Product Redesign: Tweak offerings to improve output flexibility.
Facility Management: Close unnecessary facilities during lower demand periods.
Forecasting in Capacity Management
Definition: The prediction of future demand crucial for capacity management and demand matching.
Importance: Helps control perishable resources effectively, aiding in revenue management strategies.