Summary Lecture 8 Notes

Key Focus Areas

• Addressing Gap 3: Failure to match demand and supply

• Challenges and strategies for matching demand and supply in capacity-constrained services.

Understanding Provider Gap 3

• Defined as the discrepancy between developed customer-driven service standards and the actual performance by company employees.

• Important for ensuring the service meets designed expectations.

Demand and Capacity Issues

• Services have unique challenges compared to goods due to the inability to inventory services.

• Variations in demand can significantly impact how organizations manage capacity.

Capacity Constraints

• Types of Capacity Constraints:

  • Time: Critical for organizations that sell time, such as professional services.

  • Labour: Constraints from labor-intensive service models.

  • Equipment: Services that rely heavily on specific equipment can face significant capacity limitations (e.g., airfreight).

  • Facilities: Common constraints in services like hospitals, restaurants, schools, etc.

Strategies for Matching Capacity and Demand

• Demand Patterns:

  • Understanding demand through analyzing data over time helps predict behavior.

  • Types of demand patterns include predictable cycles (daily, weekly) and random fluctuations influenced by external factors (e.g., weather).

• Operational Strategies:

  • Develop a reservation process.

  • Differentiate waiting customers based on importance, urgency, service duration, or premium payment options.

Enhancing Customer Experience During Waits

• Different methods to improve wait times:

  • Keep customers engaged to reduce perceived wait time.

  • Provide explanations for waits to mitigate anxiety.

  • Aim for equitable treatment of customers to enhance satisfaction.

  • Understand factors influencing wait perception (solo vs. group waits, value of service).

Summary and Takeaways

• Service organizations must effectively utilize capacity planning due to their inability to inventory products.

• Employ both demand and capacity strategies for optimization.