Balancing Between Demand and Capacity
- 2. CONTENTS CAPACITY OPTIMUM AND MAXIMUM USE OF CAPACITY CAPACITY CONSTRAINTS THE UPS AND DOWNS FROM EXCESS DEMAND TO EXCESS CAPACITY MEASURING AND MANAGING CAPACITY STRETCHING AND SHRINKING LEVEL OF CAPACITY CHASING DEMAND CREATING FLEXIBLE CAPACITY DEMAND UNDERSTANDING DEMAND PATTERNS ANALYZING DEMAND BY MARKET SEGMENT MULTIPLE INFLUENCES ON DEMAND STRATEGIES FOR MANAGING DEMAND
- 3. CAPACITY It is the upper limit or ceiling on the load that an operating unit can handle Capacity can be in terms of: •Equipment •Space •Employee skills
- 4. OPTIMUM AND MAXIMUM USE OF CAPACITY • Optimal usage : ensures that all resources are being used productively to deliver the desired quality,while maximal use may require resouces to be strained to serve more customers that can be served ath the desired level of quality.
- 6. • In service business we should make optimal use of capacity instead of making maximum use of capacity. • So service businesses must understand and codify the optimum capacity of its human resources and other physical facilities inorder to be consistently delivering the promised level of service quality
- 7. CAPACITY CONSTRAINTS • Service capacity is fixed for many firms • Depending on the type of service,time and labour,equipment,facilities or a combination of these can be a constraint.
- 8. THE UPS AND DOWNS •Fluctuating demand •Unlike manufacturing service operations create a perishable inventory that cannot be stockpiled for sale at a later date. •That’s the problem for any capacity constrained serives that faces wide swings in demand. •How to match demand and productive capacity?
- 9. FROM EXCESS DEMAND TO EXCESS CAPACITY • At any given moment a fixed capacity service may face one of four conditions: Excess demand Demand exceeds optimum capacity Demand and supply are well balanced at the level of optimum capacity Excess capacity demand
- 11. MEASURING AND MANAGING CAPACITY • Many service organisations are capacity constrained.There is an upper limit to their capacity to serve additional customers at a particular point in time.They may be also constrained in terms of being unable to reduce their productive capacity during periods of low demand.
- 12. • In service context,productive capacity can take atleast five potential forms. 1. Physical facilities designed to contain customers 2. Physical facilities designed for storing or processing goods 3. Physical equipment used to process people,posessions or information 4. Labour 5. Access to sufficient capacity in the public or private infrastructure
- 13. STRETCHING AND SHRINKING THE LEVEL OF CAPACITY • Measures of capacity utilization include the number of hours that facilities,labour and equipment are productively employed in revenue operation and the percentage of available space that is actually utilized in revenue operations.
- 14. •Some capacity is elastic in its ability to absorb extra demand.
- 15. • Another strategy for stretching capacity within a given time frame to utilize the facilities for longer periods.
- 16. CHASING DEMAND • Schedule downtime during periods of low demand
- 17. • Use part-time employees • Rent or share extra facilities and equipment
- 18. • Cross-train employees • Developing complementary services
- 19. • Promoting off-peak time
- 20. CREATING FLEXIBLE CAPACITY • It means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another. • Sometimes the problem is not in the overall capacity but in the mix that's available to serve the needs of different market segments.
- 21. Demand Demand is an economic principle referring to a consumer’s desire and willingness to pay a price for a specific good or services.
- 22. UNDERSTANDING DEMAND PATTERNS • We can chart out the periodic and random demand fluctuations and try to understand their causes. • We can chart periodic demands hourly, daily, weekly, monthly or yearly. • Random demand fluctuations due to factors like the weather, natural calamities or at the time of emergency services.
- 23. • To control variations in demand for a particular service, managers need to determine the answers to a series of important questions about the patterns of demand and their underlying causes. • 1. Do demand levels follow a predictable cycle? • 2. What are the underlying causes of these cyclical variations? • 3. Do demand levels seem to change randomly?
- 24. ANALYZING DEMAND BY MARKET SEGMENT • Different customers have different demand patterns by day or by season. • Some users have little choice in timing of demand, others are flexible. • Some demand is undesirable and should be discouraged.
- 25. • For the market segmentation there are some categories which are analysed:- • 1. customer demographics
- 26. • 2. socioeconomic criteria • 3. brand loyalty and awareness • 4. extent of product use • 5. psychographics • 6. location
- 27. Discouraging Demand for Nonemergency Calls'
- 28. • Keeping good records of customer transactions helps when it comes to analyzing demand patterns by market segment. • Computer-based services can track customer consumption patterns by date and time of day automatically and enter them into a company's database.
- 29. • Some services, such as telephone and electrical, even have the ability to track subscriber consumption patterns by time of day. • Sometimes it is in a firm's best interest to discourage demand from certain types of customers—or at least to encourage these customers to use the services at nonpeak times. Some requests for service are inappropriate and make it difficult for the organization to respond to the legitimate needs of its target segments..
- 32. Price and Other User Outlays • Price is often the first variable companies use to bring demand and supply into balance, but changes in product, distribution strategy, and communication efforts can also play an important role.
- 34. Changing product elements • The manufacturer can either produce for inventory or try to sell skis in the spring and summer at a discount. If the skis are sufficiently discounted, some customers will buy early in order to save money. However, in the absence of skiing opportunities, no skiers would buy lift tickets for use on a midsummer day at any price.
- 36. Modifying the Place and Time of Delivery • The first strategy involves varying the times when the service is available to reflect changes in customer preference by day of week, by season, and so forth. • Theatres and cinema complexes, cafes and restaurants, retail shops, etc.
- 38. • A second strategy involves offering the service to customers at a new location. • Examples include home-delivered meals and catering services, and vans equipped with primary care medical facilities.
- 40. Promotion and Education • Communication efforts alone may be able to help smooth demand even if the other variables of the marketing mix remain unchanged. Signage, advertising, publicity, and sales messages can be used to educate customers about the timing of peak periods and encourage them to use the service at off- peak times when there will be fewer delays.