Services - Managing Demand and
Capacity
Issues
Lack of Inventory Capability
Capacity Constraints
Varying Demand Patterns
13-1
Strategies for Matching Capacity and Demand
 Yield Management: Balancing Capacity
Utilization, Pricing, Market Segmentation, and
Financial Return
 Waiting Line Strategies: When Demand and
Capacity Cannot Be Matched
13-2
Variations in Demand Relative to Capacity
13-3
Variations in Demand Relative to Capacity
 Excess demand: the level of demand exceeds max
capacity.
 Some customers will be turned away.
 For customers who do receive service, quality may be
lacking because of crowding or overtaxing of staff and
facilities
 Demand exceeds optimum capacity.
 Customer may not be turned away, but quality may still
suffer.
13-4
Variations in Demand Relative to Capacity
 Demand and supply are balanced at optimum
capacity.
 Staff and facilities are occupied at ideal level.
 No one is overworked, facilities can be maintained, customers
are receiving quality.
 Excess capacity: demand is below optimum.
 Resources are underutilized resulting in lower profits.
 Some customers may receive high quality service, but if
quality depends on the presence of other customers,
customers may be disappointed.
13-5
Strategies for Adjusting Demand to Match
Capacity
13-7
Strategies for Adjusting Capacity to Match
Demand
13-8
Waiting Line Strategies
 Employ operational logic to reduce wait
 How to configure the queue?
 Multiple Queue
 Single Queue
 Take a Number
13-10
Waiting Line Strategies
 Establish a reservation process
 Differentiate waiting customers
 Importance of the customer
 Urgency of the job
 Duration of the service transaction
 Payment of a premium price
 Make waiting more pleasurable
13-11
Issues to Consider in Making Waiting
More Pleasurable
 Unoccupied time feels longer than occupied time.
 Preprocess waits feel longer than in-process waits.
 Anxiety makes waits seem longer.
 Uncertain waits seem longer than known, finite waits.
 Unexplained waits seem longer than explained waits.
 Unfair waits feel longer than equitable waits.
 The more valuable the service, the longer the customer
will wait.
 Solo waits feel longer than group waits.
13-12