LESSON 7: BALANCING DEMAND AND PRODUCTIVE CAPACITY FOR QUALITY SERVICE

INTRODUCTION
To better understand the dynamics of balancing demand and capacity, it will
facilitate learning if we recall the basic definition or at least have a grasp of the
concept of demand, capacity, and productivity. In the study of basic economics, we
learned that demand represents the amount of need of certain products or goods for
the consumption of individuals or markets. Parallel to this, in the tourism and
hospitality industry, demand is the volume of services required by clients or
customers at any certain period of time. In the service industry, demand implies the
quality of services that are required from the firms. These may include passenger
seats in the airlines, tables for restaurants, rooms for hotels, or attendants from spas.
Although the previous examples talked about tangible materials, the actual demand
speaks about the provision of service to attend to the needs of the customers. Airline
seats refer to transporting passenger to a destination, tables refer to dining space for
hungry customer, rooms for the accommodations during the stay, and attendants
refer to a therapy that will be accorded to clients.
This chapter discusses the concept of demand, capacity, and the challenges of
matching demand and supply in the service industry. Service performance gap
occurs when an organization fails to manage demand, over utilizes its capacities,
caters to wrong customer mix, or becomes price-dependent. Most service
organizations consider the effective use of capacity as key success factor. The aim
is to utilize employees, equipment, and facilities as productively as possible.

LESSON PROPER

Service organizations must consider the different factors that affect demand and
capacity. These factors may result in conditions that post challenges to managers in
maintaining the productive operation of the company. Most service organizations are
faced with the predicament of having fixed capacity and unpredictable demand.
Unfortunately, as discussed by Zeithaml, Bitner, and Gremler in their book. Services
Marketing 7th edition (2017), at any given moment, a service organization may face
any of the following conditions:
a. Excess in demand. The demand for services for surpasses the maximum
available capacity. The situation often leads to denying services to excess
customer and losing the opportunity to gain profit.
b. Demand exceed optimum capacity. Quality of experience in this situation is
deteriorating. Customers can still be accommodated, but the place already
feels crowded. There is dissatisfaction of the services rendered.
c. Balanced demand and supply at optimum capacity. This condition reflects
the ideal situation for both the organization and the customers. The facility is
 in full capacity but is not strained; employees are busy but not overworked.
The customers receive on time and no delays.
Managing Demand
Managing demand has always been one of the primary considerations of service
organizations to maximize productivity. In order to manage fluctuating demand in a
service business, it is a must to understand the nature of demand, including demand
patterns, reasons of fluctuation, and the market segments that create demand at any
given point in time.
a. Predictable Cycles. These refer to the periodic increase and decrease of
demand levels at specific time which may transpire at different intervals; daily
(may happen by hour); weekly (may happen by day); monthly (may happen by
day or week): and /or yearly (may happen based on month or seasons). In case
where predictable cycles are detected, the reason they occur should be
identified.
b. Random Demand Fluctuations. Contrary to the first condition, sometimes,
demand appear to be random. There is no predictable cycle that could be
derived. Even so, the cause of demand can still be identified. A good example
is the weather condition of an area. The number of parkgoers increases if the
weather is good and declines if the sky is not clear of rain showers. Other
random and unpredictable conditions that may affect demand include: health-
related incidents (floods, fires, and hurricanes); or even acts of war and
terrorism.
c. Demand Pattern by Market Segment. A service organization that has thorough
knowledge about its customers may be able to come up with a strategy in order
to cater more appropriately to its customers. With the analysis of the profile of
an organization’s customer, it may be able to identify patterns of demand
whether it is predictable or random. The organization would then be able to
design a service specific to the market segment.
Managers should be aware that applying an effective demand planning process
may contribute to a reduction in the level of disruptions caused by operational risks
(Swerczek, 2019).
Upon learning about the patterns of demand among the different market
segments, an organization can focus to demand management activities. There are
several basic approaches to management of demand:
a. Take no action and leave demand to find its own levels.
b. Reduce demand during peak periods.
c. Increase demand during low periods.
d. Inventory demand using a queuing systems.
e. Inventory demand using a reservation system
These approaches are options that guide an organization to improve its
strategies to maximize profitability. Customers may react positively or
adversely depending on how well an organization manages to implement
these approaches. Naturally, customers react based on the convenience it
 brings to them. The first approach, take no action, looks very simple but may
be a hotbed or trouble among many service-oriented organizations. Ultimately,
customers may learn from experience or from word of mouth when they should
stand in line to use a service and when it will be available without delay. With
the presence of competitors, customers may also be able to find other service
organizations that are more responsive.
Molding Demand Pattern through Marketing Mix Elements.
Organizations often approach management of demand based on what fits their
style and resources. The freedom to choose and the diversity of choices to demand
management has led organizations to be creative and resourceful. Many
organizations utilize the element of marketing mix as tools to manage demand since
it directly affects the customers. Organizations can easily influence their clients to
adjust accordingly by using different elements of the marketing mix.

Price

Promotio Marketin
Product
n g Mix

Place

Figure 7.1 Elements of Marketing Mix

1. Use Price and Nonmonetary Costs to Manage Demand. The use of pricing is
one of the most utilized way of balancing supply and demand. Changes in
price has an immediate and direct effect on the decision-making process of
customers. Pricing strategy is stronger when the services are price-sensitive.
Changes in price may influence the decision of customers to either delay or
advance the timing of their purchase. Nonmonetary costs involve customer
decisions as to choosing convenience and preferences in availing services.
Some customers would choose to dine in a restaurant at times when they do
not need to wait and to avoid crowded conditions.
2. Changes Product Elements. There are service organizations that offer
products that even any amount of price discounts would translate to having
business. In order to encourage customer demand, a new service product
needs to be introduced. The objective is to encourage the same set of
customers, to find new other market segments, or to cater to both. An
example is a swimming resort that offers water and other sports activities
during summer may offer to cater to teambuilding clients and customers or
may offer function areas for variety of events.
3. Modify Place and Time of Delivery. For services that are continuously offered
at specified time and place, service organizations can capitalize to market
needs by adjusting the time and place to delivery.
 a. Vary the times when the service is available. Services maybe adjusted on
schedules where market segments can most likely avail of the services.
Professionalism may only have time to move around after office or during
their rest days. Shopping hours of malls may be extended to cater to
different types of office workers. Business process outsourcing (BPO)
employees may require services beyond the usual day time hours.
b. Offer the service to customers at a new locations. Visibility is the key to the
success of some business. However, not all service organizations can locate
at strategic areas most of the time due to financial and logistics concern.
Service organizations can choose to be mobile and locate at different places
at different times. Or added service features can be offered to customers to
generate business during lean times. For example, clothes for laundry may
be picked up and delivered by the laundry shop before and after washing.

4. Promotion and education. Organizations can always use the multimedia to

inform its clients about its operations, innovations, and changes through advertising,
publicity, or sales promotion. A strong communication effort may help in managing
demand even if the other elements of the marketing mix are constant.

Managing Capacity

Figure 7.2 Factors Affecting Capacity

Among many organizations across different industries, service capacity is fixed.
Fixed capacity can be due to different factors depending on the type of service that
an organization provides. These factors may include time, labour, equipment,
facilities, or a combination of these.
Among several service organizations, the primary constraint on service
production is time. If the period of work of an employee is not used productively
because of some reasons, the profits are lost. On in case these is a high level of
demand at a certain period of time, an additional time cannot be created in order to
satisfy the demand.
For service organizations that employ a number if employee, labor can be the
primary capacity constraint. In cases that demand fluctuates and, for some reason,
persists for some time, then the service organization will be very concerned with idle
labor and extra costs. Some other cases consider equipment as a critical constraints.
Service organizations that are dependent on their machineries as their limitations. If
an airline company can only maintain a few small aircrafts, then the capacity of those
carriers defines the capacity limit of the organization.
Many other organizations are limited by the facilities that they can provide.
Service organizations like hotels can only sell a certain number of rooms; spas are
limited to the number of bath areas; and restaurants are restricted to the number of
table and seats available.
To maximize the understanding the concepts of capacity, it is imperative to
learn the different between optimal and maximum use of capacity. These terms
pertain to different situations. Optimal capacity would mean that the resources of a
service organization are fully utilized but not overused. And more importantly,
customers still receive quality and prompt service. Maximum capacity, on the other
hand, refers to conditions where the total limit of service is fully utilized. The
maximum us of capacity may result in excessive waiting by customers, leading to
customer dissatisfactions.
Human factor capacity, which includes people’s time or labor, is more flexible
and harder to specify as compared to facilities and equipment. In cases where a
service provider’s capacity has been exceeded, it would most likely result in
diminished service quality, customer dissatisfaction, and employee burnout and
turnover.
Stretching Capacity Levels
Capacity levels of some service organizations can be considered as elastic
when it comes to accommodating more demands. For example, bars can offer seats
for around 50 people and allow standing room for 30 with enough space for all.
However. During special holiday occasions, may be around 100 people can squeeze
in and mix with partygoers.
Likewise, other capacities may be stretched. Employees and staff can be
asked to perform at high intensity during peak times. Although, because of human
factor, the efficiency of their performance will only be as good until they get tired,
which may result in poor service. The capacity of some facilities can be extended
when these are used for longer periods. Cinemas or theaters that are screening from
11 am to midnight may add more screening hours to accommodate more customers.
Moreover, the average amount of time customers spend in the service
process may be reduced. Diners in a restaurant will have a faster turnover if the
services provided to them are faster. Seating of customers can be done immediately
as soon as the table previously used by other customers are quickly buzzed out; the
menu is made available; and the bill is promptly presented after the meal. Slack time
in the delivery of service should be minimized.
Aligning Demand and Capacity
Service organizations must have a clear understanding of the limits of their
capacity and the patterns of demand they face in order to come up with strategies to
match the available supply with the demand. Matching capacity and demand may be
accomplished through the following strategies: level the fluctuations of demand by
modifying demand t match the existing capacity or adjust according to demand
fluctuations.
Strategies in Modifying Demand to Match Existing Capacity
This general strategy aims to reduce excess customers beyond the capacity
of the organization during peak times and to influence them to use the service during
off-peak times instead. Service organizations will be able to maximize productivity if
they can move customers during slow periods or even attract new customers at this
time. This strategy may not be possible for other customers whose needs cannot be
adjusted. For example, executives and business people may not be able to move
their flight schedules, hotel bookings, and other reservations at a later or an earlier
time. Customers belonging to this category will be considered as lost opportunities.
The following methods can be considered when trying to match the demand with the
existing capacity:
a. Communicate with Customers. Service organizations can create and maintain
communication with customers to inform them of the peak periods and to
sway them to use the service at other times for them to avoid crowding,
delays, and long waiting time
b. Modify timing and Location of Service Delivery. Organizations may choose to
adjust their operation time to cater to market segment to disperse crowding.
Other locale in strategic areas or offer online transactions to accommodate
customers whenever and wherever they are. Families usually go out and relax
during weekends, hence, cinemas can increase the number theaters showing
family-oriented movies. Bus and rail cards may be purchased at convenience
stores other than their usual ticketing booths.
c. Offer incentives for off-peaks usage. Special discounts, promo packages, or
freebies may be offered to customers who will use the services during off-
peak periods.
d. Set priorities. Service organizations may choose to prioritize frequent and
loyal customers during peak times. This somehow guarantees a continued
patronage to your organization. Organization may also choose to serve
customers that need immediate attentions or require greater considerations.
Airlines would allow the elderly, minors, or differently abled to board the plane
before others.
e. Charge full price. Service organizations may opt to charge the full amount to
customers during peak periods and not allow the use of discount cards or
coupon. Hotels may not be able to honor gift certificates during the holiday
season because they are fully booked.

Strategies in Adjusting Capacity to Meet Demand

The objective of this second strategy is to adjust the capacity of a service
organization in order to match supply and demand. Shifting capacity involves
expanding the organization’s ability to meet customer needs during peak periods and
minimizing capacity during downtime to minimize costs or wasting of resources. The
following are some of the schemes that can be considered and adopted:
1. Increase Capacity temporarily. Most of the time, capacities can be temporarily
expanded to meet the demand. Expanding capacities need not equate to
inducing new resources, but instead, employees or staff, facilities, and
equipment will be programmed or required to work for longer and harder to
sustain demand.
a. Extend People, Facilities, and Equipment Temporarily. For
instance that there is a strong level of demand, services may be
extended temporarily. Malls extended their mall hours two weeks
before Christmas day to accommodate the Christmas rush
shoppers. It may be possible to extend the hours of service
temporarily to accommodate demand.
b. Use part-Time employees. Service organizations usually call out
additional workforce from their on-call list of staff to supplement
labor during the peak of the demand. Caterers and shopping
centers hire part-time employees during the holiday season to cope
with the demand for events, functions, and holiday rush.
c. Cross-train Employees. Employees may be trained with multiple
skills in order to make them perform tasks where they are most
needed. This would also address work issues where staff are
underutilized in certain departments while others are overworked.
d. Outsource Activities. Service organizations that are experiencing
temporary peak in demand for internal service operations, such as
information technology, finance, or human resources, may just
choose to outsource the service instead of hiring and training new
employees for a temporary positions.
e. Rent or Share Facilities and Equipment. During the temporary
peak periods, organizations may decide to rent equipment and
facilities instead of procuring new ones.

2. Adjust use of resources. Also known as “chase demand” strategy, it aims to

modify service resources to go after the demand curve in order to match
capacity with demand patterns. Still, the focus would be on people, facilities,
and equipment in relation to adjusting the basic mix and use of these
resources.
a. Schedule Downtime during periods of Low Demand. Operations
may be downgraded during off-peak periods to provide opportunity
for people, equipment, and facilities to recover and not waste
resources.
b. Perform Maintenance and Renovations. Repair maintenance
work, and renovations may be done during low demand periods.
 c. Schedule Vacations and Employee Training Strategically. To
ensure that the employees are at their best whenever they are
asked to perform, they need to be properly rested and trained.
Vacation leaves and trainings may be schedules during off-peak
times. In this way, operations will not be greatly affected and the
staff are already in tip-top shape during peak season.
d. Modify or Move facilities and Equipment. Adjustments to
facilities and equipment during slow demand period should be done
similar to adjustment being made during peak season. In this way,
the organization need not put too much strain to its equipment and
facilities, hastening their deterioration.
e. Encourage Customers to Perform Self-Service. Limited
capacities can be reduced when customers learn to perform tasks
without having employees attend to them most of the time. Self-
service facilities and technologies may augment the labor force in
providing services to customers.
f. Ask Customers to Share. Customers can be given options to
share the services they are availing of. Transport network vehicles
may offer “ride sharing” schemes to people who are going on the
same directions for a reduced rate or fee.
g. Create flexible Capacity. Organizations sometimes design their
services to cater to specific segments of the market. Organizations
may design facilities can be easily modified in order to cater to
broader type of market. Restaurant tables may be specifically
designed for pairs, families, or groups; it could be an issue if the
customers of a restaurant are in groups but the only tables that are
free are for pairs. Organizations may be able to design tables that
could cater to pair, to fours when combined, and to groups when
combined further, and vice versa.

Increase Demand to Match Capacity

There are approaches in matching capacity and demand that are focused on
increasing demand during conditions where demand for service is low. The following
may be considered with the aforementioned situation:
a. Educate Customers. During periods of low demand, organization may inform
customers about the availability of their services. Further advertising and
promo materials may encourage and inform customer of the advantage when
availing of their services at this time.
b. Convert how the facility is used. Some organizations may opt to offer their
facilities to be used for different purposes, depending on the season of the
year. Dormitories occupied by student studying in Baguio city during school
time may be offered as transient house for visitors during vacation time or
Holy week.
c. Modify the service offering. Service organization may modify the process of
how they deliver their services to increase demand. Spa and massage parlors
can offer home service for customers who do no want to leave their homes.
d. Differentiate on price. Most organizations offer discounted or promo packages
during slow seasons. Resorts and hotels in summer destinations offer
discounted fees for groups, families, or pairs who will book during the rainy
season.

Strategies in aligning capacities and demand abound. The organizations’ ability

to decide and choose the best for them is a key to keep them profitable.
Productive Service Capacity
The term productive capacity denoted resources or assets that organizations
utilize to manufacture goods and to render services. For service-oriented
organizations, productive capacity can be in the form of equipment, facilities,
infrastructure, and labor. This is also known as capacity management.
Equipment is an important element of capacity since it is used during the
process of rendering services. Equipment are vital components in the delivery of
services among organizations. These equipment facilitate the process in order to
provide the best and most immediate services to customers. This may take the
form of small tools to a very complex machine used to process or aide in the
course of delivering service.
Facilities are resources that pertain to handling of customers and provisions to
store or process of goods and services. They usually pertain to the buildings,
structures, or premises where customers avail of the products. They also refer to
areas where storing and processing of goods sold to customers are located.
Infrastructure refers to public and private structures essential to deliver quality
service to customers. It may include structures such as roadways, bridges, ports,
terminals. And other public utilities.
Labor refers to human elements that manipulate the process and deliver the
goods and services required by the customers.
Yield management
Yield management is also known as revenue management. Organizations use
this method to find the best combination among price, customer, and capacity
used. The objective of yield management is to produce the best possible return
form a limited available capacity. Particularly, it tries to allocate the fixed capacity
of a firm to match the potential demand in various market segments in order to
maximize revenue or yield. In a mathematical presentation, yield management is:
Actual Revenue
Yield = --------------------------------
Potential Revenue

Where:
 Actual Revenue =Actual Capacity Used X Average Actual Price
Potential Revenue =Total Capacity X Maximum Price
Yield is basically a measure of the extent to which an organization’s resources
(time, labor, equipment, or facilities) are achieving their full (revenue-generating)
potential.
Yield management may seem to be the best tool to match demand and supply,
but it has its share of risks, which are the following:

a. Loss of competitive focus. Organization that are so focused on profit

maximization may carelessly forget the facets of service that provide long-
term competitive success.
b. Customer alienation. Multiple price structures may create confusion and
dissent among customers and may perceive it as unfair.
c. Overbooking. Disenfranchisement may be felt by customers who will be
affected by overbooking practices used by yield management systems.
d. Incompatible incentive and reward systems. Complains and resentment
may happen when employees feel like the incentive structures do not
match their efforts.
e. Inappropriate organization of the yield management function. Some
organizations may have difficulty complying with the requirements of the
yield management methods to operate effectively.

Waiting Lines and Queuing Systems

Waiting is a phenomenon that happens everywhere. Also known as queue, it

may happen whenever a system to process a transaction is exceeded by the number
of influx of dealings. Queue are manifestations of surplus of requirements over the
capacity to transact.

Mismatch of capacity management and demand often results in queuing, but

sometimes, it is not possible to manage capacity to precisely match demand, or vice
versa. There are conditions where precise matching of capacity and demand would
be too costly for an organization to maintain. Ships and planes cannot be available
anytime to ferry passengers to certain destinations. A schedule has to be made to
maximize productivity.
 Sometimes, even scheduled flights that have specific times to arrive and leave
may experience delays due to differences of length of time for service of other flights
in the same airport. There is queuing because other planes take longer to deplane
and take off.

Organizations may consider the following different strategies to deal with

queuing issues:

1. Audit the Operational Process. The organization should study the

operational process to pinpoint the possible causes of queuing. Any part
of the process may recognize or redesign to eliminate lines and facilitate
movement. Some service organizations may not be able to eradicate
lines; in this condition, concerned organizations may have to choose what
kind of queuing system to use; or if systems is already present, the
organization may decide on how to configure the queue. Queue
configuration is concerned with the design and effect of queue system
that will be placed. Specifically, it discusses the number of queue, the
locations, the space needed, and the impact on customers.
2. Institute a Reservation Process. An option for service organization to
avoid waiting lines in their facilities is to put in place a reservation system.
Using the reservation system would allow customers to choose any
available time they intend to arrive in the company. This would guarantee
that the customers will be accommodated once they arrive. Further, the
reservation system would be able to spread demand to less popular time
periods or slots. The downside of this system would be customers who
will be “no-shows” in their appointed time.
1. Differentiate Waiting Customers. Service organizations who have
waiting lines usually come up with policies to prioritize customers
based on needs or profiles. Customers need not wait the same length
of time to avail of the service. Some organizations differentiate among
customers to allow some customers to wait for a shorter amount of
time. The usual rule for choosing 4.
3. The nest customer to be served is through “first-come, first-served” basis.
There are other factors or rules that may apply depending on company
policy. The following are the other bases of the differentiating customers:
 a. Importance of the customer. Some organizations may have
frequent customers availing of the company service regularly, or
sometimes, customers who spend large amounts with the
organization (also referred to as preferred clients) can be given
priority in service by providing them with a special waiting area or
separate lines.
b. Urgency of the job. Customers who require pressing needs may be
served first. Often, this applies to institutions that provide for
medical needs or security concerns. In the regular day-to-day
transactions, priority is given to customers with essential issues
more than those require routine checks.
c. Duration of the service transaction. Services may be differentiated
on the basis of length of service required. If upon diagnosis it was
determined that it requires short service, then the customer may be
referred to “express lanes” for immediate disposal. Customers
requiring more attention and may take time to address the issue
will be endorsed to a service provider that caters to specialized
requirements.
d. Payment of a premium price. Some service organization have
special accommodations to customers who pay extra. Customers
in this category are often given priority, such as separate check-in
lines or express systems for airplane passengers, “fast pass” for
theme parkgoers, or VIP lounge for “preferred clients”
4. Make Waiting More Pleasurable. Customers who are waiting may still be
satisfied depending on how they will be attended to by the service
organization. It is not just the length of waiting time that has an impact to
customers, their experiences and conditions during the wait will also matter.
Reducing the waiting time of customer requires a multidimensional
approach. Increasing capacity is not always the best option among
conditions where service organizations need to balance customer
satisfaction vis-à-vis costs of operation. Service organizations may consider
other approaches, such as the following:
a. Revalidating the queuing system design (including configuration and wait
options);
b. Fitting the queuing system according to market segments (needs,
urgency, price, or importance of the customer);
c. Managing customers’ behavior and their perceptions of the wait (making
the waiting time more pleasurable);
d. Installing a reservations system (booking or appointments to distribute
demand); and
e. Redesigning service process to shorten transaction time (installing self-
service kiosks).
Different Types of Queues
Managers have a lot of choices for queuing system. The challenge is for them
to choose which best fit the requirement of their organization.
1. Single-line, sequential stages. In this system, customers pass through several
serving operations or segments, as in a buffet line. Bottlenecks may happen in
any segment where it would take longer to undertake than the previous
segment.
2. Parallel lines to multiple servers. This applies to establishments that cater to a
big number of people at any given time. The immigration section at the airport
utilizes this queuing system.
3. Single line to multiple servers. This is also known as a “snake”. In contrast to
“parallel lines to multiple servers” system, issues about line speed movements
are addressed. Check-in counters of airline companies within the airport
premises cater to departing passengers who are checking in their luggage.
4. Designated lines. This system segregates lines for different customers based
on specific categories. Immigration personnel designate lanes for diplomatic
passport holder, foreign passport holders, and residents, overseas Filipino
workers (OFW), or Association of Southeast Asian Nations (ASEAN)
countries.
5. Take a number. Upon entry to the establishment, customers are provided with
numbers from an automated counter. The customers are given the opportunity
to sit down, relax, or do something else while waiting for their numbers to be
called. This system caters to a significant volume of customers being attended
to by organizations. Telecommunication companies and other utility
companies use this system of queuing.
6. Waiting list. Food service establishments usually use this type of queuing
systems where customers are requested to provide their named along with
the size of their group. Customers wait until their names are called. There are
several designs of wait listing, which are the following:
a. Party size seating – Customers wait until a table that matches the number
of people in the company is available.
b. VIP seating –Favored customers are given priority slots and special rights.
c. Call-ahead seating –Customers call the restaurant before arrival to hold
seats for the customer.
d. Large party reservations –Customers that require a significant number of
seta and tables or a fraction of the guest area are compelled to make
arrangement prior to arrival.
Psychology of Waiting Time
The following are how people perceived waiting time at different conditions:
1. Unoccupied Time Feels Longer than Occupied Time. Customers that are doing
nothing while waiting will likely be bored and will observe the passage of time
more than when they are doing something.
2. Pre-process Waits Fell Longer than In-process waits. Customers tend to feel that
the waiting time seems shorter if they perceive that the service has started.
Customer tend to believe that service has started and they are not waiting
anymore if they see that there are activities related to the upcoming service.
3. Anxiety Makes Waits Seem Longer. When customers become anxious, they carry
with them negative impressions about what they are experiencing. Customers’
anxiety may be addressed if they are properly informed on the length of waiting
time.
4. Unexplained Waits are longer than Explained Waits. Customers who are aware of
the causes of waiting are usually more patient and less worried. Informed
customers may have an estimated idea on how long they have to wait.
5. Unfair Waits are longer than Equitable Waits. When customers think that they are
unfairly attended to because other customers who arrived after them have already
been serviced; it will heighten the impression that waiting seem longer. This
happens when there is no visible queuing system and customers are trying to be
served.
6. The More Valuable the Service, the Longer the Customer Will Wait. Customers
expecting premium services are more tolerant in terms of waiting.
7. Solo Waits Feel Longer than Group Waits. Customers who come in groups are
more tolerant to waiting because they can focus their attentions on their
companions while waiting. They may be oblivious of the time, especially if they are
into discussions of interesting topics.
8. Physically Uncomfortable Waits feel longer than Comfortable Waits. Waiting is
burdensome when customers are waiting in an uncomfortable situation. The
discomfort magnifies the feeling of being in line for a long time, offer discounted
fees for groups, families or pairs who will book during the rainy season.
Productive Service Capacity
The term productive capacity denotes resources or assets that organizations
utilize to manufacture goods and to render services. For service-oriented
organizations, productive capacity can be in the form of equipment, facilities,
infrastructure, and labor. This is also known as capacity management.
Equipment is an important element of capacity since it is used during the
process of rendering service. Equipment are vital components in the delivery of
services among organizations. These equipment facilitate the process in order to
provide the best and most immediate services to customers. This may take the form
of small tools to a very complex machine used to process or aide in the course of
delivering service.
 Facilities are resources that pertain to handling of customers and provisions to
store or process goods and services. They usually pertain to the buildings,
structures, or premises where customer avail of the products. They also refer to
areas where storing and processing of goods sold to customers are located.
Infrastructure refers to public and private structures essential to deliver quality
service to customers. It may include structure such as roadways, bridges, ports,
terminals, and other public utilities.
Labour refers to human elements that manipulate the process and deliver the
goods and services require by the customers.

Yield Management
Yield Management is also known as revenue management. Organizations use
this method to find the best combinations among price, customer, and capacity used.
The objective of yield management is to produce the best possible return from a
limited available capacity. Particularly, it tries to allocate the fixed capacity of a firm
to match the potential demand in various market segments in order to maximize
revenue or yield. In a mathematical presentation, yield management is:
Actual Revenue
Yield =
Potential Revenue