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Managing Demand & Capacity

its inevitability. modeling. consumer behavior linked with it • Using queuing model for service decisions .Objectives • Reasons for frequent imbalance between the demand and the supply • The means of demand measurement and forecasting • Short term measures to improve the supply situation • Using 4P’s to improve the supply • Queuing.

Services • • • • Inseparability of production and consumption Perishable nature of services Where capacity exceeds demand Where the capacity and demand are well balanced • Demand at a level higher than the optimum capacity • Demand far exceeds the service capacity .

investment in capacity is wasted. Might create a unfavorable impression . leads to dissatisfaction and loss of opportunity to add revenues • If demand is lower.Disparity between demand and supply • Queue formation if demand is higher.

Balance demand and supply • Prediction or forecasting of demand accurately • Ability to vary the service capacity in line with the demand pattern to keep the level of service at the desired level • Tempering the demand to keep it in line with the supply capacity. These can be achieved only if the forecast is accurate. .

Demand measurement • Use of historic data • Time series analysis – Long term or secular movement – Cyclical variations – Seasonal movements or seasonal variations – Irregular or random movements • Customer intentions surveys .

Respond to Changes in Demand • • • • Flexible capacity Adjusting the down time Flexible end use Coping through employee response – Employment of part time employees – Cross train employees • • • • Increase in capacity through customer participation Use of sub-contracting to increase capacity Sharing capacity Opening and closing hour changes .

Reshaping the demand • Use of reservations and appointments • Time based tariff or prices .

Queues • Avoidance of negative aspects of queues • Delivery of customer satisfaction despite the queues • Optimization of facilities for benefits to all concerned .

the longer the customer will wait • Solo wait feel longer than group wait .Behavioral aspects of Queues • • • • • • • Unoccupied time feels longer than the occupied time Pre-process wait feels longer than in-process wait Anxiety makes the wait seem longer Uncertain waits feel longer than known finite wait Unexplained waits are longer than explained waits Unfair waits are longer than equitable waits The more valuable the service.

Different types of Queues • Single line and single service facility queue • Multiple queues for same service facilities • Variation of multiple service facilities with a single queue .

Decision regarding the number of facilities to be offered • • • • • Queue length System length Waiting time in the queue Total time in the system Server idle time .