Capacity Management and Resource Utilization

By Dr. Nripendra Singh Agenda

Capacity Management

Jaypee Business School, Noida

Bottlenecks and Queues

Managing Coping Zone Case Studies

Capacity Management
Managers are required to anticipate the demand and allocate resources to provide satisfactory service in most cost-effective manner. But this is very delicate act, as both Underutilized and Overstretched resources can be disadvantageous. Underutilized: Idle resources, financial losses Customers are suspicious of services that appear to be not busy. Employees become demotivated Overstretched: Customer attention is reduced, due to rise in demand. Employee making more mistakes. Putting employees in unfamiliar jobs, increases their stress.

Service Capacity
Maximum level of activity that a service process can handle under normal conditions. We can measure capacity at the process level like No. of calls handled in one hour or one shift No. of meals served by a restaurant during lunch time. No. of repair calls made by a computer engg. during 8 hour day. Key words: Under normal operating conditions and Consistently.

Assessment of service capacity becomes difficult due to: Service product mix runner, repeater and stranger service processes eg. Normal call vs complex enquiry or complain call. Impact of location rural vs urban Extent of intangibility in service product eg. Knowledge workers like teachers or consultants. Ease of identification of resource constraints (bottlenecks) eg. Arvind eye hospitals OT management vs debugging a software problem. Three basic strategies to manage capacity: 1) Level Capacity 2) Chase Capacity 3) Demand Capacity All three strategies are generally used as a mix.

Level Capacity Strategy

Objective is to maximize utilization of expensive fixed resources like professionals, airlines, popular restaurants (to maintain exclusivity).

Issues: Resource utilization goals are frequently achieved at the expense of service quality Customer may receive inconsistent service levels Customer accepts poor level in case of valuable services like Doctors It may become vulnerable to competition due to complacency (eg. let patients wait or suffer).
Approaches: Promoting off-peak demand (combined with pricing ste.) eg. Happy Hours Queue management (physical queue) eg. Railway reservation center Booking systems (non-physical queue) eg. ICICI Bank Counter No. System

Chase Capacity Strategy

Adopted by High-volume Consumer Services like fast-food restaurants. Key objective is to maintain queue lengths, therefore staff as per demand. If queues are long customer will switch. Premises are not fully utilized: only 6 hours out of 24, when facilities are 100% utilized. Therefore challenge is to develop Volume flexibility. In fast-food restaurants case by developing staff roster to deal with variation in demand- core shift team, split shift team, and part-time workers. Thus, Volume Flexibility is managed by employing staff on flexible contracts. Examples Retailers like Big bazzar Insurance companies using call centres Theme parks (do not open all attractions on low demand) Peak Lopping technique used by call centers. Excess calls are automatically routed to the other parts of the organization. Making use of customers eg. Self service restaurants.

Demand Management Strategies

Pricing Strategy eg. Happy Hours Restricted Service at peak hours eg. Only lunch in the afternoon. Specialist Service Channels eg. Surgeries, Immunization and counseling schedules by doctors.

Advertising & Promotion eg. Video or book launch by authors and artists with autographs etc.

Operations Planning & Control

Sequencing and Allocation of Capacity (eg. Sports stadium)
FIFO eg. First come first served

eg. Reservation centre

LIFO eg. Truck load Most valuable customer first eg. Premium customer in banks Most critical first eg. Medical emergency Least work content first eg. Airlines check-in desk allows customer with hand baggage to move first. Most work content first eg. Used in daily / routine work.

Bottleneck Management or Theory of Constraint

Original flow
Proposal input (25/hr)

Risk analysis actuary (15/hr)

Inform customer of decision (30/hr)

Revised flow

Proposal input and credit score (22/hr)

Definite yes/no (50%)

Needs analysis (50%)

Risk analysis actuary (15/hr)

Inform customer of decision (30/hr)

Queue Management
1) Unoccupied time feels longer than occupied time 2) Pre-process waits feel longer than in-process waits 3) Anxiety makes the wait seem longer 4) Uncertain waits are longer than known, finite waits 5) Unexplained waits seem longer than explained waits 6) Unfair waits are longer than equitable waits 7) The more valuable the service, the longer customers will wait 8) Solo waiting feels longer than group waiting 9) Uncomfortable waits feel longer than comfortable waits 10)New or infrequent users feel they wait longer than frequent users.

Managing the Coping Zone

At this level of resource utilization things are just too busy staff becomes stressed and is less likely to give courteous response to customer, everything seems problematic, customer satisfaction reduces. This break point is usually reached before full or 100 percent utilization.
High Customer Perceived Qlty Coping Zone in a Night Club

Coping Zone

Low

Resource Utilization

80% 100%

Medi-Call Personal Alarm Systems Ltd

Issues of managing the coping zone in services. It is set in a small call centre dealing with a mixture of emergency and routine non-urgent calls. There is a link between capacity management and the motivation of service providers.
Think about the link between resource utilisation and perceptions of quality. It reflects the majority of customers, but by no means all customers. For example, some customers will prefer an empty restaurant a lot depends on their mood, on previous experience and expectations, and on the occasion. A key element here is that in order for a particular service delivery process to be in the coping zone less frequently will usually require end-to-end process coordination across a number of functions.

Questions 1. When does Medi-calls call centre enter the coping zone? What is the likely impact of this overload on customers and staff? 2. What strategies do you recommend that Medi-call adopts in busy periods? What actions would you need to implement them effectively? 3. Do you agree with Medi-calls philosophy on reassurance calls? What do you recommend? What are the most effective approaches for managing the coping zone? Or What aspects of quality of service to your customers suffer when you get too busy? What can you do to manage this to make things better for customers (and employees) in the busy period? How can you avoid being in the coping zone as much?

Medi-calls coping zone

Medi-Call load profile
600

500

Administration time Capacity

Load (minutes)

400

300

Time on phones

200

100 00.00 01.00 02.00 03.00 04.00 05.00 06.00 07.00 08.00 09.00 10.00 11.00 12.00

Thank You!
Discussions: Select four service organisations and suggest how they might measure capacity and the problems in so doing. What capacity strategies might be used by an insurance broker, an internet retailer, and cruise ship company? Explain why they are appropriate. Describe the last time you were in a queue. Apply the principles of queuing to assess the waiting experience. What is meant by the coping zone? What are the implications for staff and customers of a supermarket when the supermarket enters this zone?