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McGraw-Hill © 2000 The McGraw-Hill Companies 1 S M S M McGraw-Hill © 2000 The McGraw-Hill Companies Chapter 14 MANAGING DEMAND AND CAPACITY
McGraw-Hill © 2000 The McGraw-Hill Companies 2 S M Objectives for Chapter 14: Managing Demand and Capacity Explain: the underlying issue for capacity-constrained services the implications of capacity constraints the implications of different types of demand patterns on matching supply and demand Lay out strategies for matching supply and demand through: shifting demand to match capacity or flexing capacity to meet demand Demonstrate the benefits and risks of yield management strategies Provide strategies for managing waiting lines
McGraw-Hill © 2000 The McGraw-Hill Companies 3 S M Understanding Capacity Constraints and Demand Patterns Understanding Capacity Constraints and Demand Patterns Time, labor, equipment and facilities Optimal versus maximal use of capacity Charting demand patterns Predictable cycles Random demand fluctuations Demand patterns by market segment Capacity Constraints Demand Patterns
McGraw-Hill © 2000 The McGraw-Hill Companies 4 S M Figure 14-3 Strategies for Shifting Demand to Match Capacity Figure 14-3 Strategies for Shifting Demand to Match Capacity Use signage to communicate busy days and times Offer incentives to customers for usage during non-peak times Take care of loyal or regular customers first Advertise peak usage times and benefits of non-peak use Charge full price for the service--no discounts Use sales and advertising to increase business from current market segments Modify the service offering to appeal to new market segments Offer discounts or price reductions Modify hours of operation Bring the service to the customer Demand Too HighDemand Too Low Shift Demand
McGraw-Hill © 2000 The McGraw-Hill Companies 5 S M Figure 14-4 Strategies for Flexing Capacity to Match Demand Stretch time, labor, facilities and equipment Cross-train employees Hire part-time employees Request overtime work from employees Rent or share facilities Rent or share equipment Subcontract or outsource activities Perform maintenance renovations Schedule vacations Schedule employee training Lay off employees Demand Too HighDemand Too Low Flex Capacity
McGraw-Hill © 2000 The McGraw-Hill Companies 6 S M Table 14-1 What is the Nature of Demand Relative to Supply? Source: Christopher H. Lovelock, Classifying Services to Gain Strategic Marketing Insights, Journal of Marketing, 47, 3 (Summer 1983): 17.
McGraw-Hill © 2000 The McGraw-Hill Companies 7 S M Table 14-2 What is the Constraint on Capacity?
McGraw-Hill © 2000 The McGraw-Hill Companies 8 S M Waiting Line Issues and Strategies unoccupied time feels longer preprocess waits feel longer anxiety makes waits seem longer uncertain waits seem longer than finite waits unexplained waits seem longer unfair waits feel longer longer waits are more acceptable for valuable services solo waits feel longer
McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved Chapter 14 Managing Demand and Capacity The Underlying Issue: Lack of Inventory.
Managing Demand and Capacity
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MANAGING DEMAND AND CAPACITY Chapter 15. Objectives Explain the underlying issue for capacity-constrained services: lack of inventory capability Present.
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15-1 MANAGING DEMAND AND CAPACITY Variations in Demand Relative to Capacity.
15-1 Managing Demand and Capacity The Underlying Issue: Lack of Inventory Capability Capacity Constraints Demand Patterns Strategies for Matching.
Managing Capacity and Demand. Airlines miss out on revenue if the seats are not filled. The railways lose money if trains have empty seats. Similarly,
MANAGING DEMAND AND CAPACITY. Capacity is usually constant whereas demand usually fluctuates. Fluctuations could be due to various reasons, predictable.
Service and Relationship Marketing Module:3 Chapter 9- Managing Capacity and Demand.
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CHAPTER 9 Balancing Demand Against Productive Capacity
Slide © by Lovelock, Wirtz and Chew 2009 Essentials of Services MarketingChapter 1 - Page 1 CHAPTER 9 Balancing D emand Against P roductive Capacity.
Balancing Demand and Capacity
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Copyright 2009 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Sales and Operations Planning Operations Management - 6 th Edition.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter Chapter 9: Balancing Demand and Productive Capacity.
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