Chapter - 8

Managing Demand and Capacity

Objectives of the Session

To Understand: Concept of Demand Demand patterns Capacity Constraints Strategies to Match Demand and Capacity Creating a Demand Inventory Yield Management

Concept of Demand
Contraction and Recession Expansion or boom Technological developments Demographics Natural and other disasters

Demand patterns
Sketching demand patterns Foreseeable cycles Random demand variations Demand patterns by market segment

Capacity Constraints
Equipment Facilities

Labor Times
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Strategies to Match Demand and Capacity

Demand shift Varying the original service offer Communication with customers Altering the timing of service delivery Price differentiation

Strategies to Match Demand and Capacity

Adjusting Capacity to Meet Demand
Time Labor Facilities Equipment
Employ part-time or contract workers Outsourcing Share facilities or rent equipment Schedule downtime Cross-training employees Modify facilities or move equipment
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Creating a Demand Inventory

Queuing System

Reservation System

Urgency of service Spread Demand Duration of service Avoid Unequal transaction Demand Special clients Shifting Demand Paying premium prices

Creating a Demand Inventory

Psychological considerations in waiting
Unoccupied time seems longer than occupied time Pre-process waits seem longer Anxiety makes the waiting period seem longer Uncertain waits are longer than knows, finite waits Unexplained waits are longer than explained waits Unfair waits are longer than equitable waits The more valuable the service, the longer will people wait Solo waits feel longer than group waits Physical discomforts makes waiting feel longer Waiting seems to be longer for new or occasional users
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Yield Management
Yield management aims at earning the highest possible revenue in capacityconstrained services through service providers operations.

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Yield Management
Segment the market based on customer needs

Collecting information

Setting different prices for the same product or service

Communicate the pricing strategies with customers

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Yield Management
Application Areas of Yield Management
Perishable Products

Benefits of Yield Management

Shows Capability the Management

Limited Capacity
Customer Segmentation based on Time and Price

Helps in Determining Service Breakups in

Helps Fixing Prices Advance Selling Services Discounted Category

Helps in Managing Inventory

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Summary
Concept of Demand Demand patterns Capacity Constraints Strategies to Match Demand and Capacity Creating a Demand Inventory Yield Management

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Thank you
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