Copyright Atomic Dog Publishing, 2004 Chapter Eleven Managing Supply, Demand, and Productivity.

Copyright Atomic Dog Publishing, 2004

Chapter Eleven

Managing Supply, Demand, and Productivity


Managing Supply and Demand

• Firm capacity

• Optimal capacity

• Perishability nature of services

• No buffer for services from demand

• Demand volatile

• Optimal, maximum demand for professional and business services


Matching Supply and Demand

• Determine demand pattern

• Assess causes of demand variations

• Develop methods for managing supply

• Develop methods for managing demand


Managing Supply

• Part-time employees

• Employees work overtime

• Peak-time operating procedures

• Cross-training of employees

• Increase customer participation

• Shared facilities

• Outsourcing


Part-Time Employees

• Reduce costs

• Increase capacity

• Less training

• Lower performance

• Lower productivity

• Poor attitude

• Less knowledgeable

• Less personalization

• Higher turnover

Benefits Concerns


Employees Work Overtime

• Employees knowledgeable

• Employees know customers

• Cost effective for some services

• Increase capacity

• Lower service quality due to fatigue

• Higher costs

Benefits Concerns


Peak-Time Operating Procedures

• Keep operations at capacity

• Identifying peak routines

• Lack of personal attention

• Incomplete job

• Crowded facility

• Feeling of being cheated

Benefits Concerns


Cross-Training of Employees

• Keep operation at capacity

• Reduce bottlenecks

• Fill-in for absent employees

• Lower service quality

• Lower productivity

Benefits Concerns


Increased Customer Participation

• Increase productivity

• Maximize capacity

• Reduce costs

• Customers lack expertise

• Conflict of scripts

• Lower service quality

• Sometimes decrease productivity—if customer is too slow

Benefits Concerns


Shared Facilities or Equipment

• Reduce capital investment costs

• Maximize facility utilization

• Efficient scheduling

• Access to facility or equipment

• Customer confusion

Benefits Concerns


Outsourcing

• Expand capacity

• Expand supply

• Level of service quality

• Stealing of customers

• Conflicts as to who was hired

Benefits Concerns


Managing Demand

• Shift demand from high to low demand periods

• Decrease demand during peak demand periods

• Stimulate demand during low demand periods


Shifting Demand

• Business is not lost

• Service quality is not adversely affected

• Increased efficiency

• Customers may not want to shift

• Customers may not have control over the way they use the service

Advantages Disadvantages


Reducing Demand

• Service quality is normally improved


• Lost revenue

• Not a good strategy for firms in the for-profit sector



Stimulating Demand


• Increased income

• Increased utilization of facility

• May not be profitable

• May cause some current customers to shift usage



Tools for Managing Demand

• Reservation system

• Differential pricing

• Communication


Enhancing Productivity

• Quality of workforce

• Capital equipment

• Automating tasks

• Customer/service interaction

• Customer contact and support functions

• Self-service options

• Outsourcing


Changing the Service Process

• Develop customer trust

• Understand customer habits

• Pretest innovation

• Teach customers

• Promote benefits

• Stimulate trial usage

• Monitor performance

Copyright Atomic Dog Publishing, 2004 Chapter Eleven Managing Supply, Demand, and Productivity.

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