Copyright Atomic Dog Publishing, 2004
Chapter Eleven
Managing Supply, Demand, and Productivity
Copyright Atomic Dog Publishing, 2004
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
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Matching Supply and Demand
• Determine demand pattern
• Assess causes of demand variations
• Develop methods for managing supply
• Develop methods for managing demand
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Managing Supply
• Part-time employees
• Employees work overtime
• Peak-time operating procedures
• Cross-training of employees
• Increase customer participation
• Shared facilities
• Outsourcing
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Part-Time Employees
• Reduce costs
• Increase capacity
• Less training
• Lower performance
• Lower productivity
• Poor attitude
• Less knowledgeable
• Less personalization
• Higher turnover
Benefits Concerns
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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
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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
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Cross-Training of Employees
• Keep operation at capacity
• Reduce bottlenecks
• Fill-in for absent employees
• Lower service quality
• Lower productivity
Benefits Concerns
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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
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Shared Facilities or Equipment
• Reduce capital investment costs
• Maximize facility utilization
• Efficient scheduling
• Access to facility or equipment
• Customer confusion
Benefits Concerns
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Outsourcing
• Expand capacity
• Expand supply
• Level of service quality
• Stealing of customers
• Conflicts as to who was hired
Benefits Concerns
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Managing Demand
• Shift demand from high to low demand periods
• Decrease demand during peak demand periods
• Stimulate demand during low demand periods
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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
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Reducing Demand
• Service quality is normally improved
• Increased efficiency
• Lost revenue
• Not a good strategy for firms in the for-profit sector
Advantages Disadvantages
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Stimulating Demand
• Increased efficiency
• Increased income
• Increased utilization of facility
• May not be profitable
• May cause some current customers to shift usage
Advantages Disadvantages
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Tools for Managing Demand
• Reservation system
• Differential pricing
• Communication
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Enhancing Productivity
• Quality of workforce
• Capital equipment
• Automating tasks
• Customer/service interaction
• Customer contact and support functions
• Self-service options
• Outsourcing
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Changing the Service Process
• Develop customer trust
• Understand customer habits
• Pretest innovation
• Teach customers
• Promote benefits
• Stimulate trial usage
• Monitor performance
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