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BALANCING DEMANDAND PRODUCTIVE CAPACITY
CHAPTER 9
P V Bhanu Prakash Reddy
Rachana Vatsyayan
Ramesh Nair
Sadique Reza
Saurabh Pugalia
Sneha Nagar
GROUP 4
INTRODUCTIONBalancing demand and capacity is essential to create benefits for the customers as
well as improving financial returns for the business.
4 Conditions faced by Fixed Capacity Service:
FLUCTUATIONS IN DEMAND THREATEN SERVICE PRODUCTIVITY
Excess demand
Demand exceeds optimum capacity
Demand and supply are well balanced at the level of optimum capacity
Excess capacity
Demand exceeds
Demand exceeds capacity
VOLUME DEMANDED
CAPACITY UTILIZED
Maximum Available
Optimum Capacity
Low Utilization(may send bad signals)
(well balanced
(business is lost)
optimum capacity(quality declines)
Excess Capacity(wasted resources)
Capacity
demand and supply)
The resources or assets that a firm can employ to create goods and services.
Productive Capacity
Physical facilities to contain customers
Physical facilities to store or process goods
Physical equipment to process people, possessions, or information
Labor used for physical or mental work
Public/private infrastructure
Different forms of productive capacity are:
CAPACITY MANAGEMENT STRATEGIES
- offer inferior extra capacity at peaks- increase capacity- extend/cut hours of service
Stretch and Shrink
Adjust Capacity to match demand (Chase Demand) - schedule downtime in low demand periods- use part-time employees - rent or share extra facilities and equipment - invite customers to provide self-service
- creating an optimum mix to serve the needs of different
Creating flexible capacity
market segments
PATTERNS OF DEMAND
Predictable cycles of demand:
Day (varies by hour)
Week (varies by day)
Month (varies by day or by week)
Yearly (varies by month or by season or public holidays)
Other period
Employment
Billing or tax payments
Pay days
School hours/holidays
Seasonal Climate changes
Causes of cyclical variations
Natural cycles
Weather
Health problems
Accidents, fire, crime
Natural Disasters
Causes of Random changes in demand:
Different customers have different demand patterns by day or by season
Variation in the net profitability of each completed transaction
Dividing demand by market segment:
MANAGING DEMAND LEVELS
5 Basic approaches to managing Demand:
Take no action
Reduce demand
Increase demand
Inventory demand by reservation system
Inventory demand by formalized queuing
MARKETING STRATEGIES CAN RESHAPE SOME
Use price and other costs to manage demand
Change product elements
Modify the place and time of delivery
Promotion and education
DEMAND PATTERNS:
alternative queue configurations
Single Line/Single Server Parallel Lines to Multiple Servers
Single line/Single server at sequential stages
21
20
24
23
29
2526
3227
31
30
28
Designated lines to designated servers Single lines to multiple servers
“Take a Number” (single or multiple servers)
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