PRATIBHA SINGH(FB10095) AMANDEEP KAUR(FB10068) ASHISH VERMA TABREZ KHAN

CONSIDER THIS. A successful chain of stores vending a large of gifts, cards and novelties recently announced discounts up to 50% for customers, who would brave the summer noon and shop.

INTRODUCTION

CAPACITY FLEXIBILITY STRATEGIES

ROOT OF THE PROBLEM

TOPICS OF THE PRESENTATION

DEMANDFLEXIBILITY STRATEGIES PROBLEMS FROM CAPACITY SIDE PROBLEMS FROM DEMAND SIDE

INTRODUCTION
In any sector, to fulfill the demand, there should be a backup of capacity.

Sectors which are dealing with this issue are : Airlines, restaurants, beauty parlors
e.t.c.

Balance can be made on either side, but the fact lies in finding the root of the
problem and then applying the solution

DEMAND FOR SERVICES

ROOT OF THE PROBLEM FROM DEMANDS SIDE

DEMAND DISAGGREGATIO N

PREDICTABLE & UNPREDICTABL E DEMAND

DEMAND FOR SERVICES

FLUCTUATING NATURE OF DEMAND

PREDICTABLE & UNPREDICTABLE DEMANDS

I. PREDICTABLE DEMAND
i. ii. iii. iv. Demand varies in a predictable manner Shows a distinct predictable pattern in its move Exposes the firm to lesser risk Give chances to capitalize on high demand & loss minimizing strategies v. For e.g.: Banquet Halls(High demand during marriage & festive seasons) Public Transportation(High demand during morning & evening)

II. UNPREDICTABLE DEMAND

i. Demand varies in unpredictable manner ii. Situation is out of control of firm iii. For e.g.: Rumor of Bomb hoax, decreasing the demand of movies & theatres Natural calamity increasing the demand of hospital services

THE PROBLEM IS.

Due to these uncertainties in demand, four types of situations arises: Excess Capacity-Demand is below Optimum Capacity Excess Demand-the level of demand exceeds maximum available capacity Demand exceeds Optimum Capacity-the service is less than adequate Demand and Capacity are well balanced-this is the level of Optimum Capacity.

Variations in Demand Relative to Capacity

WHAT ARE THE CONSEQUENCES..

SUPPLY: Less than optimum level, DEMAND: Less than optimum levels
Customer Receives excellent individual services Full use of facilities No waiting Lack of customers could create negative image of the atmosphere Employee Resources(staff/facilities) under-utilized Business Productivity decreases Profitability suffers

CONSEQUENCES CONTD
2.SUPPLY: OPTIMUM SUPPLY, DEMAND: WELL-BALANCED
Customer
No delays Service quality delivered Pleasant amount of crowding

Employee
Utilization at an ideal rate

Business
Ideal productivity

3. SUPPLY: Maximum supply ; DEMAND: Higher than optimum levels

Customers Crowding Customers turned away Chance for competitors offerings

Employee Staffs & facilities overburdened Service Quality suffers

Business Lost business opportunities

4. SUPPLY: Maximum, DEMAND : Higher than optimum supply levels

Customers
Crowding Queuing & long waits All customers are serviced

Employees
Excess pressure on all staffs & facilities Service quality suffers

Business
Maximum profit

CONSTRAINTS IN CAPACITY OF SERVICE MARKETING

MAJOR CONSTRAINTS
TIME

FACILITIES

LABOUR

EQUIPMENT

Constraints on Capacity
Nature of the Constraint
Time

Type of Service
Legal Consulting Accounting Medical Law firm Accounting firm Consulting firm Health clinic Delivery services Telecommunication Network services Utilities Health club Hotels Restaurants Hospitals Airlines Schools Theaters Churches

Labor

Equipment

Facilities

THE BASIC PROBLEM: PERISHABILITY

Matching of Capacity and Demand is difficult in Service

Industries. Services cannot be inventoried, returned, or resold. Opportunity to sell services is quickly lost. Idle services during slow times represent revenue lost forever. This is Known as Perishability Factor .

EXAMPLES OF PERISHABILITY
0 A restaurant is serving food on a daily basis. One day

there is a strike. Can it serve the same food on the other day? 0 Sure. If it wants to go out of business!!!. But otherwise, the restaurant will have to serve fresh food because the previous food prepared would have perished. 0 services such as a doctors treatment, a hair dressers haircut, a movie or airline ticket etc cannot be saved for later use. They can be used only once else they perish. Thats perishability in services marketing.

FIXED CAPACITY
1..Capacity of the service remain fixed

Cont.
2..Intangible and uninventoriable

Cont.
3..Fixed resources like equipment and physical facilities

DEMAND DISAGGREGATION

High demand is not enough diagnostic value.

Aggregate data collection, doesnt gives proper insights about the sources of demand.

Needed because, demand type is not homogenous

Different customer groups require different treatments.

This understandin g can be used by marketer, in the case of high demand, in the selection of customers

STRATAGIES FOR MATCHING DEMAND AND CAPACITY

When an organizations has a clear grasp of its capacity constraints And an understanding of demand pattern through information's..

Historical data on demand level and composition

Demand forecasts by segment under specified conditions Meaningful location-by-location demand variations Customer attitudes toward queuing Customer opinions of quality at different levels of capacity utilization etc

then it is a good position to develop strategies for matching demand and capacity.

(A) Shifting demand to match capacity

With this strategy an organizations seeks to shift customers away from periods in which demand exceeds capacity, perhaps by convincing them to use the services during period of slow demand.

(A) Strategies for Shifting Demand to Match Capacity Demand Too High

Offer incentives to customers for usage during nonpeak times. Take care of loyal or regular customers first.
Shift Demand

Demand Too Low

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.

Advertise peak usage times and benefits of nonpeak use.

Charge full price for the serviceno discounts.

Approaches for Shifting Demand to Match Capacity

Vary the service offering

One approach is to change the nature of the service offering, depending upon on the season of the year, day of the week, or time of day. For example: Airlines even change the configuration of their planes seating to match the demand from different market segment.

Communicate with the customer

This approach for shifting demand is to communicate with customers, letting them know the times of peak demand so they can choose to use the service at alternative times and avoid crowding or delays.

Approaches for Shifting Demand to Match Capacity (contd.) Modify Timing and Location
This approach help the service firms to adjust their hours and days of service delivery to more directly reflect the customer demand.

Differentiate on Price
The common response during slow demand is to discount the price of the service.
For example, Business travelers are far less price sensitive than are families traveling for pleasure.

Approaches for Shifting Demand to Match Capacity (contd.) RESERVATION SYSTEM

Demand can be inventoried by the use of a reservation system. It helps to provide a very specific information about demand.

For example: A reservation system in the theatre permits to develop specific knowledge about the demand for various shows in a day and on different days in a week.
This information can be used to develop optimal solution.

(B)Strategies for adjusting capacity to Match Demand

The fundamental idea is to adjust, stretch, and align capacity to match customer demand rather then working on shifting demand to match capacity.

Strategies for adjusting capacity to Match Demand(contd.) Use part-time employees Request overtime work from employees. Rent or share extra facilities and equipment Ask customers to share and Invite to perform self-service Schedule downtime during periods of low demand

Strategies for adjusting capacity to Match Demand(contd.)

Cross-train employees

Stretch time, labor, facilities and equipments

1)Offer extra capacity at peaks (e.g., bus/train standees) 2)Vary seated space per customer 3) Extend/cut hours of service Subcontract or outsource activities.

Why Do Waiting Lines Occur ?

Because the number of arrivals at a facility exceeds capacity of system to process them at a specific point in the process Queues are basically a symptom of unresolved capacity management problems

PROBLEMS OF WAITING .?????????????

Waiting Is a Universal Phenomenon

An average person may spend up to 30 minutes/day waiting in lineequivalent to over a week per year! Almost nobody likes to wait It's boring, time-wasting, and sometimes physically uncomfortable

WHY WAITING LINE STRATEGIES.????

When capacity is not able to meet the rising demands

To make waiting fun , or at least tolerable When waiting become unavoidable. Wait occurs, due to variability in length of time of services. Consider this, even if patients are scheduled by appointments in a clinic, there is a wait because, some patients take longer to get served than the allotted time.

Ways of Saving Customers from Burdensome Waits

Add extra capacity so that demand can be met at most times

Rethink design of queuing system to give priority to certain customers or transactions

Redesign processes to shorten transaction time

Manage customer behavior and perceptions of wait

Install a reservations system

Issues to Consider in Making Waiting More Tolerable

Unoccupied time feels longer than

occupied time
Anxiety makes waits seem longer

Uncertain waits seem longer than known,

finite waits
Solo waits feel longer than group waits

Wait times (cont.)

Unexplained waits seem longer than explained waits Unfair waits feel longer than equitable waits The more valuable the service, the longer the customer

will wait

Waiting Line Strategies

Employ operational logics
1) Modify operations

2) Adjust queuing system

Establish a reservation process

Differentiate waiting customers

1)Importance of the customer 2)Urgency of the job 3)Duration of the service transaction 4)Payment of a premium price Make waiting fun, or at least tolerable

Create An Effective Reservation System

Fast and user-friendly for customers and staff Answers customer questions Offers options for self service (e.g., the Web) Accommodates preferences (e.g., room with view) Deflects demand from unavailable first choices to alternative times and locations Informs and educates Customers in advance of arrival Saves customers from having to wait inline for service (if reservation times are honored)

Example: Restaurants, Transportation companies, Theatre etc service providers use reservation systems to alleviate long waits.

Waiting Line Configurations

CAPACITY MODIFICATION STRATEGIES

Why?

Because of Demand- Supply imbalances Therefore, Service capacity need to be fixed, and

always a manager should be ready to achieve flexibility in capacity.

Ways to meet Capacity to fluctuating Demand

Employ Part- time employees

Sometimes demand cant be modified, therefore get an insight of peak demand period
Efficiency Maximisation

Efficiency Quo hinders further efficiency enhancement

Cross Training

Wider exposure of workers to service systems & learn diverse skills needed for different operations

Involve Customers

Increase customer involvement in service-creation process

Capacity Sharing Cordinally Utilising resources

Super Human effort

Simply Achieve unachievable tasks