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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