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Demand and Capacity In Services

In the service industry, understanding and managing demand according to the capacity is much more important, because, if you cannot do it properly, you will either lose business, or you will have wasted resources. A simple example will do here, Lets say that you have a new bakery where you can serve 15 people at a time. let’s say that it’s your optimum capacity. That is, if there are fifteen people, you can serve them all and they can have a great time. and your maximum capacity would be 22. You can serve them, but the service quality will suffer a little. So, here are the different scenarios. If you have 8 customers at a time, you can serve them all pretty well, but your resources will be wasted. 15 is the optimum for all. And up to 22 you can serve with some level of decline in the quality of the service. But, if you have 30 people coming at once, eight of them will have to go back, and they might never want to visit you again. And you don’t want that. So, you have to manage the demand in some ways. Let’s just say that the demand will rise at a specific time of the day. What you can do is, you can give some sort of discount to the customers at a time when the demand is not as high. that is exactly the reason why you see a lot of restaurants giving discounts at unconventional hours. Before you do this, understanding the pattern of demand is very important. You don’t want to give out a huge discount at your low periods where the demand at the highest peak might go down. You can offer different types of products in different times to separate the customer base throughout the day. Now, there are other ways to manage the demand of the customers, and for that, we need to let go of the bakery example as all of the strategies cannot be applied to bakeries. What you can do is make a reservation system. That way, customers will know beforehand that whether the service will be available or not. There are also services where you can separate the customers based on the urgency. You can make a priority system for who you are going to serve first. You can of course make use of the waiting line and make sure the customer perception of the wait is not that bad. How do you manage the waiting line for customers is another video. These were some ways to manage the demand for the service. You can also manage your capacity levels according to the demand. You can hire part time employees to handle the busiest times of the period. You can hire extra people for only the holiday season when you expect to have more business for your bakery. The capacity can be made flexible. You can join two tables together in case of a large gathering. Or you can also ask single customers to share a table at peak hours. Customers can also be trained to perform some of the tasks as self-service if the number of employees is limited. And if you cross train the employees, you can use them performing different tasks where they might be needed most. I talked about hiring more employees during the busy periods. But what do you do during downtime. All the maintenance work and repairing should be done during the time of low demands. And your permanent employees should get some time off for their own holidays. Now, a short review of service demand and capacity. A lot of these will depend on the type of service you are providing. The demand can vary based on the time of the day, or it can be weekly, monthly or yearly based. I have talked about optimum capacity and maximum capacity. In some cases, the optimum and the maximum capacity will be the same. For example, in a passenger aircraft. Whether you are going to go for managing demand or managing capacity is completely up to you. of course you can do both, but not everyone can afford everything. There are different portions of the capacity that you can concentrate on. The physical equipment, the employees and the infrastructure. Other Videos in the Service Marketing Series: Service Positioning -    • Service Positioning Explained || Positioni...   Types of Services -    • Types Of Services || Service Processes || ...   Flower of Service -    • Flower of Service Explained || Service Mar...   Service Consumption Stages -    • Service Consumption Stages || Three-Stage ...   Service Distribution -    • Service Distribution || Service Marketing   Service Customers -    • Customer Participation in Services || Serv...   Service Pricing -    • Service Pricing Strategy || Service Marketing   Service Consumption Stages -    • Service Consumption Stages || Three-Stage ...   Service Marketing mix -    • Service Marketing Mix || 7P's Of Marketing...   Timestamps: Demand and Capacity – 0:00 Example Scenario – 0:17 Managing Demand – 1:20 Managing Capacity – 2:52 Review – 4:00 Bonus – 5:05 Outro – 5:34 Patreon Link: https://www.patreon.com/user?u=36571443