Managing Demand and Supply of Services

Managing demand
and supply of
services
Managing Demand and Supply
Perishability – implications for demand and supply
Present the implications of time, labor, equipment, and

facilities constraints combined with variations in demand
patterns.
Strategies for matching supply and demand through (a)

adjusting demand to match supply or (b) adjusting supply to
meet demand.
Alternative supply and demand
outcomes
Alternative supply and demand
outcomes (cont.)
Constraints on Supply
Nature of the Constraint Type of Service
Time Legal
Consulting
Accounting
Medical
Labor Law firm
Accounting firm
Consulting firm
Health clinic
Equipment Delivery services
Telecommunication
Network services
Utilities
Health club
Facilities Hotels
Restaurants
Hospitals
Airlines
Schools
Theaters
Churches
Strategies for Shifting Demand to
Match Supply
Demand Too High Shift Demand
Demand Too Low
• Use signage to communicate • Use sales and advertising
busy days and times.
to increase business from
• Offer incentives to customers
current market segments.
for usage during nonpeak
times. • Modify the service offering
• Take care of loyal or to appeal to new market
“regular” customers first.
segments.
• Advertise peak usage times
and benefits of nonpeak use. • Offer discounts or price
• Charge full price for the reductions.
service—no discounts.
• Modify hours of operation.
• Bring the service to the
customer.
Strategies for Adjusting Supply to
Match Demand
Demand Too High Demand Too Low
• Stretch time, labor, facilities • Perform maintenance,
and equipment. renovations.
• Cross-train employees. Adjust Supply
• Schedule vacations.
• Hire part-time employees. • Schedule employee
• Request overtime work training.
from employees.
• Lay off employees.
• Rent or share facilities.
• Rent or share equipment.
• Subcontract or outsource
activities.
Waiting Line Strategies
Employ operational logic
 modify operations
 adjust queuing system
Establish a reservation process

Differentiate waiting customers
 importance of the customer
 urgency of the job
 duration of the service transaction
 payment of a premium price
Make waiting fun, or at least tolerable

Waiting Line Configurations
Source: J. A. Fitzsimmons and M. J. Fitzsimmons, Service Management, 4th ed. (New York: Irwin/McGraw-Hill, 2004), chap. 11, p. 296.
Issues to Consider in Making Waiting
More Tolerable
unoccupied time feels longer than occupied time
preprocess waits feel longer than in-process waits
anxiety makes waits seem longer
uncertain waits seem longer than known, finite 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
 solo waits feel longer than group waits
Four Customer Definitions of Value
Value is everything
Value is low price.
I want in a service.
Value is the Value is all that

quality I get for I get for all
the price I pay. that I give.
Summary of Service Pricing Strategies
for
Four Customer Definitions of Value
Value is low price. Value is everything
I want in a service.
• Discounting
• Odd pricing • Prestige pricing
• Penetration pricing • Skimming pricing
Value is the quality Value is all that I get

I get for the price I pay. for all that I give.
• Value pricing • Price framing
• Market segmentation • Price bundling
pricing • Complementary pricing
• Results-based pricing
SPEED & QUALITY
 Preparation is done on the basis of next business day forecast
which involves activities like defrosting of dough, starters &
cheese.
 FIFO system is used in inventory management and in
customer order management as well. This system is used as
pizza is to be delivered in 30 to 35 times.
 Proper levels of product ingredients have to be mixed to retain
the aroma, freshness & taste.
 Proper dating is done on pizza ingredients with correct
labeling of MRD (Made, Ready,Discard)
 Dispatching :- Geographic area is divided according to
different zones. Guest checks are printed with customer post
code. The manager’s works to dispatch the deliveries that can
be taken two at a time, this saves time & effort.
QUALITY ASSURANCE
 To keep products safe storage the temperature of freezers are
kept in between -18 to + or – 5 degree centigrade. The seals
must be intact so that the temperature can be maintained.
 Quality assurance is achieved through the complaints
monitoring system and their corrections through available
remedial methods.

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Managing demand

Perishability – implications for demand and supply

Present the implications of time, labor, equipment, and

Strategies for matching supply and demand through (a)

Establish a reservation process

Make waiting fun, or at least tolerable

Value is the Value is all that

Value is the quality Value is all that I get

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