Content area
Full Text
Keywords Service operations, Simulation, Demand, Capacity
Abstract Service managers are continually challenged with balancing customer demand and service capacity. Recent studies have raised awareness of various demand and capacity management practices available to services, but little numerical work has been done to identify how these decisions work together and how they relate to one another. For instance, reducing prices may attract customers during a slow period, but the extent of impact this should have on cross-training staff is not clear. A simulation based on theoretical and empirical insights explores the impact of various decisions on profitability and operations. The decisions modelled include the impact of. automation, customer participation, cross training employees, informing customers about the operation, and others. It is shown that demand and capacity decisions do indeed impact on each other - sometimes in ways that are not initially obvious. Results provide useful thought-- starters for service managers striving to improve their operations.
Introduction
Service practitioners have always been challenged with balancing demand and capacity, partly due to the difficulty in predicting demand patterns, but also because of the difficulty in determining and controlling service rates. This study considers the topic from a broad perspective and also considers specific management issues.
This topic has been referred to most frequently as "capacity management", although some have referred to it as "demand management" (Crandall and Markland, 1996) or "managing capacity and demand" (Fitzsimmons and Fitzsimmons, 1998). We will refer to the area of study as "demand and capacity management" to be clear that we are discussing both aspects, and also to make a distinction between the two for purposes of analysis. Thus, both demand management, which is attempting to influence when customers attend the service, and capacity management, which is defined as ensuring a service has the capability to meet the demand experienced, are discussed. Demand management is an attempt to shift demand, while capacity management is a response to demand. This is a large area of study, encompassing a number of topics within operations and marketing. Both long and short-term decisions are required to fully manage demand and capacity.
Most services manage capacity by attempting to match capacity levels with the demand they expect. A few options available to accomplish this are scheduling...