3 Managerial perspectives of demand
In this section we take a look at some of the managerial perspectives of demand and capacity which focuses on understanding demand for decision-making.
Activity 3 Capacity management
Pick any service that you are familiar with, such as a supermarket, airport or restaurant.
Imagine that service in a situation where it does not have anywhere near enough capacity to meet demand. What sorts of things will go wrong? How will the capacity shortage affect the efficiency of the service?
Now imagine the same service but with far too much capacity. Is this a better position to be in? Will it be efficient?
Discussion
A service that is short of capacity will clearly have some very visible problems of queues and delays. We’ve often been in a position of queueing for hours to check in for a flight, been crammed into a train with no room, told that there is no table at the restaurant and so on. The performance of such services often rapidly declines once demand significantly exceeds (or even closely matches) the capacity to serve customers. In many cases the service quality suffers and staff become more stressed, often making the situation worse in the long run. In emergency services the response time to go to incidents rapidly declines when there is a shortage of capacity.
Services that have excess capacity sometimes also experience problems. For example, the atmosphere in an empty restaurant can be uncomfortable, especially if the staff are constantly hovering over you. Sometimes the service seems too rushed. Staff motivation can suffer if they don’t have enough to do. There is also the obvious problem that there is a lot of waste of resources, both in terms of under-utilised staff but possibly wasted food etc. For emergency services the responsiveness can be good, at a cost of sometimes unused staff.
Given these two extremes, is there a balancing point where capacity is enough to do the job without there being excess wasted resource and maintaining good quality?