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Lecture 11:
Topic: Last GAP
Lack of inventory capacity Capacity constraints
Time (law firms)
Labour (Customer service hotline rep)
Equipment (FedEx trucks)
Facilities (movie theatres)
# seats, # workers, kitchen supply
Time of customers finishing food
Time issues (opening hours)
What affects demand? Demand patterns
Predictable cycles (restaurants)
Random fluctuations (weather)
Market segment (walk-in vs regular customers)
Food quality
WOM
Promoting wages
Holiday/ festivals higher demand
Natural climate (Typhoon less demand)
Peak time (lunch/ dinner)
o Solution: Afternoon tea/ happy hour
Function: attract customers by creating busy atmosphere as
customers are more likely to go in if restaurants are busy

Four types of Capability & Demand scenarios
1. Toyotas JIT system Not the case in service
a. Excess capacity (waster resources)
b. Best scenario in service
i. Having a little excess capacity E.g. having 100 cashiers open but
only 80% are utilized
To make sure costumer get better service experience
2. How to match Capacity & Demand?
a. E.g. Obamacase website broke down due to too much capacity
(launched simultaneously in the xxx region)
Test market
Research on potential customers
3. HK Disneyland
a. Sold more tickets than what they can accommodate Lost customers
Shift Demand by:
Provide cheaper tickets for alternative days
Strategic alliance with cinemas, competitor Ocean Park
Adjust Capacity by:
Bring your employees relatives by providing cheaper tickets
Use time to renovate facilities
Rent part of facilities for filming movies
Create some wedding packages


When demand
decreases due to
lost customers
Switching service
offers
Shifting Demand when demand is too high:
Communicate busy days and times
Modify timing and location of service delivery
Charge full price for the service no discounts

Shifting Demand when demand is too low:
Advertise peak usage times and benefits of non-peak usage E.g. Can enjoy
service more
Vary the service offering
Differentiate the price

Adjusting Capacity when demand it too high:
Stretch the labor, facilities and equipment
Cross-train employees
Hire part-time employees BUT Costs E.g. training cost, employee loyalty
declines if they feel frustrated about fire/dropout

Adjusting Capacity when demand it too low:
Schedule downtime during period of low demand
Renovations, maintenance
Schedule vacations
Bring employees relatives/ families Boost employee morale

Yield Management
Why using price is not wise for adjusting demand?
Price = indication of quality
Customer expectation on price
o Wait till price goes down again

Yield =


E.g. Psychologist example:



Airlines Allocate revenue via different classes e.g. business, prestige, economy

Communication Strategies

External Internal
Interactive
E.g. Airlines 50 sec commercial about best
customer service
Convey the value of company
showing the flight attendant customer
testimony
E.g. Southwests commercial
Singapore Commercial Showing a lady
taking care of customers