Fitness Plus

TOMS 5302 A
Professor Uma Kumar
1st March 2015

By
Sirine Al-Tayech
Lujia Tang
Lin Lu
Ola El Ali
Bashar Haddad

March 1st, 2015

Fitness Plus Management
Dear Sirs,
We have conducted our analysis of Fitness Plus capacity utilization. Our report has used
the methods of utilization rate and capacity cushion in identifying bottlenecks and
capacity related issues.
Based on our analysis, it does not appear that Fitness Plus has reached its full capacity
yet, however adjustments must be made in relation to your pricing strategy for peak and
off-peak hours in order to resolve bottlenecks around popular machines such as
Cardiovascular and ensure members satisfaction.
Our attached report provides additional details of our complete analysis methodology and
assumptions used.
Please do not hesitate to contact us if you have any questions or requests for additional
information.
Best regards,

Executive Summary
Fitness Plus has not yet reached max capacity but due to the uneven demand throughout
the day, overcrowding and bottlenecks are appearing over popular activities. Optimizing
pricing strategy by charging a premium for peak time hours and a discount for off-peak
hours would help in shifting and smoothing the demand.
Except for the cardiovascular equipment, all the other facilities are under capacity or at
appropriate capacity levels. We recommend maintaining capacity cushions between 30%
and 40% to ensure customer satisfaction.
Periodical reviews of expected demand, complaints, equipment and service levels must
be performed in order to gauge members reaction to the price changes and once full
utilization have been reached, Fitness Plus can start looking into opening a new branch
assuming enough demand is present for that particular location.
Situational Analysis
Fitness Plus is a full service health and sports club, located in a suburban office park area
in Greensboro, North Carolina. The club provides a range of facilities and services to
support its three primary activities of fitness, recreation, and relaxation. To support
fitness, the club offers an aerobics room, free weights, a workout room with Nautilus
equipment, and a large workout room with 29 prices of cardiovascular equipment. For
recreation, it offers a large outdoor pool, 6 tennis courts, 8 racquetball courts, as well as
volleyball, softball and swim leagues. Finally, in terms of recreation, Fitness Plus offers
yoga classes, whirlpool tubs, and trained massage therapists.
Since its establishment in 1991, Fitness Plus has experienced growth in membership
rates, primarily due to the increasing popularity and increased awareness of the benefits
of health and fitness amongst consumers. Over the past 10 years, growth in memberships
has increased and reached an all time high in May of 2000, where the average number of
members per hour was 25, even reaching 80 members at peak time. This growth however
has led to the problem of complaints from clients about overcrowding and the

unavailability of equipment in certain areas. In analyzing their current capacity problem,

Fitness Plus must assess whether or not there is enough room at the current location to
properly service existing members, or if they should open a larger facility in another
location. Furthermore, Fitness Plus must make their decision ASAP, as there is increasing
threat from new competitors in the area such as Golds Gym, Oasis Gym and the YMCA,
and expanding the current facility or opening a new one would require significant
investment in time, which could result in them losing share to these competitors.
Measuring Capacity
As it is stated in situation analysis, the growth of members has brought complaints about
unavailability of facilities (Cardiovascular, Nautilus and Aerobics) and the workout area
is overcrowded.

Thus, it is necessary to identify whether the capacity of existing

equipment is constrained during the peak hour. The method of Utilization Rate and
Capacity Cushion will be used to determine the capacity of Fitness Plus based on the
given information.
Firstly, based on the formula of capacity utilization, the effective capacity for each given
facility will be measured. According to the case, it is assumed that each member takes 60
minutes to complete one workout session with Nautilus and Cardiovascular equipment.
Fitness facilities:
1. Nautilus: It consists of 24 pieces of Nautilus equipment in the small workout room,
and each member takes 60 minutes. Thus, in one hour, the total number of members who
can assess to the equipment is: 60minutes/60minutes * 24 equipment= 24 (members)
2. Cardiovascular: It consists of 29 Cardiovascular equipment in the small workout
room, and each member also takes 60 minutes to use the equipment. Thus, the total
number of members who can be able to use the equipment is: 60minutes/60 minutes* 29
equipment= 29 (members)

3. Aerobics: The aerobics room can accommodate 35 people per class, and it is assumed
that each class lasts for one hour. Thus, the total number of member who can assess to
this room and have yoga class is 35 in one hour (60minutes/60 minutes* 35=35)
4. Free weights: The case does not introduce the information about the type and number
of the equipment, since there are no members complaints regarding this facility usage. It
is assumed that it is being utilized appropriately.
Recreational facilities:
It is assumed that each game played in the racquetball and tennis courts last for 1 hour. It
is also assumed that there are two players for each single game; there are four players for
each double game.
1.Racquetball courts: There are total of 8 racquetball courts, which can accommodate 16
or 32 members for 8 single or double matches in one hour.
2.Tennis courts: There are total of 6 tennis courts, which can accommodate 12 or 24
members for 6 single or double matches in one hour.
Secondly, by using the given usage of each facility, the output of each facility can be
calculated. According to the case, during the peak period of 4:00 pm- 7:00 pm, there are
80 members per hour checking in to use facilities.
The calculation is shown in the table:
FITNESS

Usage pattern *

Numbers of members =

PLUSs

during

checking in per hour

facilities
Aerobic
Cardiovascula

hour
30%
40%

*
*

80
80

=
=

24
32

r
Nautilus
Free weights
Racquetball

25%
20%
15%

*
*
*

80
80
80

=
=
=

20
16
12

peak

Output

courts
Tennis courts

10%

FITNESS

Output

Effective

Utilization

PLUSs

(1)

capacity

(3)=(1)/

facilities
Aerobic
Cardiovascular
Nautilus
Free weights

24
32
20
16

(2)
35
29
24
16

Racquetball

12

courts
Tennis courts

80

rate

Over/Unde Capacity
r Capacity

cushion=100%

(2)*100%
68.57%
110.34%
83.33%
100%

Under
Over
Under
Appropriat

-(3)
31.34%
-10.34%
16.67%
0

16

75%

e
Under

25%

12

66.67%

Under

33.33%

In terms of utilization rate of free weights, it is assumed they are used appropriately.
Because there is no relevant date provided thus an assumed 100% utilization rate is
considered, however, the rate will not be true in reality. There are no complaints about the
unavailability of free weight, so the capacity cushion rate should be higher than 0.
In all, based on the table above, it is clear that except for the cardiovascular equipment,
all the other facilities are under capacity or in appropriate capacity. In terms of the
capacity of cardiovascular equipment, what should be addressed is that the effective
capacity calculated above is the minimum capacity. In other words, it is indicated in the
case that individuals work out an average of 60 minutes per visit. Usually, members
will not spend all the time of each visit on one facility, which means that the real time an
individual spent on cardiovascular equipment must be less than 60 minutes. In this
situation, if a new assumption that the average time one member spent on cardiovascular
equipment per visit is 50 minutes is made, the capacity will turn out to be 35
(60minutes/50 minutes* 35=35), higher than the output and under capacity. As a result,
it can be concluded that Fitness Plus has not reached its capacity. Generally, all the
facilities are almost under capacity.

Improving Capacity
One of the most difficult challenges service managers face is to cope well with uneven
demand. The frequent fluctuations in demand can lower service levels or result in under
utilization of resources. Fitness plus has a problem where there are different demand
levels during different times of the day. This is causing the gym to be idle at times and be
over-utilized at times.

In order to be able to measure capacity levels, a capacity strategy is needed to smooth out
the demand during the day as much as possible. Capacity cushion is an amount of
capacity in excess of expected demand when there is uncertainty about demand levels.
Sizing the capacity cushion will help Fitness plus find out if they are approaching 100%
utilization. This signals to the management whether it needs to decrease the rate at which
they are accepting members into the club or increase physical capacity. Usually, in such a
case, it is recommended to maintain the capacity cushion at 30%-40%. Setting this goal
would be a good starting point for the firm to try and organize the capacity dilemma on
hand.
Organizing the capacity is directly related with the demand fluctuations. Therefore,
managing demand should positively influence the capacity problem. The objective of this
strategy would be to shift the excess demand from the peak hours to off-peak hours.
Either changing the demand, or offering other services can achieve this. Usually the
simplest way would be to intensify advertising to increase demand and even it out over
the day. However, this would be a rather costly alternative to the gym. In order to smooth
out the demand, Fitness Plus could slightly increase prices during the peak times. The
gym could offer different memberships with different prices according to different times
of the day. This is often referred to as price optimization. Following this, a system can be
created which monitors the amount of memberships purchased for a certain time slot. The
gym could then stop selling memberships for a certain time slot when it has almost
reached full capacity (taking into consideration the capacity cushion). The gym could also
distribute coupons for extra services such as massages or extra classes during off-peak
hours, in order to encourage customers to use the gym during off peak hours.

Implication on Other Operating Decisions

As previously discussed, Fitness Plus is facing a classic capacity design problem, one of
the 10 critical decision areas in operations management as highlighted by Henzers
research on the subject. Three other critical decisions to be made by operational managers
include scheduling, layout design, and location, which are directly linked to the capacity
design solution for Fitness Plus discussed above.
Scheduling includes the efficient allocation and control of human and capital resources,
in such a way to provide the best service possible to customers. In the case of a service
business such as Fitness Plus, scheduling most directly relates to the appropriate
scheduling of the number and type of administrative/support staff and personal trainers,
depending on the time of day and on the type of gym services utilized during a certain
time by clients. By analyzing the demand and capacity at different times, Fitness Plus can
improve the scheduling of their resources. For example, if relaxation services are utilized
mostly in the evenings, then more classes and staff should be allocated to those time slots.
Layout design refers to how facilities and services are organized with respect to each
other, and with respect to what will provide the most utility and convenience for clients.
For example, it might make sense if the fitness and recreational facilities were located at
equal distances from the whirlpool tubs in the locker room and from the massage area.
This is because after engaging in fitness and recreational activities, clients will most
likely want to relax with one of the relaxation services offered, and so having the services
organized in such a way will increase customer satisfaction. Finally, location of the
current as well as any future locations of the gym should be dependent on the customer
base. For example, if smoothing out the demand during the day still does not solve the
overcrowding and capacity issue of Fitness Plus, they may seriously need to consider
opening a new location. However, it does not make sense to open a new location in the
downtown area if target clientele do not reside in that area. It is much easier to attract the
current target market to a new location, rather than try to convince the market in a certain

location of your services, especially that they may already be members of a gym that
caters to their needs specifically.
Conclusion:
We have discussed in details the capacity issues faced by Fitness Plus and how they have
been exhibited by existing complaints by customers and over crowding and/or
unavailability of machines.
Our recommended price optimization strategy can immediately address short term
concerns by increasing prices for busy hours while offering discounted prices for offpeak hours which will help smooth out demand (number of members per hour) to ensure
high satisfaction of members. This strategy should be run in parallel to staff resources
scheduling, in order to ensure an appropriate level of employees are available to cater to
the needs of their members. Periodical reviews of expected demand, complaints,
equipment and service levels must be performed in order to effectively utilize the
capacity and gauge changes in members behavior.
In the longer run, Fitness Plus might consider expanding into a new location assuming
that capacity levels would be fully utilized and there is sufficient demand for their
services in the new location.