10 Synopsis of Case

As a human being I think I feel good when I am physically well. In the modern

world, people are very conscious about their health and for that reason Health care and

Fitness club growing very fast. Before starting a business any big or small company should

know its own capacity and how effective it is. To identify the cost, they should know the

capacity of an organization. By knowing how effectively the capacity is operating, decisions

can be made to determine whether to expand and where the expansion should occur (Yu-Lee,

2002).

Fitness Plus is a full-service sports and health club in Greensboro, North Carolina. In

this case we observe that now- a -days the quantity of membership has grown up which

results in capacity problem, overloaded. To avoid all the risk to losing customers, they need

to resolve the capacity problem issue. Krajewski and Ritzman (2010) mentioned that

capacity planning is central to the long-term success of an organisation. Here we will try to

find a solution for capacity problem and choose a better option to continue the heath club

business in that area.

20 About Fitness Plus

Fitness Plus opened its doors in 1991 in a large suburban office park. It offers full-

service of health and sports. It provides a range of facilities and services which mainly

support three major activities such as fitness, recreation and relaxation. The club open every

day for its customers. People started to live in the Greensboro area in a high number and

geographically it was growing. The down town area received a major face lift and also cause

health conscious among the residents.

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It had also created demand for Fitness facilities. Day by day the member is increasing and

causing overcrowded in the Fitness Plus. In the case we observe that first two years, the

volume of membership was small and use of the facilities was light. In 1995, an average

number of members per hour were 15. But it was as high as 40 in the peak time. In May

2000 the number was as high as peak time-around 80 members while in normal daytime the

amount was 25. In that situation there was a lot of complain from existing customers about

overcrowding and equipment unavailability.

Besides this some new competitors of Fitness Plus which is just 10 to 15 minutes distance are

YMCA –very low cost service provider, Oasis-which offers catered to young adults and

Gold’s Gym-for weight and cardiovascular training only.

30 Major Issues Discussed

Due to the increase volume of members, Fitness Plus now faces facility issues. Most

of the members are complaining about overloaded members and unavailability of fitness

instruments. The key areas are Nautilus, Cardiovascular and Aerobics fitness. By research

about the club the total number of members increasing at peak time is double than before

which is 80. In off peak time its increases 15 to 25. It assumes that every member spent 60

minutes per visit. In the peak time the number of uses of fitness facility is higher than off

peak. That’s why all the complain focus on that area.

From the case study we can identify that the Health club got two options in hand.

Firstly they can expand the facility by reducing the other capacity and secondly build a new

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capacity in that area. It will take 4 months for the first option and the second will take much

longer. As Fitness Plus doesn’t have enough resources they can only follow one option.

Other major problem is competitors’ like YMCA, Oasis and Gold's are operating in the same

business in the same area with a discount price.

Questions and Answer:

Question 1: What method would you use to measure the capacity of Fitness Plus? Has

Fitness Plus reached its capacity?

3.1 Capacity Study

Capacity is the maximum rate of output of a process or a system. Every manager

Should take the responsibility and need to ensure that the company has the capacity to meet

current and future demand. Otherwise the company will face loss.

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 Source: http://www.cmg.org/measureit/issues/mit08/m_8_2.html

In Fitness Plus the huge growth of members brought complaints about two issues

which is overcrowding and unavailability of equipment. The main focus of this problem is

Nautilus, Cardiovascular and Aerobics fitness areas. That’s why the main target in Fitness

Plus would be on space capacity for the Aerobics activities and instruments capacity for the

workout activities during the pick hours. Yu-Lee (2002) highlighted that in capacity

measurement, space and equipment are regarded as primary capacity as these are the building

blocks of capacity. As the popularity of health and fitness Plus is growing faster, the

numbers of members are increasing in the peak time. In 3 hours peak time they are getting

240 members which is 80 members per hour. The Capacity Measurement Summary is as

follows

Source: http://technet.microsoft.com/en-us/library/bb821280.aspx

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 Aerobics: Around 35 members can join together per session in Aerobics. Every session

will continue for an hour. According to data collection the usages in peak hours is 30%

which are (80 x.30) =24 per hour.

Cardiovascular: The total number of equipments in this section is 29. We assumed

that it takes 45 minutes to finish the exercise for each member. After calculation we see that

(60mins ÷ 45mins x 29 instruments) = 38 members can use the facility per hour. Data shows

that during peak time the total usages is 40% which are (80 x .40) = 32 members every hour.

Nautilus: The total number of equipments in this section is 24. We assumed that it

takes 45 minutes to finish the exercise for each member. After calculation we see that

(60mins ÷ 45mins x 24 instruments) = 31 members can use the facility per hour. Data shows

that during peak time the total usages is 25% which are (80 x .25) = 20 members every hour.

Free weights: There is a room which is equipped with free weights. So far there was

no complaints from this sight, we can say that in peak hours it can accommodate (80 x .20)

=16 members per hour.

Recreational activities: According to data during peak hours there is no complaining

from members in this area. There are 8 racquetball courts which can accommodate 16

members on single games and 32 members on double games. During peak hours (80 x .

15)12 members play the games. There are 6 tennis courts where 12 members can play single

games and 24 members can play double games. Data shows only (80 x .10) = 8 member use

the facility in peak hours. The given assumptions are made an hourly basis. Here we can see

that they can accommodate more members in the peak time.

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 Figure 1: Capacity Measurement Summary
Activities Usage No. of Available Capacity Members’
patter members capacity variance Complaint
n per hour per hour per hour
(members) (members)

Aerobics 30% 24 35 9 Yes

Cardiovascular 40% 32 38 6 Yes
Nautilus 25% 20 31 11 Yes
Free Weights 20% 16 16 nil No
Racquet Ball Courts 15% 12 16 4 No
Tennis Courts 10% 8 12 4 No

3.2 Capacity Analysis

Capacity is the maximum rate of output of a process or a system Krajewski and Ritzman

(2010). The main problem for Fitness Plus is capacity and our main aim is to measure the

capacity. Correctly measured capacity is a sine qua non for managing capacity because the

decisions made are often based on the measurements that one observes (Yu-Lee, 2002). In

capacity measurement it is one of the major issues. All of the capacity measures that can be

ultimately created are based on the primary measures i.e. physical space, condition of

equipments, work force, type of members, frequency use of equipments and the type of

equipments and support system (Yu-Lee, 2002). After capacity study we found that the

Health club has sufficient capacity to meet customers demand in peak hours. We need to

focus beyond the capacity measurements. The club needs to identify what type of members

they are getting in the pick hours. They can form some groups like young students, working

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adult, family etc. They can restricted the access of children under 16 years in the peak hours

and these students can use the facility in off-peak or in week-ends. They should aware that

all the instruments are working properly and the club have enough equipment to full fill the

demand. Apart from that, the club should collect necessary data on how frequent members

use the exercise instruments. By collecting all information and find out the most popular

instruments using by customers. They can replace the less use instruments with the popular

one to full fill the demand. Around 35 members can join together per session in Aerobics.

Every session will continue for an hour. According to data collection the usages in peak

hours is 30% which are (80 x.30) =24 per hour. The problem in the case study is, Yoga

classes held twice a week time in the same Aerobics room which may be a cause for this

problem. Based on the data mentioned here, the health club now can identify the cause that

causing overcrowding and short of instruments.

40 Capacity Planning

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 Source: Operation Management by Krajewski, Ritzman,&malhotra on page 241.

As the nature of the characteristic fluctuations of the demand for services, and that’s why

The services are produced and consumed simultaneously, service companies struggle

continuously with the problems of matching their short-term capacity and demand. The

strategies used to respond to this situation are classified as either capacity management –

adjusting capacity the demand pattern to better match the available capacity. One of the most

frequent consequences of peak demand is an increase in the waiting time for members. In

this given case, if a high volume of members come to use the fitness facility at the same time,

then the situation will be worst. Then there is a chance of waiting line or queue development.

This is a common problem for any service organisations such as Bank, Casting vote, ATM,

Shops and all most everywhere. In the case of Fitness Plus, this could be largely due to its

flexi-layout process where members are free to choose their own fitness activities (Chase,

Jacobs and Aquilano, 2004).

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 Meas
Source: Operation Management by Krajewski, Ritzman,&malhotra on page 241.

To analyse the waiting time problems, Waiting-line model would be the perfect

• Outp
model. This model is also useful in capacity planning for service organisations (Krajewski

and Ritzman, 2010). There is not more information given in the case about the usage pattern

of the equipments. Data shows that the large workout room contains 29 pieces of

cardiovascular instruments in fully working conditions. We assumed that it takes 45 minutes

to finish the exercise for each member. After calculation we see that (60mins ÷ 45mins x 29

instruments) = 38 members can use the facility per hour. Data shows that during peak time

• Input
the total usages is 40% which are (80 x .40) = 32 members every hour. According to the

Waiting-line model members can use 2 instruments per visit and spent about 20 minutes per

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instruments. Each member will wait 5 minutes for the next instruments. Hourly the rate will

be 3 customers (per instruments 20 minutes). The arrival rate will be equivalent to an

average of 2.5 times an hour. 32 members per hour get transformed into an arrival rate of 80

members hourly (32x 2.5), taking into account repeated visits (Krajewski and Ritzman,

2010).

To calculate the capacity cushion this assumptions can be used. We can see that

capacity cushion is less than 10 percent and customers waits an average 8.6 minutes to get an

instrument (0.1428 x 60). The health club should have a systematic plan for the waiting time

to resolve the waiting issues. They can provide a comfortable waiting area which should

have all facility like entertainment. Members can sit down and watching news, sports like

premiership sports live etc. Capacity cushion = 100% – Average Utilization rate (%)

Waiting-line model can’t be suitable for Aerobics section. Around 35 members can

join together per session in Aerobics. Every session will continue for an hour. According to

data collection the usages in peak hours is 30% which are (80 x.30) =24 per hour. As it is a

group activity so every member can finish the class in the same time assuming a one hour

session.

Questions and Answer:

Question 2: Which capacity strategy would be appropriate for Fitness Plus? Justify

your answer.

Question 3: How would you link the capacity decision being made by Fitness Plus to

other types of operating decisions?

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50 Capacity Strategy

Coping with uneven demand is one of service management’s toughest challenges

(Fitzsimmons and Fitzsimmons, 2004). All service companies faces cyclical such as daily,

weekly, monthly fluctuations in the demand level. For this reason they face reduction in

service level (in high demand) or under-utilised resources (in low demands). The service

companies manage capacity with the variations in demand.

Fitness Plus should take immediate action to solve the capacity issue. Currently they

have two options firstly optimise current capacity and secondly building a new facility

downtown. All the project for new facilities needs to be done by January next year as its the

peak time for new membership enrolment. It will take 4 months for the first option and the

second will take much longer. As Fitness Plus doesn’t have enough resources they can only

follow one option.

In this situation, my recommendation would be that the health club should optimise

its current capacity at its existing facility in the short-term and as a long-term project they

should consider building a new facility.

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 Capacity Timing and Sizing Source:

Operation

Planned unused Forecast ofcapacity Management

capacity required

y
by Krajewski,
ti Capacity
c
a
p increment
a Ritzman,&mal
C
Time between
increments hotra on page

Time
244.

(a) Expansionist strategy

Figure 6.2 – TwoCapacityStrategies

Copyright © 2010Pearson
Education, Inc. Publishing as
Prentice Hall.

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 Source: Operation Management by Krajewski, Ritzman,&malhotra on page 244.
Ca
5.1 Short-term Strategy

Service companies apply three major ways to smooth its demands which are

influencing, scheduling and denying. Influencing which are differential pricing and

promoting off-peak demand. Scheduling which is requiring advance reservations and

denying is forcing extra customers to wait in the queue until more capacity becomes

available. All three strategies result in shifting some demand from one period to other. The

strategies are:

5.1 .1 Pricing Strategy

By charging a higher price in the peak period or charging a lower price during the

time of peak demand. This is one of the common strategies used by hotel industry.

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According to price Fitness Plus can introduce two types of membership plan. They should

determine the best price which will not result in capacity constraints. Price optimisation is

expected to shift the demand during peak to the off-peak period and at the same time it will

increase revenue. There are many reasons that service providing companies raise price in

peak- period. Competitions market limits ability to fully exploit the peak time by increasing

prices. Some people believe in quality service not the price and some are vice versa. Some

members like competitive service providers and if they do so, there is a great chance to lose

those customers. So Fitness Plus should consider this pricing strategy to avoid all risk of

losing customers. They should keep in mind that they have three new competitors who are

operating in the same area offering full range of services.

5.1 .2 Non-Pricing Strategies

The peak demand period provides an excellent opportunity to contact members

who may be interested in off-peak services (Kotler, 2008). High potential customers can be

identified in the peak period who really dares to do the things. In this case customers already

use the Fitness Plus facility and they wants to use the facility in future. Fitness Plus can

motivate the customers in additional off-peak service in a good price. They can distribute

leaflet for their off-peak services. They can provide on screen add for their additional

services so that member can see the adds while waiting for their turn. In this way they can

reach potential off-peak customers. Some service provider’s offer discounted tickets for

massage, drinks, and health supplements during the off-peak time. They can offer the same

thing.

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 They can introduce reservations system to avoid customers waiting long time.

This way they can control demand in the peak hours. Service providers can stimulate off-

peak demand in lots of ways. Members can book their position in the time they want and

after fulfil the target they can start booking customers for the off peak session. It’s the same

way how we book ticket for bus or train for a long journey. They can introduce online

booking system were customer can log in with their membership number and book their

position in advance. But Fitness Plus should keep in mind that reservation system only

works well where there is a little competition or the competitors face similar issues.

Fitness Plus can categorise members in group and can restriction members on that

certain groups. They can make a data for peak time and identify which category customers

use the facility. They can restrict members below 16 years using the facility in the busy

period as most of the members are working executives. They can introduce student’s

discount rate and encourage them to use the facility in the off-peak period.

According to data we observe that Fitness Plus have enough capacity in the workout

section to fulfil the demand and can easily meet demands in peak time. Although if there is a

capacity problem in that area it may be some members using instruments twice in a single

visit or due to breakdown. They should find out which instruments customer use most and

which is less useable. They can increase the amount of popular instruments and decreasing

the less use one. Fitness Plus should maintain all its equipments time to time and it will

reduce repair cost.

In Aerobics the problem is for timing mix-up. They offer Yoga classes in the same

room. They can re-arrange the classes if necessary and should keep in mind that both classes

not clashes each other. They should maintain aerobics instruments and have enough supply

to meet the demand.

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 5.2 Long-term strategy

Long-term capacity plans deal with investments in new facilities and equipment at

the organizational level, and require top management participation and approval because they

are not easily reversed (Krajewski and Ritzman, 2010). In the long-term it involves

forecasting demand. Here we will highlight the capacity decision as an integral part of

overall corporate strategy (Krajewski and Ritzman, 2010). In the Greensboro area there are

new developments taking place and Fitness Plus should consider that issues as well. The area

becomes more popular and new business facilities for people. There are already three new

health club operating their business in that area. There are also huge growths in population in

that area.

Fitness Plus should consider the current and future situation and make proper

decisions to expand business with a new facility or expand its current location. The top target

should be forecasting demand. This is one of the important tasks for any organization. They

should make an accurate forecasting data for demand and finish the task according to the

data. It is very important because if the data is wrong the whole result for future plan will be

worst and can’t meet the desired overall performance. If they can find out their actual

demand they can work for it and find a solution to overcome the demand. The management

level should take responsibly and take instant action to resolve any issues.

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 Source: Operation Management by Krajewski, Ritzman,&malhotra on page 198.
Tot
They should close all loops which is gathering information of demand deviations that exist

for the period (actual demand vs. Forecast demand). Here we can see that Greensboro is

developing day by day and that’s the reason new businesses are relocating in that area. As the

population is growing there is a opportunities to establish new business in that certain area.

Besides this people are very healths conscious now a- days and all the communication

channels like TV, newspaper, internet and other resources put ads for health awareness.

For that reason there is more demand on health care services all over the world. The world is

changing very fast and businessmen are applying new ideas everyday to fight with the

competitors. New facilities coming everyday with discount price and let the old competitors

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in danger. So Fitness Plus should take quick action to fight with competitors and avoid loose

additional business.

Source: Operation Management by Krajewski, Ritzman,&malhotra on page 245.

6.0 Conclusion
• Capac
Fitness Plus should take instant action according to customers complain. They

proce
should resolve the overcrowding issues and unavailability of instruments. The health club

should take accurate action plan to satisfy customers and meet their demands. Otherwise

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there is a probability to lose those customers as they have options to go to the nearest health

club who is offering all facilities in an affordable price. It can follow short term strategy

which we mansion earlier and resolve some of the capacity problems. The management and

staff should explain customers about their plan of changes in procedures and explain them the

new facilities coming very soon. Sometimes they can offer 1 hour free session during the off

peak time when there is less customers and let the new comers know about their quality of

service. So that in the near future the new comers join the Fitness club as a member. They

should monitor the Fitness club facility and quality all the time and make changes if

necessary such as remove less use instruments and buy more usable instruments to reduce the

complain issues. They should ensure effective use of resources. Fitness Plus needs to take

all relevant action to provide a quality service in that area which attracts customers to join the

club. As all we know today’s market is a competition market and in order to compete that

market they needs to be extra ordinary. Otherwise they can’t survive in that business. In the

long-term Fitness Plus should look its overall corporate objectives and according to the plan

they should initiate the strategic plan. They should plan instantly so that they can have all

data to start initial work.

Finally, if everything looks positive they can tell customers about their expansion plans

and ensure them to give a better quality service in near future.

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Total Word Count: 3727.

References

Chase, R.B., Jacobs, F.B. & Aquilano, N.J. (2004), Operations Management for Competitive
Advantage, 10th ed., McGraw Hill Companies, New York

Fitzsimmons, J.A. & Fitzsimmons, M.J. (2004), Service Management: Operations, Strategy
and Technology, 4th ed., McGraw Hill Companies, New York

Kotler, P. (2008), Kotler on Marketing, Simon & Schuster UK Ltd, London

Krajewski, L.J., Ritzman, L.P., & Malhotra, M.K. (2010), Operations Management:
Processes and Supply Chains, 9th ed., Prentice-Hall International, Inc., New Jersey

Yu-Lee, R.T. (2002), Essentials of Capacity Management, John Wiley & Sons, Inc., New
York

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Appendix I: Fitness Plus – Range of Facilities and Services & Operating Hours

Following are the specific activities offered by Fitness Plus, and their respective capacity:

Fitness Activities

• Aerobics room (35 people/class)

• Free weights

• Workout room (24 Nautilus machines)

• Cardiovascular workout room (9 stair steppers, 6 treadmills, 6 life-cycle bikes, 3 air

dyne bikes, 2 cross-aerobics machines, 2 rowing machines, and 1 climber)

Recreation Activities

• Racquetball (8 courts)

• Tennis (6 courts)

• Outdoor pool

• City sports teams (softball, volleyball, and swim teams)

Relaxation Activities

• Yoga classes (2/week in aerobics room)

• Whirlpool tubs (1/locker room)

• Trained massage therapist

Hours of Operation

Monday through Thursday 6:30 a.m. to 11:00 p.m.

Friday and Saturday 6:30 a.m. to 8:00 p.m.
Sunday 12:00 p.m. to 8:00 p.m.

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Appendix II:
( mp h = me m b e rs p e r h o u r )
c u s to me r
d a ta b a s e

c u s to m e r
S TAR T s ig n s in s ta f f c h e c ks ID
v a lid
me m b e r ID a n d c o n f irms no
at des k m e mb e r? c u s to me r a c c e s s
c u s to m e r e n te r s c ard p a id m e mb e rs h ip
d e n ie d END
n o t f u ll c a p a c ity d u rin g p e a k
n o c u s to me r c o m p la in ts
y es (p e a k: 8 0 m p h ) te n n is (1 0 % )
( p e a k: 8 mp h
d e s k c le rk me mb e r e n te rs /c a p a c ity : 1 2
in s tru c to r
mph) b a lls f o r
te n n is a n d
no ra c q u e tb a ll
a e ro b ic s c la s s open p la y r a c q u e tb a ll
y es 30% f itn e s s 25%
3 0 % (p e a k: 2 4 mp h a e r o b ic s g a me ? (15% )
a c tiv ity
/c a p a c ity : 3 5 mp h ) c la s s ? (p e a k: 1 2 m p h
c h o ic e ?
/c a p a c ity : 1 2
fu ll c a p a c ity d u r in g p e a k
mph)
c u s t o m e r c o m p la in ts

f u ll c a p a c ity d u rin g p e a k
n o c u s to me r c o m p la in ts
in d iv id u a l
w o r ko u t?
85%

free Na u tilu s c a rio v a s c u la r

f re e w e ig h ts
w e ig h ts
w o r ko u t (2 0 % )
( p e a k: 1 6 mp h
/c a p a c ity : u n kn o w n )
in s tru c to r /
s u p e rv is o r
f u ll c a p a c ity u n kn o w n
n o c u s to m e r c o mp la in ts
Na u tilu s w o r ko u t c a rd io v a s c u la r
m a c h in e s m a c h in e s
(25% ) w o rko u t (4 0 % )
(p e a k: 2 0 mp h ( p e a k: 3 2 mp h /
/c a p a c ity : 4 8 m p h ) c a p a c ity : 5 8 mp h )
s u p e rv is o r / in s tru c to r /
in s tru c to r s u p e r v is o r
fu ll c a p a c ity d u r in g p e a k f u ll c a p a c it y d u r in g p e a k
c u s t o m e r c o m p la in t s c u s to m e r c o m p la in ts

p e rf o rm
in d iv id u a l y es DES IRED
w o r ko u t o f e q u ip m e n t
c h o ic e a v a ila b le ?

no

r e tu rn to f itn e s s
c hoose
a c tiv ity c h o ic e y es
a n o th e r
d e c is io n
w o rko u t

no

m e mb e r le a v e s

END

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Appendix II: Fitness Plus Facility Layout (continue)

Color Key to Flow Diagram

fitness activity
demand alternate process
(process)

manual
fitness process
activity operation
choice ?
(decision)

computer
fitness database
equipment

employee paperw ork

interaction input

return to
previous terminator
step

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