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Chapter 11: Managing Capacity and Demand Chapter 11 Managing Capacity and Demand TEACHING NOTE Many of the approaches to matching capacity and demand discussed in the chapter should be familiar to students and prompt lively discussion. The controversial practice of "overbooking" is treated in economic terms, but the behavioral implications of this policy for both service personnel and consumers should be discussed. This chapter presents a number of techniques to assist management in matching supply and demand, but leaves to the imaginative student the opportunity for other creative approaches. The chapter concludes with a discussion of a technique that was pioneered by American Airlines called yield management. Yield management is a computer- based approach for maximizing revenues. Instructions for playing the yield management game are given in the textbook and students should be encouraged to familiarize themselves with the material before game day. The tally sheets and other instructional materials are presented in this manual. SUPPLEMENTARY MATERIALS Case: American Airlines, Inc. Revenue Management (HBS 9-190-029) Following deregulation, American Airlines embarked on an ambitious program of revenue management by building on its SABRE reservation system. The case presents the reader with pricing decisions on two routes and describes the development of yield management. Case: University Health Services: Walk-In Clinic (HBS 9-681-061) In response to complaints of excessive waiting, a triage system was introduced and one year later the director reviews the results to decide whether or not the patient waiting time is acceptable. LECTURE OUTLINE I. Generic Strategies of Level Capacity and Chase Demand (Table 11.1) II. Strategies for Managing Demand (Figure 11.1) Customer-induced Variability (Table 11.2) Segmenting Demand (Figure 11.2) Offering Price Incentives (Tables 11.4 and 11.5) Promoting Off-peak Demand Developing Complementary Services Reservation Systems and Overbooking (Tables 11.9 and 11.7) 11-1 III. Strategies for Managing Capacity Defining Service Capacity Daily Workshift Scheduling (Figures 11.3, 11.4, 11.5) Weekly Workshift Scheduling with Days-off Constraint (Table 11.8) Increasing Consumer Participation Creating Adjustable Capacity Sharing Capacity Cross-training Employees Using Part-time Employees Scheduling Part-time Employees at a Drive-in-Bank (Figures 11.6 and 11.7) IV. Yield Management (Figures 11.8, 11.9, 11.10, 11.11, 11.12) Yield Management Applications TOPICS FOR DISCUSSION 1. What organizational problems can arise from the use of part-time employees ? The use of part-time employees can be very helpful to businesses that have peak demand periods such as restaurants, supermarkets, and banks. Part-time employees are usually paid lower wages and they enjoy fewer, if any, of the company benefits that are provided for full-time employees. Also, it is not generally feasible for a company to offer career development incentives to part-time employees and it is also more difficult to fit them ... View Full Document

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