Chapter 11: Managing Capacity and Demand
Managing Capacity and Demand
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.
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.”
tally sheets and other instructional materials are presented in this manual.
American Airlines, Inc. Revenue Management
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.
University Health Services: Walk-In Clinic
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.
Generic Strategies of Level Capacity and Chase Demand (Table 11.1)
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)
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
Using Part-time Employees
Scheduling Part-time Employees at a Drive-in-Bank (Figures 11.6 and 11.7)
Yield Management (Figures 11.8, 11.9, 11.10, 11.11, 11.12)
Yield Management Applications
TOPICS FOR DISCUSSION
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
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