Effective management of supply and demand
Introduction
Effective management of supply and demand in service industries requires good planning.
Chase demand and level capacity are the strategies used to match demand and services.
Service managers need to know to help them find the best fit between demand and supply.
To balance demand and supply is not an easy task for managers since the choices made will reveal the differences.
How managers can alter demand and influence capacity
Services are direct
High probability of interaction between producers and consumers in production.
The consumer must be brought to the delivery system.
Evaluating capacity levels for service operation is require quality skills.
Managers need to develop the best strategies of manufacturing goods and services separate from competitors. Daily operations of a company need strict and skillful management to provide business success.
Common managerial actions that pose challenges
The increase in the wrong kind of capacity
Failure to increase the company sections wholly
Failure to consider the competitive reaction.
Undercutting one’s service.
The company fight for market share may make the managers increase the capacity of raw materials. This destroys the quality and quantity of produce. The managers should evaluate the intensity of competition to develop the best approaches to yield more positive results.
Management strategies
Chase demand strategy
Chase strategy requires the company to chase the demand available in the market despite being flexible.
Production process requires matching of the market demand leaving behind no leftovers.
The strategy aims to come up with a plan that maintains steady production.
The firm needs to raise/ lower inventory levels to satisfy the changes in customer demand.
Service managers who adopt this strategy have unskilled employees who may underperform.
It’s costly to adopt because of the high turnover rate and unskilled labor expenses.
Level capacity strategy
Require company production to remain at a constant level despite variations in demand.
It enables the company to maintain production irrespective of demand patterns.
Managers using this strategy enjoy high skilled labor which leads to attainment to company objectives.
Management of demand and supply
Besides the choice of strategy, the manager should select a suitable method to cope with the fluctuating demand schedule.
This can be done by altering demand and supply control.
Pricing
Used to shift demand from peak period to off-peak periods.
Includes a variety of schemes aimed to attract consumers and earn more profits simultaneously.
The mechanisms include two for one coupon on Tuesday nights, happy hours at bars, and weekend and night rates for long distance callers.
Developing non-peak demand
Managers need to come up with ideas to increase the volume of sales during low seasons.
Managers should be aware that the ideas may pose negative effects.
The process comes along with expenses such as to train employees, acquire more machinery, more skilled supervision.
Developing complementary services
Aims to attract consumers away from the challenges of peak sessions by providing an alternative service as they struggle to attain their satisfaction.
This provides more profits for the company.
Leads to more customer satisfaction
Creating a reservation system
Used to make the productive capacity more effective
Maintains the performance of the company in different periods.
Ensures close links between the company and the consumers
Controlling supply
The service manager influences the planning process directly. To adjust capacity to the fluctuating demand in the market, managers should;
Use part-time employees
Maximize efficiency
Increase consumer participation.
Part-time employees help to chip in new skill into the company
By maximizing the efficiency, managers can assess the performance to check on whether skills available are efficient.
Engaging consumers in production lowers the labor requirements.
Sharing capacity
Invest in expansion ante
Seeking the best fit
The company can share resources with their competitors
Managers should focus on the whole growth development of company departments.
Managers need to plan the best decision between demand and capacity that works out in the company and improves its profit margin.