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23 Cards in this Set
- Front
- Back
Low utilization |
Sends bad signals, there is excess capacity and wasted resources |
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Optimal capacity |
Well balanced demand and supply, ideal use |
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Maximum available capacity |
Demand exceeds optimal capacity, quality declines |
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Capacity utilized |
Demand exceeds capacity, business is lost |
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What happens when there is excess capacity? |
The level of demand exceeds max capacity. Some customers will be turned away, for customers who do not receive service, quality may be lacking bc of crowding or overtaxing of staff and facilities |
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What happens when demand exceeds optimum capacity? |
No one is turned away but qual its may suffer |
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What happens when demand and supply are balanced at optimum capacity? |
Staff and facilities are occupied at ideal level. No one is overworked, facilities can be maintained, customers are receiving quality |
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What happens when there is excess capacity? |
Demand is below optimum. Resources are underutilized resulting in lower profits. Some customers may receive high quality service, but if quality depends on the presence of other customers, customers may be disappointed. |
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Examples of capacity constraints: |
Time, labor, equipment and facilities. Optimal vs max use of capacity. |
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4 examples of demand patterns: |
1. Charting demand patterns 2. Predictable cycles 3. Random demand fluctuations 4. Demand patterns by market segment |
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5 ways to reduce demand during peak times: |
1. Communicate busy days and times to customers 2. Modify timing and location service delivery 3. offer incentives for non peak usage 4. Set priorities by taking care of loyal and high need customers first 5. Charge full price, no discounts |
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4 ways to increase demand to match capacity: |
1. Educate customers about peak times and benefits of non peak use 2. Vary how the facility is used 3. Vary the service offering 4. Differentiate on price |
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5 ways to increase capacity temporarily: |
1. Stretch people, facilities, and equipment temporarily 2. Use part time employees 3. Cross train employees 4. Outsource activities 5. Rent or share facilities and equipment |
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4 ways to adjust the use of resources: |
1. Schedule downtime during periods of low demand 2. Perform maintenance and renovations 3. Schedule vacations and employee training strategically 4. Modify or move facilities and equipment |
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Yield management |
The process of allocating the right type of capacity to the right kind of customer at the right price so as to max revenue or yield. |
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Yield equation |
actual revenue/potential revenue |
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Actual revenue equation |
actual capacity x average actual prices |
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Potential revenue equation |
total capacity x max price |
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Yield management is most effective when: (2) |
1. Different segments make reservations at different times 2. Customers who arrive/reserve early are more price sensitive than those who arrive/reserve late |
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5 challenges and risks in using yield management: |
1. Loss of competitive focus 2. Customer alienation 3. Overbooking 4. Incompatible incentive and reward systems 5. Inappropriate organization of the yield management function |
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What should one do in waiting line strategies? |
Employ operational logic to reduce wait. Set a reservation process. Make waiting more pleasurable |
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4 ways to differentiate waiting customers: |
1. Importance of the customer 2. Urgency of the job 3. Duration of the service transaction 4. Payment of a premium price |
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Issues to consider in making waiting more pleasurable: |
It feels longer, anxiety, solo waits longer than groups, the more valuable the service the longer the customer will wait. |