Managing Capacity and Demand

Alberto PORTIOLI STAUDACHER

Dipartimento Ing. Gestionale
Politecnico di Milano
alberto.portioli@polimi.it
Service Management
Aligning capacity and demand

DEMAND CAPACITY
MANAGEMENT MANAGEMENT

Increase
Segment
customer
Development of the demand
Share participation
complementary
capacity
services
Fix price
Schedule shifts
Development of incentives Employees
a reservation cross- training
system
Promote Create an
demand Use of adaptable offer
in low season part time
employees

Yield
management

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Demand segmentation 3

You rarely serve only one single market segment

Customers' needs and behaviors are often
different
Proper data analysis allows us to identify
opportunities for segmentation, differentiating
the service and thus improving performances

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Demand management at Health Clinic
Doctors complain for the excessive workload
Patients complain for excessive waiting

Average daily visits: 200

Variability: 150-240

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Demand segmentation at Clinic Health
Percentage of Doctors’ average daily visits

Reduce demand variability fixing

appointments in an appropriate way
140
130 Day Appointments
120
Monday 84
110
Tuesday 89
100
Wednesday 124
90
Thursday 129
80
Friday 114
70
60
M Tu W Th F

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Demand segmentation at Clinic Health
Percentage of Doctors’ average daily visits

140
130
120
110
100
90
80
70
60
M Tu W Th F

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Set price incentives 7

In periods of low demand lower prices will be

offered
This will move price sensitive customers to periods
when demand is lower, thus leveling the request

E.g. train operators make ticket prices that are

differentiated by day of the week and time

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Promote demand in low season 8

Looking for other services to be offered

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Development of complementary 9

services

Complementary to do more and better businesses

Complementary for synergies/pairing
Complementary for seasonality

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Development of a reservation 10

system

With a reservation you almost have an early sale.

The advantages are significant for customers
(reserved seat, welcome, ...)

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 Managing Capacity

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Increase customer participation 12

When demand increases, also capacity increases:

therefore fewer resources are needed to deal
with increase in demand
The degree of customer participation can be
varied according to demand

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Make a part of the capacity, 13

variable

Flexibility solutions with outsourcing

First class - economy distribution

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Capacity sharing 14

Some airlines make their own aircrafts available

to other companies, at times of low demand
(they also change the fuselage decorations)
Multi property apartments
Sharing of resources between branches

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Employees Cross-training 15

Having some operators with extensive expertise

allows to answer local peaks of demand for
specific activities
Supermarket (eg. TESCO)
Bank

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Use of part-time employees 16

If variability is predictable enough you can use

part-time staff

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Shifts scheduling 17

2500

2000

1500
Calls

1000

500

0
12 2 4 6 8 10 12 2 4 6 8 10 12
Time

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Shifts scheduling 18

2500

2000

1500
Calls

1000

500

0
12 2 4 6 8 10 12 2 4 6 8 10 12
Time

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Daily shifts scheduling 19

Demand forecast
Calculate the needs of operators (limit is on the level of
service, and queuing theory)
Identify the types of possible shifts (national
contracts, union agreements)
Shifts scheduling (eg. minimize Σ xi)
Assign people to shifts

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Scheduling weekly shifts with 20

rest days

Define the type of shift to implement (eg. 5d

work followed by 2 of rest)
Model the problem with Integer Linear
Programming
Solve the ILP problem
Assign people to shifts

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Scheduling weekly shifts with 21

rest days Solution

Objective function: 1 x1 1 x2
Minimize x1 + x2 + x3 + x4 + x5 + x6 + x7
2 x3 0 x4
Restraints:
3 x5 0 x6
Sunday x2 + x3 + x4 + x5 + x6 ≥3
Monday x3 + x4 + x5 + x6 + x7 ≥ 6 1 x7
Tuesday x1 + x4 + x5 + x6 + x7 ≥ 5
Wednesday x1 + x2 + x5 + x6 + x7 ≥ 6
Thursday x1 + x2 + x3 + x6 + x7 ≥ 5
Friday x1 + x2 + x3 + x4 + x7 ≥ 5
Saturday x1 + x2 + x3 + x4 + x5 ≥5
xi Number of people assigned to shift i Schedule matrix, x = day of rest
xi ≥ 0 and integer Operator Sun Mo Tu We Thu Fri Sa
1 x x … … … … ...
2 … x x … … … …
3 … ... x x … … …
4 … ... x x … … …
5 … … … … x x …
6 … … … … x x …
7 … … … … x x …
8 x … … … … … x
Total 6 6 5 6 5 5 7
Requested 3 6 5 6 5 5 5
Exceeding 3 0 0 0 0 0 2
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Food for thought 22

How does the system change if you also

introduce the following possibilities?

1 shift with Sun and Thur as rest days and the

others as working days

1 shift with Sun as rest day and the others as

working days

The solution will be better, worse, or the same as

the previous case? Why?
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