BY

DEVANAND MENON

PRATHAMESH PARAB

MATCHING SUPPLY & DEMAND IN SERVICE INDUSTRY , CRM &

MGMT STRATEGY

OBJECTIVE

• Explain:• the underlying issue for capacity-constrained

services• the implications of capacity constraints • the implications of different types of demand

patterns on matching supply and demand• Lay out strategies for matching supply and demand

through:• shifting demand to match capacity or• flexing capacity to meet demand

• Demonstrate the benefits and risks of yield management strategies

• Provide strategies for managing waiting lines

Fundamental Issue

the underlying issue for capacity-constrained services

Lack of inventory perishability (cannot store up) simultaneous product and consumption (cannot be

transported from one place to another)

Managing Demand and Capacity

No buffer for services from demand.

Demand volatileGoal: supply and

demand balanced at optimum capacity

Under utilizing when demand is below optimum capacity

If demand is above capacity then quality may suffer

What is the Nature of Demand Relative to Supply?

Extent to which supply is constrained

Wide

Narrow

Peak demand can usually be met without a major delay

1 Electricity Natural gas Telephone Hospital maternity unit Police and fire emergencies

2 Insurance Legal services Banking Laundry and dry cleaning

Peak demand regularly exceeds capacity

4 Accounting and tax preparation Passenger transportation Hotels and motels Restaurants Theaters

3 Services similar to those in 2 but which have insufficient capacity for their base level of business

Understanding Capacity Constraints and Demand Patterns

Time, labor, equipment and facilities

Optimal versus maximal use of capacity

• Charting demand patterns

• Predictable cycles

• Random demand fluctuations

• Demand patterns by market segment

Capacity Constraints Demand Patterns

Managing Demand

Shift demand from high to low demand periods.

Decrease demand during peak demand periods.

Stimulate demand during low demand periods.

Strategies for Shifting Demand to Match Capacity

• Use signage to communicate busy days and times

• Offer incentives to customers for usage during non-peak times

• Take care of loyal or regular customers first

• Advertise peak usage times and benefits of non-peak use

• Charge full price for the service--no discounts

• Use sales and advertising to increase business from current market segments

• Modify the service offering to appeal to new market segments

• Offer discounts or price reductions

• Modify hours of operation

• Bring the service to the customer

Demand Too High Demand Too LowShift Demand

Shifting Demand

Business is not lost.Service quality is

not adversely affected.

Increased efficiency.

Customers may not want to shift.

Customers may not have control over when they use the service.

Advantages Disadvantages

Reducing Demand

Service quality is normally improved.

Increased efficiency.

Lost revenue.Not a good strategy

for firms in the for-profit sector.

Advantages Disadvantages

Stimulating Demand

Increased efficiency.

Increased income.Increased

utilization of facility.

May not be profitable.

May cause some current customers to shift usage.

Advantages Disadvantages

Tools for Managing Demand

Reservation system.Differential pricing.Communication

Strategies for Flexing Capacity

to Match Demand

• Stretch time, labor, facilities and equipment

• Cross-train employees• Hire part-time employees• Request overtime work from

employees• Rent or share facilities• Rent or share equipment• Subcontract or outsource

activities

• Perform maintenance renovations

• Schedule vacations

• Schedule employee training

• Lay off employees

Demand Too High Demand Too LowFlex Capacity

Who are the customers in a hospital?

Patients Family membersReferral DoctorsSuppliersEmployees

Who is the key customer in the hospital?

What is patient satisfaction?

Patient Satisfaction is “hospital services and its perception by the patient” minus ”patient expectations”

0 = Patient Satisfied- = Patient Dissatisfied+ = Patient Delighted

Patient satisfaction measures need to be developed from the patients perspective

Patients are becoming better informedInvolve patients for making improvementsPatient satisfaction is not Static but

Dynamic

Patient Expectations

Good Medical CareGood Nursing CareLess Waiting TimeExcellent

HospitalityPersonal AttentionCourteous

BehaviorAffordable

Charges

CleanlinessGood Coordination Cooperation

among the StaffDisciplineCommunication &

InformationTransparency in

charges and procedures

Challenges in Service Marketing

Giving a feel for the “product”Managing Demand FluctuationsMaintaining QualityCost ContainmentAttitudinal block in using proven

marketing principles in service marketing

Factors that promote Demand Perspective

Services are available for longer or convenient hours

Patients are provided information through Brochures, Publicity, etc on services available

Services are reliable and offered promptly

Required equipment are availablePatient friendly Systems & Procedures

Factors that promote Demand - Accessibility Perspective

Good public transportationCentrally locatedOutreach Programs to reach out to the

Rural People

Factors that promote Demand - Affordability Perspective

Standard pricing structureCharges affordable by most of the

people in the CommunityTransparency in Patient Fees – no

hidden chargesSimple procedure for getting

free/subsidized care

Factors that increase Demand - Promotion Avenues

Structured approach with designated staff Good Rapport with CommunityPublicity through different mediaPromotion at Outreach activitiesMeetings/seminars for other doctorsDeveloping a referral networkPromotion through satisfied patients Industrial tie-up for routine examination

of their employees

Factors that affect Demand - Attitude Perspective

Reasons for Low Demand:Sophisticated technology will automatically

trigger demandBelief that patients, if need eye care, will

definitely come to usProviding Service as per Providers’

ConvenienceSystems & Procedures are not patient friendlyGap between Patients’ Expectations &

Providers’ PerceptionLack of patient orientation

Factors that demand attitude :- perspective

Skilled Doctor & other staffStandard Clinical ProtocolGood Administrative System &

ProceduresCourtesy & PolitenessProper ExplanationClean environment and comforts

meeting or exceeding expectationsSystems to monitor clinical outcomes &

Patient satisfaction

Factors that promote Demand - to the Rural areas & the poor

Reasons for Low Demand:

No one to EscortFear of SurgeryIgnoranceNo desire for surgeryNo time for SurgeryNo money for

surgery

Promoting Demand:Counseling to build

confidence that Staff will take care

Health education Explain benefits Free Transport/FoodFree/subsidized

Surgery

CRM AND STRATEGY CRM AND STRATEGY MANAGEMENTMANAGEMENT

What is CRM? What is CRM?

• The approach of identifying, establishing, maintaining, and enhancing lasting relationships with customers.”

• CRM “is a business strategy that aims to understand, anticipate and manage the needs of an organisation’s current and potential customers”.(know,target,sell,service)

• CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers

CRM CRM

Customer Relationship Management ICICI.pdf