Managing Constraints on Capacity:
Demand cannot be controlled perfectly. Efficient management of resources needs that the firm should consider the changing capacity by increasing it to meet higher demand and contract it when the demand is low. Depending on the type of service, service firms are faced with various constraints.
- Time: In case of some services, the primary constraint on service production is time. For an example, ‘a consultant, a lawyer or a hairdresser all sell their time. The profits are lost if their time is not used productively. In the same way time cannot be created if there is excess demand.
Time is a major constraint from the point of view of individual service provider. Time capacity can be increased by operating for longer hours. This cannot be an option if the time does not match the customer’s needs. Its capacity can also be increased by shortening the length of the time in serving the customer.
Time can be saved by using the slack demand time for repairs and maintenance, since the functions of repairs and maintenance has to be performed sometimes or the other: However, if they are kept away from peak demand periods, the overall productivity will be improved. E.g. legal, consulting, accounting, medical.
- Labour: In the case of labour intensive unit the number of service providers is large. Here, labour or staffing levels can be the primary capacity constraint. A law firm, consulting firm or a repair maintenance contractor all fare the same problem. At certain times the demand for their organisations’ services cannot be met as the staff is already operating at peak capacity. In some cases it is easier to hire and fire. But it can be costly if the employees require extensive training in order to provide service. This can be avoided by imply increasing the working hours of the regular staff at the time of high demand and paying overtime.
The capacity of the workforce can be made more flexible through extensive cross training This enables the employees to perform several different jobs It is also possible to increase the productivity and hence work capacity. E.g. Law firms, accounting firms, consulting firms, health clinics.
- Equipment: Equipment may be critical constraints for service firms. In case of, transportation, the trucks or the planes required to service demand may have capacity limitations. Especially during festivals, summer and winter vacations the delivery service providers are faced with this problem. Telecommunication companies face equipment constraints when everyone wants to use the telephone lines at the time of peak hours.
The use of productivity enhancement tools can increase the capacity of fixed work force. They can be kept free from doing repetitive task. Example, Banks have built ATMs, manufacturers of sophisticated computers and electronic products have build self diagnostic components, into their products in order to avoid sending costly engineers into the field to carry out routine analysis. In many kinds of firms computers automate ordering and billing activities and keep track of customer’s purchase history. This has transformed operations performed by the clerical staff. E.g. Delivery services, telecommunication, utilities, health club.
- Facilities: Most of the service firms are faced with the problem of limited facilities. Education institutions like schools and colleges are constrained by the number of rooms and the number of seats in each class, restaurant capacity is restricted to the number of tables and seats available, Airlines are limited by the number of seats in the aircraft and so on.
Physical facilities are very difficult to adjust. Adding a building or a room or an aircraft tends to increase the capacity but then it will add to the cost. However, a service firm with a multiple outlet may be able to accommodate excess demand at one unit by sending the extras to another unit. Temporary renting is another solution. E.g. Hotels, restaurants, hospitals, airlines, schools and theatres.
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