Session III Service

Operations
Management
Yield Management
A Lecture-Presentation by Prof. Deepak
Jakate
Strategies for Matching Supply and
Demand for Services

DEMAND SUPPLY
STRATEGIES STRATEGIES

Partitioning Increasing
demand customer
Developing participation
Sharing
complementary
capacity
services
Establishing
Scheduling
price
Developing Cross- work shifts
incentives
reservation training
systems employees
Promoting Creating
Off - peak adjustable
Using
demand capacity
Part - time
employees

Yield
management
Demand Strategies
• Partitioning demand
(Photocopying, repair vs.
replace ).
• Developing complementary
services (Barber Shop, Internet
Café, laundomat treadmill).
• Establishing price incentives (off
season discounts, ERP).
• Developing reservation systems
• Promoting off - peak demand
Supply Strategies
• Increasing customer participation
(self service)
• Sharing capacity (counter
-cyclicality)
• Scheduling work shifts (over
lapping shifts)
• Cross – training employees
• Creating adjustable capacity
• Using part - time employees
Ideal Characteristics for Yield
Management

• Relatively Fixed Capacity

• Ability to Segment Markets
• Perishable Inventory
• Product Sold in Advance
• Fluctuating Demand
• Low Marginal Sales Cost and High
Capacity Change Cost
Managing Waiting
Lines
Cultural Attitudes
• “Americans hate to wait. So business
is trying a trick or two to make lines
seem shorter…” The New York
Times, September 25, 1988
• “An Englishman, even when he is by
himself, will form an orderly queue of
one…” George Mikes, “How to be an
Alien”
• “In the Soviet Union, waiting lines
were used as a rationing device…”
Hedrick Smith, “The Russians”
Waiting Realities

• Inevitability of Waiting: Waiting

results from variations in arrival
rates and service rates
• Economics of Waiting: High
utilization purchased at the price
of customer waiting. Make waiting
productive (salad bar) or profitable
(drinking bar).
Laws of Service
•Maister’s First Law:
Customers compare expectations
with perceptions.
•Maister’s Second Law:
Is hard to play catch-up ball.
•Skinner’s Law:
The other line always moves faster.
•Jenkin’s Corollary:
However, when you switch to
another other line, the line you left
moves faster.
Remember Me
•I am the person who goes into a
restaurant, sits down, and patiently
waits while the wait-staff does
everything but take my order.
•I am the person that waits in line for
the clerk to finish chatting with his
buddy.
•I am the one who never comes back
and it amuses me to see money spent
to get me back.
•I was there in the first place, all you
had to do was show me some courtesy
and service.
Psychology of Waiting
•That Old Empty Feeling:
Unoccupied time goes slowly
•A Foot in the Door: Pre - service
waits seem longer that in - service
waits
•The Light at the End of the Tunnel:
Reduce anxiety with attention
•Excuse Me, But I Was First: Social
justice with FCFS queue discipline
•They Also Serve, Who Sit and
Wait: Avoids idle service capacity
Approaches to Controlling
Customer Waiting
• Animate: Disneyland distractions,
elevator mirror, recorded music
• Discriminate: Avis frequent
renter treatment (out of sight)
• Automate: Use computer scripts
to address 75% of questions
• Obfuscate: Disneyland staged
waits (e.g. House of Horrors)
The Art of Service Recovery
“To err is human; to recover,
divine”

• Measure Cost of Lost Customer

• Listen Carefully
• Anticipate Need for Recovery
• Act Fast
• Train Employees
• Empower the Frontline
• Inform Customers of Improvement
Essential Features of Queuing
Systems

Renege

Arrival Queue
process Departure
Calling Queue discipline Service
population configuration process
Balk No future
need for
service
Arrival Process

Arrival
process

Static Dynamic

Random Random arrival Customer-

Facility- exercised
arrivals with rate varying
controlled control
constant rate with time

Accept / Reject Price Appointments Reneging Balking

Distribution of Patient Interarrival Times

40
Relative frequency, %

30

20

10

0
1 3 5 7 9 11 13 15 17 19

Patient interarrival time, minutes

Temporal Variation in Arrival Rates

3.5 140
3 130
2.5 120

Percentageof averagedaily
110

physicianvisits
2
100
1.5
o ur

90
rh

1
e
llsp

80
a

0.5
ec

70
g
era

0 60
v
A

1 3 5 7 9 11 13 15 17 19 21 23 1 2 3 4 5
Hour of day Day of week
Poisson and Exponential Equivalence

Poisson distribution for number of arrivals per hour (top view)

One-hour
1 2 0 1 interval
Arrival Arrivals Arrivals Arrival

62 min.
40 min.
123 min.

Exponential distribution of time between arrivals in minutes (bottom view)

Queue Configurations

Multiple Queue Single queue

Take a Number
Enter
3 4 2

8 6 10
12 7
11 9
5
Queue Discipline

Queue
discipline

Static
Dynamic
(FCFS rule)

selection Selection based

based on status on individual
of queue customer
attributes

Number of Processing time

customers Round robin Priority Preemptive of customers
waiting (SPT rule)
Outpatient Service Process Distributions

15 15
10
.%

10
tive
cy
ela
n

ency
,
5

%
e
R
u

5
freq

u
elativefreq
0
0
1 11 21 31 41 1 11 21 31 41

R
Minutes Minutes

15

10
elativefrequency,
%

0
1 11 21 31 41
R

Minutes
Service Facility Arrangements
Service facility Server arrangement
Parking lot Self-serve
Cafeteria Servers in series
Toll booths Servers in parallel
Supermarket Self-serve, first stage;
parallel servers,
second stage
Hospital Many service centers
in
parallel and series,
not all
used by each patient
Questions?
Thank You !
Deepak Jakate
Managing Partner
Envision Management Services
Supply Chain Excellence
Six Sigma
Training & Education
Business Consulting
Investment Advisory
Secondary Research

email : deepak.jakate@rediffmail.com
mobile : 09892700607