Managing demand and supply in service business

madugundurukmini By madugundurukmini, 6th Dec 2013 | Follow this author | RSS Feed | Short URL http://nut.bz/3benm-he/
Posted in Wikinut>Business>Sales & Marketing

A delicate balance may have to be struck between profitability and quality of service to satisfy customers.

The matching of supply and demand

Service organization face a particular problem when it comes to demand management and capacity utilization like manufacturing, services cannot pile up their `output' in a warehouse and wait for demand to materialize.

In service marketing the matching of supply and demand is particularly difficult because of the perishable nature of services which cannot be stored and the participation of customers in the certain of the service. Sometimes their reaction may be quick or slow; this creates variabilities in capacity.

Many services carry relatively high fixed cost.

It is difficult to match demand and supply but it should be managed for two reasons.
First, when demand is below capacity then the cost will increase, profitability will be eroded and the service may even become unproductive. Many services carry relatively high fixed cost.

Secondary, when the demand and capacity supply are out of balance, the service itself take on a different form. This can be true when a business is running over its optimal capacity. It is not simply a matter of aiming for maximum capacity utilization. A delicate balance may have to be struck between profitability and quality of service to satisfy customers. This is known as `optimum capacity utilization'. The following are the important measures to manage the demand and supply effectively. For this purpose financial as well as volume measure should be taken.

Tags

Business, Demand, Managing, Service, Supply

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author avatar Fern Mc Costigan
7th Dec 2013 (#)

Nice post!

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