![]() However, businesses besides Disney have made large profits in lodging, restaurant, and recreational facilities. Disney executives had learned well the lessons of Orange County, California, and Disneyland, where revenue is limited to on-site entertainment, food, and souvenir dollars. Not considering the competitive reaction-The Orlando, Florida lodging industry’s response to the announcement of Disney World’s opening is a classic example of this type of service management fiasco. The room capacity beyond the level supported by the central services was wasted. However, the number of guests adjusted itself to the level of occupancy that the central services could support, not to the level of room capacity. The fact that room rentals contribute up to 90 % of total revenue and that tennis courts, swimming pools, meeting rooms, parking areas, and so on contribute next to nothing, or nothing, convinced the operator to create an imbalance in favor of revenue-producing activities. Not increasing all-around capacity-A resort operator decided to increase the number of rooms in a lodging facility and not to expand the central services required to support the additional guests. Consequently, the airlines “mothballed” many of the jumbos or sold them if they could. However, when competitors began flying smaller planes more frequently on the same routes and reaping a good number of passengers, it became painfully apparent to many airlines that frequency (and, to some extent, timing) of departures is the key to market share. ![]() In an effort to fly more seats, the airlines lined up to purchase jumbo jets. The conclusion was obvious: Fly the seats, and you get the passengers. 1 Conversely, the dominant airline would carry a disproportionately larger share of the total passengers flown. Increasing the wrong kind of capacity-In studying the battle statistics in the war for market share among airlines, competitors observed that an air carrier in a minority position on a particular route would often get a smaller proportion of the total passengers flown on the route than the share of seats flown. So, the “odd characteristics” often make all the difference between prosperity and failure.Ĭonsider the following service managers’ actions, which resulted in fiasco: And if one looks at service industries, it is quite apparent that successful service executives are managing the capacity of their operations and that the unsuccessful are not. Given this distinction, it seems clear that there are characteristics of a service delivery system that do not apply to a manufacturing one and that the service manager has to consider a different set of factors from those that would be considered by his or her counterpart in manufacturing. Whereas the consumption of goods can be delayed, as a general rule services are produced and consumed almost simultaneously. Because of the intangible nature of a service’s output, establishing and measuring capacity levels for a service operation are often highly subjective and qualitative tasks. Because a service cannot be transported, the consumer must be brought to the service delivery system or the system to the consumer.Ĥ. There is a high degree of producer-consumer interaction in the production of service, which is a mixed blessing on the one hand, consumers are a source of productive capacity, but on the other, the consumer’s role creates uncertainty for managers about the process’s time, the product’s quality, and the facility’s accommodation of the consumer’s needs.ģ. The perishability of services leaves the manager without an important buffer that is available to manufacturing managers.Ģ. Services are direct they cannot be inventoried. Unfortunately, these researchers never fully explore the implications of these strange traits:ġ. The literature on capacity management focuses on goods and manufacturing, and many writers assume that services are merely goods with a few odd characteristics. He goes on to discuss several ways service managers can alter demand and influence capacity. In this rundown of the juggling feat service managers perform, the author discusses the two basic strategies-“chase demand” and “level capacity”-available to most service companies. Balancing the supply and demand sides of a service industry is not easy, and whether a manager does it well or not will, this author writes, make all the difference. ![]() What makes service industries so distinct from manufacturing ones is their immediacy: the hamburgers have to be hot, the motel rooms exactly where the sleepy travelers want them, and the airline seats empty when the customers want to fly.
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