CAPACITY MANAGEMENT PT 3 of 3 | COPING WITH DEMAND FLUCTUATIONS (STRATEGIES) | SITORA INOYATOVA

Summary

This video discusses strategies for managing demand fluctuations, particularly relevant for seasonal businesses like ice cream shops. It outlines three approaches: 'Level Capacity Plan', which maintains consistent production despite varying demand; 'Chase Demand', adjusting production to match demand peaks and troughs; and 'Demand Management', which involves manipulating demand to fit capacity. Examples include using storage for non-perishable goods, hiring temporary staff for peak seasons, and offering promotions to boost off-peak sales. The video is an educational resource from Satori net, a module leader at Westminster International University in Tashkent.

Takeaways

• 🍦 The video discusses three strategies for managing demand fluctuations in businesses, particularly seasonal ones like ice cream shops.
• 🔄 The first strategy, 'Level Capacity Plan', suggests maintaining a constant capacity regardless of demand fluctuations, suitable for non-perishable goods with a reasonable shelf life.
• 📉 The second strategy, 'Chase Demand', involves adjusting capacity to match demand, which is more applicable to perishable goods and requires flexibility in staffing and equipment.
• 🏢 Examples of businesses using 'Level Capacity Plan' include mass production companies like steel manufacturers and cigarette producers, where demand is relatively stable.
• 🌊 'Chase Demand' is exemplified by seasonal businesses such as seaside restaurants, which hire temporary staff during peak seasons.
• 🎯 The third strategy, 'Demand Management', focuses on influencing demand to match available capacity, offering various tactics like pricing strategies and service level adjustments.
• 💰 Price differentials are a key method within 'Demand Management', where prices are adjusted based on demand, as seen with flowers on International Women's Day.
• 📅 'Scheduling promotions' is another tactic to influence demand, such as promoting turkeys during off-peak periods to balance seasonal fluctuations.
• 🛒 'Service differentials' allow businesses to adjust service quality based on demand, which can affect customer experience during peak times.
• 🏫 The video concludes with a practical application of 'Demand Management' for an ice cream business, suggesting strategies like offering ice cream to hotels or running promotions during off-peak seasons.

Q & A

What are the three strategies discussed in the script for coping with demand fluctuations?

The three strategies discussed are level capacity plan, chase demand, and demand management.

What does the level capacity plan strategy involve?

The level capacity plan strategy involves ignoring demand fluctuations and maintaining a constant capacity with the same number of staff, processes, and equipment throughout the year.

For which type of goods is the level capacity plan strategy recommended?

The level capacity plan strategy is recommended for non-perishable goods that can be stored for a reasonable shelf life.

What are the conditions for a business to follow the level capacity plan strategy?

A business should follow the level capacity plan strategy if the product is suitable for storage, non-perishable, and if demand is relatively reliable to avoid the risk of large stock-outs or excessive stock levels.

What is the main difference between the level capacity plan and chase demand strategies?

The main difference is that the level capacity plan maintains a constant capacity regardless of demand fluctuations, while the chase demand strategy adjusts the company's capacity to reflect changes in demand.

How does the chase demand strategy handle seasonal businesses?

The chase demand strategy handles seasonal businesses by adjusting staff, working hours, and equipment according to the demand fluctuations, such as hiring temporary staff during peak seasons and laying them off during low demand periods.

What is the demand management strategy and how does it differ from the other two strategies?

The demand management strategy involves changing or influencing the demand to fit available capacity. It differs from the other two strategies as it focuses on altering demand rather than adjusting supply to meet demand.

What are the four ways to change demand according to the demand management strategy?

The four ways to change demand are: 1) constraining customer access, 2) using price differentials, 3) scheduling promotions, and 4) offering service differentials.

Can you provide an example of how a seasonal business like a seaside restaurant might use the chase demand strategy?

A seaside restaurant might hire additional waiters during the summer season when customer demand is high and reduce staff during the winter when fewer customers are present.

How can an ice cream business apply the demand management strategy during the off-peak winter season?

An ice cream business can apply the demand management strategy by offering ice cream to restaurants and hotels during the off-peak season, scheduling promotions like 'buy one get one free', or reducing prices to stimulate demand during winter.

What is the significance of the example of cigarettes in the context of the level capacity plan strategy?

The example of cigarettes illustrates that despite some seasonal variations, the demand for cigarettes remains fairly consistent throughout the year, making it suitable for the level capacity plan strategy due to its non-perishable nature and reasonable shelf life.