Demand and capacity management
If a manufacturer of cars, washing machines or furniture fails to sell some of its products on a particular day or over a certain period they are stored for sale at a later
In service industries the matching of capacity and demand is particularly difficult. There is either too much demand for the capacity, putting a strain on resources, or too little demand, giving rise to unused capacity and a loss in revenue. This is known as the perishability factor, whereby revenue from a unit of capacity, e.g. a hotel bedroom that’s not sold on a particular day, is lost forever, unlike a product that if unsold can be stored in a warehouse for sale at a later date. Therefore services need to develop some understanding of demand patterns. While the level of demand can sometimes be outwith the organization’s control, strategies are available for measuring demand, along with capacity, with a view to bringing them into balance.