What is capacity management in service sector?

Answer 1

Capacity management is the ability to balance demand from customers and the ability of the service delivery system to satisfy the demand . This places an emphasis on understanding first the nature of demand by forecasting (Lovelock, 1984) and second the options for managing capacity to meet the expected demand. Sasser (1976) has suggested two basic strategies for managing capacity in services of "Level" and "Chase", the former applicable where capacity is limited and hence the focus is on influencing demand to be in line with capacity, and the latter strategy being possible when supply can be changed to keep in line with demand. Capacity management in services to match supply and demand has a direct influence on the ability of the service delivery system to achieve service quality and resource productivity targets. Capacity management in service operations is a testing activity for operations managers because the nature of the service delivery process and the involvement of the customers in the process restricts the normal options open for controlling the process to match supply with demand; namely, altering the capacity, holding and inventory in anticipation of demand, and requiring customers to wait for the service.