DISCUSSION QUESTIONS
1. Why do service organizations lack the capability to inventory their services? Compare a car repair
and maintenance service with an automobile manufacturer/dealer in terms of inventory capability.
In general, service organizations lack the capability to inventory their services because of two basic
characteristics: simultaneous production and consumption; and perishability. Because services are
produced and consumed simultaneously, they generally cannot be produced prior to the customer
In comparing car repair and maintenance services with an automobile manufacturer/dealer, it is
obvious how inventory plays an entirely different role in two types of firms in the same industry:
On the one hand, the car repair service has no real inventory capability. The shop can be
On the other hand, an automobile manufacturer or dealer can hold cars in inventory if a
sale is not made on a particular day. While a loss is incurred for every day an automobile
2. Discuss the four scenarios presented in Figure 13.1 and presented in the text (excess demand,
demand exceeds optimum capacity, demand and supply are balanced, excess capacity) in the context
of a professional basketball team selling seats for its games. What are the challenges for
management under each scenario?
This discussion should be preceded with a short lecture/discussion about the differences in maximum
capacity utilization and optimum capacity utilization. In an excess demand situation, some people
When demand exceeds optimum capacity, everyone who wants a ticket will get one. Capacity will be
stretched beyond what is ideal and there could be a problem with maintaining optimal levels of
[Note: If either of these first two scenarios occurs continually, excess wear and tear on the facilities
If demand and supply are balanced, everyone who wants a ticket will get one. Seats will be filled at
During situations of excess capacity everyone who wants a ticket will get one, but there will be
3. Discuss the four common types of constraints (time, labor, equipment, and facilities) facing service
businesses and give an example of each (real or hypothetical).
This question allows students to explore the various types of constraints facing service organizations
Time is the primary constraint for organizations that essentially sell time, advice, counsel,
personal services, etc. Examples include lawyers, consultants, doctors, accountants, and others.
Labor is the primary constraint in labor-intensive services where individual workers can produce
Equipment is a third common constraint for service businesses. Some services depend heavily on
certain types of equipment to deliver the service, and the constraint they face is the capacity of the
equipment. Examples include delivery services dependent on trucks and aircraft,
Facilities are a very common constraint in services like hotels, restaurants, hospitals, airlines,
4. How does optimal capacity utilization differ from maximal capacity utilization? Give an example of
a situation in which the two might be the same and one in which they are different.
Optimal capacity utilization occurs when the organization’s resources are being employed at some
ideal level (sometimes difficult to determine) where service quality can be consistently delivered and
Maximum capacity utilization occurs when the organization’s resources are being used to their
Examples where optimal and maximum use of capacity might be the same include entertainment,
5. Choose a local restaurant or some other type of service with fluctuating demand. What is the likely
underlying pattern of demand? What causes the pattern? Is it predictable or random?
This question allows students to apply the concepts of understanding demand patterns to a situation
they are familiar with. This question works very well as an in-class exercise. Students can be divided
6. Describe the two basic strategies for matching supply and demand and give at least two specific
examples of each.
This question works very well as an in-class exercise when combined with the exercise described in
7. What is yield management? Discuss the risks in adopting a yield management strategy.
Yield management is a very useful concept for students to begin to grasp. The discussion and
examples provided in the book are intentionally kept simple. The important point for students is to
8. How might yield management apply in the management of the following: a Broadway theater? a
consulting firm? a commuter train?
In each of these cases, the students should first identify the constraint on capacity (e.g., seats,
time/hours, or cars/seats, respectively) and the underlying demand patterns. Then they can begin to
9. Describe the four basic waiting line strategies, and give an example of each one, preferably based on
your own experiences as a consumer.
The four basic strategies are:
Employ operational logic – This strategy can involve a “one time fix” (see Chapter 10),
where the organization observes that it has a waiting problem and focuses in on designing
Establish a reservation process – This strategy involves essentially “inventorying demand”
Differentiate waiting customers – This strategy differentiates customers on various criteria to
Make waiting more pleasurable – This strategy offers a variety of possibilities based on