All operations have the same problem…
They all have times when they are busy and times when they are slack. Feast or Famine.
It is the way of the world:
- If you sell Christmas crackers it will always be busy in October
- If you run a gym you will always have a rush in January
- Inner-city casualty wards are mayhem on Saturday nights
- Canteens are busy at lunchtime
Whatever you do for a living, you will suffer from waves of demand. Those waves are either expensive (you hold too much capacity) or painful (you don’t serve the customer). Neither outcome is a great.
Minimising the pain
The solutions are simple:
- Smooth out demand – If I catch the train into London at 9am not 7am it is half the price
- Flex your capacity – The 9am train is also half the length
The flatter you can make demand, the easier it becomes to match supply to it
Smoothing things out — as much as you can — is a good thing to do.
- It is good for the customer – they aren’t left waiting
- It is good for your employees – they aren’t rushed of their feet
- It is good for your assets – you have time to maintain them
- And it is good for your bottom line.
Of course you can’t smooth demand out completely. Customers want what they want, when they want it. But you can work at it.
The wave maker
If it makes sense to smooth out demand why do we do so many things that amplify it?
- Why do we offer bulk buy discounts to stimulate demand? (will I use more shaving foam if I get 3 for 2?)
- Why do we have that last sales push at month end (is it surprising the following week is quiet?)
- Why do we buy all our materials at the same time (is the economy of scale really an economy?)
- Why do we do our year-end finances at year-end (could we not stretch them out a little more?)
Don’t we have plenty of waves without making more?
Author: Jonty Pearce
Published On: 8th Feb 2016 - Last modified: 13th Nov 2018
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