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Should you Balance Capacity with Demand? | Rowtons Training by Laurence Gartside - YouTube
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Should you ever balance capacity with demand?聽
Sounds sensible doesn't it? Nice and efficient,聽聽
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no wasted capacity, maximizing output.聽
That's all true, so why is it often such聽聽
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a terrible terrible idea and one of the聽
most crucially misunderstood concepts in聽聽
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Operations Management? Hi, I'm Laurence Gartside聽
trainer and coach in Operations Management.聽聽
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So I want you to think about this. Don't you聽
hate it when you go into a supermarket to pick聽聽
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up a few essentials and head to the checkout and聽
oh no, there's a massive long queue to get served.聽聽
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The one cashier is sat behind the till bleep,聽
bleep with like five other people in front of聽聽
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you with full trolleys and the other empty聽
cashier counters with no one serving and you think聽聽
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how hard can it be to hire the right amount聽
of people? Does it make you angry and think聽聽
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next time i'll just go somewhere else!聽
Being a customer waiting in a long queue聽聽
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is pretty annoying when the solution looks聽
so obvious but imagine the decision of the聽聽
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supermarket manager who has to decide how聽
many cashiers to hire for the supermarket.聽聽
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Actually, let's make our example super simple just聽
one cashier in a convenience store corner shop.聽聽
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The manager does some analysis and works out聽
that one cashier is perfectly able to serve,聽聽
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able to serve 60 people per hour one every minute聽
and they are going to work full-time for 10 hours聽聽
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a day. Well, keep it simple and ignore breaks et聽
cetera. So that's the capacity of 600 per day,聽聽
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the manager also looks at the historical demand聽
data and sees that on average the shop gets聽聽
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600 customers per day in the 10-hour day 60 people聽
per hour. What good luck? That's perfect! But, do聽聽
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customers turn up exactly every minute throughout聽
the whole day? No, of course not. There's always聽聽
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variation of demand sometimes no customers come聽
to the checkout in a given minute and sometimes聽聽
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two or more can arrive in a particular minute聽
and the queue grows but these two things don't聽聽
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cancel each other out. When there was no customer,聽
that capacity is lost. You can't catch that up,聽聽
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that's just lost time for the cashier and then聽
if two customers arrive in the next minute,聽聽
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well we serve one whilst the other waits in聽
a queue. Then, if from the next minute new聽聽
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customers do actually continue to arrive perfectly聽
one customer exactly every minute then the queue聽聽
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of one person waiting would remain for the rest聽
of the day. The cashier always unable to catch up.聽聽
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The losses accumulate but when the聽
demand and capacity rates match聽聽
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you can never catch up. In reality, in our example聽
shop with one cashier who can serve 60 people per聽聽
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hour, they really can and in a shop which does on聽
average have 60 customers per hour, in reality we聽聽
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would get a shop with a really long queue that聽
continued to grow throughout the whole day. Only聽聽
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with the backlog finally clearing at the end of聽
the day when new customers could no longer arrive.聽聽
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If it was a 24-hour shop, the queue聽
would grow forever to infinity! Well,聽聽
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okay it wouldn't because we customers would start聽
to get so angry with the long wait they would just聽聽
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leave and we lose the customers until we find聽
a status quo of a moderate line of customers.聽聽
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Enough to piss everyone off but not enough for聽
many people to choose to go somewhere else.聽聽
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This balanced capacity with demand though is聽
definitely not good for the business. We mentioned聽聽
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this is caused by aiming for a hundred percent聽
utilization when we have variation of demand but聽聽
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it's worse than that because inevitably we have聽
variation of capacity too. Our cashier doesn't聽聽
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always take one minute to process each customer,聽
quite a few take only 30 seconds some take three聽聽
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minutes which contributes to exactly the same聽
problem. Remember, if customers always arrived聽聽
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every minute exactly and our cashier could always聽
serve a customer in exactly one minute then our聽聽
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100 capacity utilization at full expected output聽
would work perfectly! Now as operations managers,聽聽
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we can work on reducing the variation of聽
capacity, our cashier's serve time consistency but聽聽
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in this case that's mostly based on the size of聽
each customer's shopping trolley. So in this case聽聽
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that's not really an option. Reducing variation聽
of demand is a massively important topic of聽聽
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all operations management but again in our聽
supermarket making customers book appointments聽聽
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with the cashier to turn up one every minute聽
really isn't what supermarkets are about.聽聽
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So that only leaves the management choice of聽
how much capacity, how many cashiers to hire.聽聽
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In business operations, what we find is聽
that queue times start to drastically聽聽
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increase when we go above a 70 to 80 percent聽
utilization depending on the level of variation聽聽
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that means getting comfortable with seeing the聽
checkout cashier or your expensive machine doing聽聽
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nothing for large portions of time not because of聽
problems but just because it is waiting for work,聽聽
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whether you are a build toward a car factory, a聽
family doctor surgery, a telephone call center,聽聽
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or a restaurant kitchen. Planning your capacity聽
utilization is an essential choice with the聽聽
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eternal temptation to just take on that bit more聽
work or trim back on capacity or staffing because聽聽
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you can see that excess 30 percent capacity. So聽
can you match capacity with demand and have 100聽聽
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capacity utilization? Yes, you can take on more聽
work and get more done but beware because waiting聽聽
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times and therefore queues will skyrocket to聽
infinity. If you want to keep learning more about聽聽
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Operations Management, Supply Chain, Inventory and聽
Process Improvement. Check out my courses over on聽聽
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my website rowtonstraining.com. Don't forget to聽
like, subscribe, ring the bell and comment on your聽聽
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queuing frustrations down below. Alright then,聽
that's all from me until next time. Crack on!
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