Deck 11: Managing Capacity and Demand

Question 1

The strategy of segmenting demand to reduce variation makes use of the fact that demand for a service seldom is derived from a homogeneous source.

Answer 1

True

Question 2

Using part-time personnel at fast-food restaurants allows capacity to vary with demand.

Answer 2

True

Question 3

The workshift scheduling problem is important in service organizations that face a cyclic demand for their services.

Answer 3

True

Question 4

Yield management is the process of allocating a fixed perishable resource to several market segments in the most profitable manner.

Question 5

The use of a ski-resort hotel for business conventions during the summer is an example of using the complementary service strategy.

Question 6

The critical fractile is a cumulative probability of demand.

Question 7

Time perishability of service capacity is a challenge for service managers because customers demand immediate service.

Question 8

Expected loss for an overbooking reservation strategy would be calculated by multiplying the loss for each no-show possibility and its probability of occurrence, and then adding the products.

Question 9

A disadvantage of yield management is that it cannot be implemented in real time.

Question 10

When peaks of activity are persistent and predictable such as meal times for restaurants, off-duty personnel can be placed on standby to supplement regular employees.

Question 11

Yield management is a strategy that manages both demand and capacity.

Question 12

Differential pricing is an attempt to make peak usage periods unattractive by imposing a penalty on the consumer for using the service during peak periods.

Question 13

An example of segmenting demand is seen when movie theaters offer matinee prices before 6:00 p.m.

Question 14

A drawback to increased consumer participation is the fact that service quality is no longer completely under the control of the provider of the service.

Question 15

SABRE is the name for American Airlines' yield management system.

Question 16

Cross-training employees as a strategy to increase flexibility is feasible only when there exist tasks, the demands for which peak at different times.

Question 17

Some restaurants use tables and chairs instead of booths to create more flexible capacity.

Question 18

Yield management is a pricing and capacity allocation system that was developed by American Airlines.

Question 19

Workshift scheduling attempts to deal with the service utilization problem by controlling the demand for the service and partitioning it so that utilization is uniform.

Question 20

Overbooking is a strategy that can be used to smooth demand.

Question 21

A restaurant that features special lunchtime combo meals is providing all of the following benefits, except: ________.

A) promotes off-peak demand
B) increases customer satisfaction
C) decreases service times
D) segment demand

Question 22

Bars that offer happy hours in the afternoon are using the strategy of ________.

A) creating adjustable capacity
B) developing complementary services
C) increasing customer participation
D) promoting off-peak demand

Question 23

Which of the following is not a characteristic of firms using yield management?

A) Ability to segment their market.
B) Perishable inventory.
C) Variable capacity.
D) Product sold in advance.

Question 24

A health club's offering a reduced rate membership for students to workout before 4:00 p.m. on weekdays is ________.

A) promoting off-peak demand
B) partitioning demand
C) using yield management
D) offering price incentives

Question 25

Which of the following is not a characteristic of yield management?

A) Capacity is relatively fixed.
B) There is one homogeneous customer class.
C) The service is considered a perishable inventory.
D) Demand fluctuates yet is somewhat predictable.

Question 26

Service capacity is defined in terms of an achievable level of output per unit time.

Question 27

The purpose of differential pricing is to ________.

A) make peak period usage unattractive
B) make off-peak usage attractive
C) charge customers according to their ability to pay
D) adjust capacity to demand

Question 28

Faced with variable demand and a perishable capacity, a service manager can smooth demand by ________.

A) using part-time help during peak hours
B) scheduling workshifts to vary workforce needs according to demand
C) increasing the customer self-service content of the service
D) using reservations and appointments

Question 29

A good overbooking strategy should ________.

A) minimize the expected opportunity cost of idle service capacity
B) balance the expected opportunity cost of idle service capacity and expected cost of turning away customers who have reservations
C) minimize the expected cost of turning away reservations
D) none of the above; services should try to avoid overbooking

Question 30

Several approaches to demand management exist, but only ________ seeks to maximize revenue.

A) promoting off-peak demand
B) reservation systems
C) offering price incentives
D) yield management

Question 31

Which of the following four steps in 'daily workshift scheduling' is out of order?

A) Forecast demand.
B) Convert to operator requirements.
C) Assign operators to shifts.
D) Schedule shifts.

Question 32

In using the critical fractile criterion P(d < x) = Cᵤ/(Cᵤ + Cₒ) for overbooking, the 'd' refers to the ________.

A) cost of overestimating demand
B) cost of underestimating demand
C) number of rooms overbooked
D) number of no-shows based on past experience

Question 33

A cruise ship has available a certain number of rooms in each of 10 categories of appointments ranging from a two-bunk inside cabin to a suite with an outside patio and indoor sitting area. If a passenger requests a sailing date in which the desired cabin is sold out, which of the following actions would be considered the least viable alternative for the cruise line?

A) Offer an upgraded cabin at a reduced price.
B) Attempt to steer the passenger to an available date.
C) Overbook the cabin.
D) Offer a downgraded cabin with special privileges such as a $100 certificate for use in the casino.

Question 34

The strategy of segmenting demand is feasible only when ________.

A) demand is not from a homogeneous source
B) demand is cyclic and predictable
C) arrivals for service are random
D) making appointments is impossible

Question 35

Which of the following is not a strategy to manage demand?

A) Cross-training employees.
B) Offering price incentives.
C) Developing reservation systems.
D) Partitioning demand.

Question 36

Level demand and chase capacity are the two generic strategies for capacity management.

Question 37

Which of the following is not an example of the differential pricing policy?

A) Weekend and night rates for long-distance telephone calls.
B) Difference in hospital fees for walk-in and scheduled services.
C) Peak-load pricing by utility companies.
D) None of the above.

Question 38

For a chase demand strategy, which of the following does not have a high trade-off?

A) Employee utilization.
B) Labor-skill level.
C) Labor turnover.
D) Supervision required.

Question 39

Which of the following is not a strategy for managing capacity?

A) Developing complementary services.
B) Using part-time employees.
C) Forecasting demand.
D) Scheduling shifts.

Question 40

Which of the following strategies is inappropriate for managing capacity and demand?

A) Smooth customer demand by offering price incentives.
B) Scheduling staff to meet variations in forecasted customer demand.
C) Decrease customer participation in the service process.
D) Promoting off-peak use of facilities.

Question 41

A medical clinic has two doctors and each can treat 25 patients a day. The doctors see walk-in patients whose arrival times cannot be controlled, and also patients who have made appointments. Knowing the expected number of walk-ins per day, appointments are scheduled to utilize the doctors fully. The following table gives the expected number of walk-ins for a particular week: What is the total number of appointments that can be scheduled during this week?

A) 30
B) 35
C) 40
D) 45

Question 42

________ is not a strategy for reduction of customer-induced variability.

A) Adapt to customer skill levels
B) Require reservations
C) Limit service breadth
D) Target customers based on capability

Question 43

When yield management is implemented, which one of the following does not result?

A) Consumer surplus increases.
B) Multiple prices are offered.
C) Capacity is more fully utilized.
D) Market for the service is segmented.

Question 44

________ variability is not one of the five sources of customer-induced variability.

A) Arrival
B) Capability
C) Effort
D) Demand

Question 45

Which of the following is not an example of a yield management application?

A) RyerFirst.
B) SABRE.
C) HIRO.
D) Restaurant Catering Software.

Question 46

________ is not a strategy for accommodating of customer-induced variability.

A) Provide generous staffing
B) Cross-train employees
C) Reward increased effort
D) Do work for customers

Question 47

________ is not a characteristic appropriate for a yield management strategy.

A) Relatively fixed capacity
B) Steady demand
C) Ability to segment markets
D) Products sold in advance