Deck 15: Managing Demand and Capacity

Question 1

Which of the following service businesses is LEAST likely to experience wide fluctuations in demand over time?

A) Baptist Hospital emergency room
B) Landmark Trust Bank
C) McDonald's restaurants
D) Houston Police Department
E) Becker and Rosen Accounting Services

Answer 1

B

Question 2

Peak demand regularly exceeds capacity in all of the following service businesses EXCEPT:

A) Marriott hotels
B) Rome's public transportation system
C) Wendy's restaurants
D) USA insurance company
E) H&R Block tax preparers

Answer 2

D

Question 3

Which of the following is NOT considered a capacity constraint for a service provider?

A) Equipment
B) Labor
C) Money
D) Facilities
E) Time

Answer 3

C

Question 4

Which of the following organizations is more likely to experience wide fluctuations in demand?

A) Dentist
B) Hospital
C) Carwash
D) Stockbroker
E) Interior decorator

Question 5

The primary constraint on service production for a lawyer is:

A) Equipment
B) Utility
C) Money
D) Facilities
E) Time

Question 6

The lack of inventory capability in services is due to which of the following characteristics of services?

A) Heterogeneity and perishability
B) Simultaneous production and consumption and intangibility
C) Perishability and simultaneous production and consumption
D) Heterogeneity, perishability and intangibility
E) Simultaneous production and consumption and heterogeneity

Question 7

Vacation-destination resorts experience _____ fluctuations in demand over time and have peak demand that _____.

A) Wide; can usually be met without a major delay
B) Wide; regularly exceeds capacity
C) Narrow; can usually be met without a major delay
D) Narrow; regularly exceeds capacity
E) Wide, can never be met

Question 8

The primary constraint on service production for an air freight delivery service is:

A) Equipment
B) Labor
C) Money
D) Facilities
E) Time

Question 9

The marketing department at a well-known university has 11 full-time faculty members and 3 part-time faculty members. There are more than 400 marketing majors at this university. The primary constraint for offering a course in direct mail marketing would more than likely be:

A) Equipment
B) Labor
C) Money
D) Facilities
E) Time

Question 10

Which of the following factors in managing demand and capacity does NOT lead to provider gap 3, failure to deliver what was designed and specified?

A) Lack of communication between contact personnel and company management
B) Under use of service capacity
C) Failure to smooth the peaks and valleys of demand
D) Overuse of service capacity
E) The attraction of an inappropriate customer mix in an effort to build demand

Question 11

A service firm is underutilizing its labor, equipment and facilities when:

A) Demand exceeds maximum capacity
B) Demand exceeds optimum capacity
C) Supply and demand are balanced at the level of optimum capacity
D) Demand is below optimum capacity
E) Demand is below minimum capacity

Question 12

The primary constraint on service production for a popular, well-established theater company that annually presents a series of musical comedies is:

A) Equipment
B) Labor
C) Money
D) Facilities
E) Time

Question 13

A professional baseball team that has unsold tickets for a Friday night game cannot resell those tickets for a game the following afternoon due to the _____ characteristic of services.

A) Intangibility
B) Simultaneous production and consumption
C) Heterogeneity
D) Perishability
E) Divisibility

Question 14

Harris Woodard has purchased a franchise business called Like New Windshields, a company that repairs cracked and pitted vehicle windshields. As a franchisee, he will come to your home or office to repair a damaged windshield. His goal is to make sure that he has enough customers without having more than he can handle efficiently. Which of the following is going to make it difficult for him to accomplish his goal?

A) Lack of inventory capability
B) Compatibility management
C) Customer heterogeneity
D) Franchise empowerment
E) Fluctuating equilibrium points

Question 15

Keith-McCoy is a government auditing firm that specializes in auditing public transportation systems. The firm was operating at maximum capacity when it was asked to submit a bid on a very lucrative account in Chicago. If the firm were to win this account and keep all of its current accounts, it will more than likely:

A) Decrease employee turnover potential
B) Increase customer satisfaction through a work focus
C) Increase employee burnout
D) Increase service quality
E) Create a narrower window of opportunity for meeting deadlines

Question 16

When a service firm's resources are fully employed, but not overused; and customers are receiving quality service in a timely manner, the firm is operating _____ capacity.

A) Above maximum
B) At maximum
C) Above optimum
D) At optimum
E) Below optimum

Question 17

In order to manage fluctuating demand in a service business, an organization must understand all of the following EXCEPT:

A) How to chart demand patterns
B) Random demand fluctuations
C) Demand patterns by market segment
D) Predictable demand cycles
E) Vertical demand configurations

Question 18

At any given time, the lack of inventory capability in service firms can result in all of the following scenarios EXCEPT:

A) Demand that exceeds maximum capacity
B) Demand that exceeds optimum capacity
C) Supply and demand balanced at the level of optimum capacity
D) Demand that is below optimum
E) Demand that is below minimum capacity

Question 19

In order to increase usage of the family-oriented ski resort, its owner sent letters to several college fraternities inviting them to spend their winter vacation at the resort. By inviting college students, the resort more than likely widened provider:

A) Gap 1
B) Gap 2
C) Gap 3
D) Gap 4
E) Gap 5

Question 20

The fundamental issue underlying supply and demand management in services is the lack of _____ capability.

A) Inventory
B) Customization
C) Automation
D) Standardization
E) Transportation

Question 21

Convention hotels provide meeting rooms and banquet hotels to convention participants. Sometimes a specific convention may involve 2,000 members or only 75 members. To take care of both sizes of groups, convention hotels have movable walls that allow them to expand or contract a facility as needed by the group. By modifying its facility, the convention hotels are able to:

A) Adjust capacity to match demand
B) Create optimal supply
C) Optimize its demand pattern
D) Outsource its requirements
E) Smooth peaks and valleys of demand

Question 22

Nine months after the terrorists' attacks on the World Trade Center and the Pentagon, maternity hospitals were filled to capacity as people who had been waiting for the right time to have children decided that there was no time like the present. The maternity hospitals experienced a(n):

A) Random demand fluctuation
B) Relative demand shift
C) Predictable demand cycle
D) Vertical demand configuration
E) Organized demand pattern

Question 23

If you buy your tickets early for a live theater production in Rome, you'll pay about 30 percent less, than if you buy them on the day of the show. The lower price helps the early sale of tickets and guarantees the audience will be large enough to justify the cost and effort put into the production. What strategy does the theater company use to shift demand for theater tickets?

A) Differentiate on price
B) Modify timing and location of service delivery
C) Vary the service offering
D) Stretch capacity
E) Communicate with customers

Question 24

The Baltimore Orioles, a professional baseball team, offer standing room only seats to fans when a home game at The Ballpark at Camden Yards is sold out. The Baltimore Orioles are stretching _____ to flex the capacity of The Ballpark at Camden Yards to meet fan demand.

A) Time
B) Labor
C) Facilities
D) Equipment
E) Customers

Question 25

Which of the following is NOT a long-term strategy for adjusting capacity with demand fluctuations?

A) Cross-training employees
B) Scheduling down time during periods of low demand
C) Renting additional facilities or equipment
D) Using part-time employees
E) Stretching existing labor

Question 26

Peak demand for rooms at the Ritz-Carlton Hotel, an upscale hotel in Phoenix, Arizona, occurs during the tourist season from November through mid-April. During the summer slow season when demand for rooms drops considerably, the Ritz-Carlton encourages local Phoenix and Tucson residents to experience the beauty of the hotel on weekends by offering attractively priced weekend packages. The Ritz-Carlton uses which of the following strategies for shifting demand to match capacity?

A) Differentiate on price
B) Modify timing and location of service delivery
C) Vary the service offering
D) Stretch capacity
E) Communicate with customers

Question 27

Traditional yield management strategies are most profitable when:

A) The service provider has a homogeneous target market
B) Its target market is not price sensitive
C) All members of the target market arrive at basically the same time
D) Those who arrive early or reserve early are more price sensitive than those who reserve or arrive late
E) All of the target market is equally price sensitive

Question 28

New York City rents a number of its public school facilities to local flea markets on weekends during the school year and summer months. New York City is using which of the following strategies for shifting demand to match capacity in its public schools?

A) Differentiate on price
B) Modify timing and location of service delivery
C) Vary the service offering
D) Stretch capacity
E) Communicate with customers

Question 29

The busiest time for tax preparers is the week prior to April 15th. Many tax preparers send out mailings to their regular customers asking the customers to bring their tax information in to the tax preparer's office in January and February. The mailings explain how they will receive their tax refunds much quicker if they bring their information in now rather than wait till the last minute. Tax preparers are using which of the following strategies for shifting demand to match capacity?

A) Differentiate on price
B) Modify timing and location of service delivery
C) Vary the service offering
D) Stretch capacity
E) Communicate with customers

Question 30

Hewlett-Packard uses FedEx to handle all of its fulfillment orders from its retail web site. Once an order is placed at the HP web site, it is automatically transmitted to FedEx's Memphis headquarters. Orders are packaged at FedEx's warehouse and shipped by FedEx to the HP customer. This arrangement was set up as a long-term solution to problems with distribution capacity that HP experienced prior to the implementation of this arrangement. Which strategy is HP using to flex demand to meet capacity?

A) Aligning its capacity with demand fluctuations
B) Stretching its existing capacity
C) Shifting demand to match its capacity
D) Smoothing peaks and valleys of demand
E) Outsourcing

Question 31

A hotel that has 300 rooms charges a rate of $150 per night Monday through Thursday. During this period of peak demand, the hotel operates at 100 percent capacity. On weekends (Friday through Sunday), the hotel discounts half of its rooms at a rate of $100 per night while the remaining rooms are still priced at $150 per night. Calculate the hotel's yield for a Saturday night, if it fills 50 percent of the $150 rooms and sells all of the $100 rooms.

A) 58 percent
B) 63 percent
C) 78 percent
D) 93 percent
E) 171 percent

Question 32

Shelton Elementary School only needs its gymnasium from Monday through Friday. On the weekends it rents the facilities to an Upward Bound basketball program sponsored by a local church. By renting its facilities, the elementary school is:

A) Adjusting capacity to match demand
B) Creating optimal supply
C) Optimizing its demand pattern
D) Outsourcing
E) Smoothing peaks and valleys of demand

Question 33

Which of the following is NOT an example of a strategy used to shift demand to match capacity?

A) Differentiate on price
B) Modify timing and location of service delivery
C) Vary the service offering
D) Stretch capacity
E) Communicate with customers

Question 34

Mass transit train and bus service has peak periods of demand Monday through Friday during morning and evening rush hours. Demand for mass transit service is a(n):

A) Random demand fluctuation
B) Relative demand shift
C) Predictable demand cycle
D) Vertical demand configuration
E) Organized demand pattern

Question 35

For those people who think they need some sort of psychological counseling but don't feel they have the time, the Internet offers HYPERLINK "http://sedoparking.com/search/registrar.php?domain=hear2listen.com&registrar=sedopark" www.hear2listen.com, which allows users to communicate with a licensed therapist at a cost of $1 per minute. Due to a(n) _____, the web site's owners know most of their business comes in the evenings and on weekends, so they have hired therapists to work for the Internet service at these times.
A. Random demand fluctuation
B. Relative demand shift
C. Predictable demand cycle
D. Vertical demand configuration
E. Organized demand pattern

Question 36

Which of the following is NOT a risk associated with the use of price differentiation to smooth demand?

A) Increased price competition
B) Attracting undesired market segments
C) Increased capacity utilization
D) Customers becoming accustomed to low price
E) Whole industry suffers from price wars

Question 37

The business program at Kennesaw State University offers classes that start as early as 6:30 a.m. and as late as 9:30 p.m. for its undergraduates. It also has Saturday and Sunday undergraduate classes in addition to its regular daytime program. KSU is using which of the following strategies for shifting demand to match capacity?

A) Differentiate on price
B) Modify timing and location of service delivery
C) Vary the service offering
D) Stretch capacity
E) Communicate with customers

Question 38

The 2005 tsunami in Southeast Asia caused:

A) Random demand fluctuations
B) Relative demand shifts
C) Predictable demand cycles
D) Vertical demand configurations
E) Organized demand patterns

Question 39

Which of the following is a risk associated with the use of yield management?

A) Excessive customer loyalty
B) Too much focus on competition
C) Employee morale problems
D) Misuse of company-driven service blueprints
E) Overreliance on salaries

Question 40

The Kingston Little Theater is a semi-professional troupe that presents six productions annually. It knows that if it presents a musical from the 1950s or the 1960s it will attract a large audience from the gay community to see the production. It could chart its demand pattern by looking at:

A) How it acquires prospects
B) Geographical influences on demand
C) Audience empowerment
D) Market segments
E) Seasonal fluctuations

Question 41

A service firm's yield can be raised by increasing capacity used or by decreasing price.

Question 42

New Bedford College is a small institution that has not yet adopted online registrations. When it's time to pay for classes, its students can pick from one of three lines. Some lines seem to move faster than others, but all allow the students to accomplish the same goal-paying their tuition and fees. Which of the following queue configurations does New Bedford College use?

A) Multiple queue
B) Double queue
C) Take-a-number queue
D) Queue with barriers
E) Roundabout queue

Question 43

By renting its 21 executive suites for slumber parties on the weekend, the Hyatt Regency Reston in Reston, Virginia is shifting demand to match capacity by varying its service offering.

Question 44

Which of the following queue configurations is designed to ensure fairness of waiting time?

A) Multiple queue
B) Double queue
C) Take-a-number queue
D) Queue with barriers
E) Roundabout queue

Question 45

A contractor could use outsourcing as a way to flex its capacity to meet demand.

Question 46

Overuse or under use of service can directly contribute to provider gap 3-failure to deliver what was designed and specified.

Question 47

A concert production that charges less for matinee shows than for its evening performances is shifting its demand to match capacity by differentiating on price.

Question 48

Supermarkets with express checkout lanes for customers purchasing 10 items or less are using which of the following waiting line strategies?

A) Establishing a reservation process
B) Making waiting fun or at least tolerable
C) Expanding waiting room capacity
D) Differentiating waiting customers
E) Employing operational logic

Question 49

A dental office that provides patients a variety of magazines to read and TV to watch while they are waiting is using which of the following waiting line strategies?

A) Establishing a reservation process
B) Making waiting fun or at least tolerable
C) Expanding waiting room capacity
D) Differentiating waiting customers
E) Employing operational logic

Question 50

The Long Island Railroad installed ticket vending machines in train stations to expedite the purchase of train tickets during periods of peak demand. The Long Island Railroad is using which of the following waiting line strategies?

A) Establishing a reservation process
B) Making waiting fun or at least tolerable
C) Expanding waiting room capacity
D) Differentiating waiting customers
E) Employing operational logic to reduce wait

Question 51

A dry cleaning establishment is more likely to experience a wide demand fluctuation over time than a cleaning company that specializes in cleaning up after a fire is.

Question 52

The primary capacity constraint on service production for an interior decorator is time.

Question 53

If you've ever watched the television show ER, you should have noticed how the emergency room staff selects patients on the basis of their need for treatment. Victims who have life-threatening injuries are seen ahead of those with minor complaints like an ingrown toenail or a case of poison ivy. Emergency rooms differentiate their waiting customers on the basis of:

A) Willingness to perform service role
B) Importance of the customer
C) Duration of the service transaction
D) Urgency of the job
E) Payment of a premium price

Question 54

On certain days during the week, Disneyworld allows guests who stay at a Disney Resort hotel to enter the Magic Kingdom, Epcot Center or Disney-MGM Studios one hour before the parks are open to the public. Walt Disney World is minimizing waiting time by differentiating customers on the basis of:

A) Their willingness to perform the service role
B) The importance of the customer
C) The duration of their stay in the amusement park
D) Their need to have fun
E) The payment of a premium price

Question 55

"Stretch" strategies for flexing capacity to meet demand can be used indefinitely.

Question 56

The lack of inventory capability in services is due to the service characteristic of intangibility.

Question 57

The appliance store told the home owner that it would deliver her new stove on Monday between 4 p.m. and 5 p.m. Obviously, the store is uses which of the following waiting line strategies?

A) Establishing a reservation process
B) Making waiting fun or at least tolerable
C) Expanding waiting room capacity
D) Differentiating waiting customers
E) Employing operational logic

Question 58

When determining its demand capacity, a service provider should not consider random demand fluctuations.

Question 59

Which of the following is NOT a base for differentiating waiting customers?

A) Willingness to perform service role
B) Importance of the customer
C) Duration of the service transaction
D) Urgency of the job
E) Payment of a premium price

Question 60

Waiting time feels longer when customers:

A) Are relaxed while waiting
B) Are reading or drinking a beverage while waiting
C) Are alone while waiting
D) Know how long they will have to wait
E) Understand why they are waiting

Question 61

List the four bases that can be used to differentiate waiting customers.

Question 62

Pat teaches computer classes on campus as a part of a university continuing education program. One of her most popular classes is one called, "Surfing the Net". She has 20 in a class and meets with them one day a week for six weeks. In a typical week she teaches three different classes. She spends a lot of time preparing her class lectures and makes sure that the class meets the needs of the students in it. Demand for her classes has tripled. Discuss how she can use "stretch" strategies to adjust the class capacity and how long they should be used.

Question 63

What are the critical fixed-capacity factors that affect how well a service business can handle demand fluctuations?

Question 64

During June, July, August, November and December, each of the cages at Ruff's Boarding Kennel is booked. Ruff's has 45 large dog cages. It charges $7 per day to board a large dog, but during the other months, business is slow. Ruff's charges $6 per day for 25 of its cages and its regular price for the rest. On September 14th, Ruff's had all of its $6 per day filled and half of its $8 per day cages full. Calculate the kennel's yield for that night.

Question 65

What are the three waiting line configurations?

Question 66

Briefly define a "chase demand" strategy.

Question 67

Rosa Wilkins gives 30-minute therapeutic massages at a local gym. All of her Monday and Friday appointments are taken and she has a waiting list for those who would like to move their regular massage to the first or the last day in the week. At the end of those days Wilkins is exhausted. Demand on Tuesdays and Thursdays is at an acceptable level, but no one seems to want a massage on Wednesday. Wilkins wishes she could convince some of her Monday and Friday customers to come on Wednesday. Can you give her some ideas to help shift the demand for her service?

Question 68

An advantage of a single-queue configuration is that customers have an opportunity to select a particular service provider.

Question 69

There are several steps involved in understanding demand patterns for an organization. What is the first thing a service organization must do?

Question 70

How is the advisement center flexing its capacity when it stays open longer hours the week prior to registration for classes?

Question 71

In a supermarket, customers who have only a few items will wait longer than customers who have a full cart of groceries because supermarkets use a differentiating queue.

Question 72

Summer enrollments at New Bedford College are low. The campus administrators rent out dorms to people participating in hostel programs. These participants have their meals provided in the school cafeteria. New Bedford is using which of the following strategies for shifting demand to match capacity?

Question 73

What does customer demand in the insurance business, the banking industry and the dry cleaning business have in common?

Question 74

What is the fundamental issue underlying supply and demand management in services?

Question 75

Last spring the advisement center at New Bedford College was unable to help all the students who wanted advice on the school's new core curriculum. During the summer the advisement center has hired you to analyze its operational procedures for any inefficiencies. As it exists now, students enter a room, take a chair or more likely a position standing up and get to talk to their assigned advisor whenever that advisor becomes free. Since all the advisors have access to the same information, you have suggested that the center set up queues. Briefly explain the queue configurations and which will be best in this situation?

Question 76

How would the wait be affected when a person waits with a group of people rather than alone for a table vacancy at an exclusive restaurant?

Question 77

What kind of demand fluctuation for janitorial services resulted from the 2004 hurricane season in Florida?

Question 78

Research indicates that yield management approaches are most profitable when a service market is targeting one large market segment.

Question 79

If the patient in the dentist's office is anxious, the wait will seem longer to him or her than it does for a patient who is calm and relaxed.

Question 80

If customer waits are common, a first step is to analyze the operational processes to remove any inefficiencies.