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