Service capacity management is one of the main management challenges. For many, the way to manage capacity can determine a business’ profitability. This is because the sizing of capacity affects the performance of the firm, as it affects investments and operating costs. Given certain characteristics of services, such as intangibility and simultaneousness between production and consumption, the capacity of the service systems is perishable and can’t be stocked. These characteristics, plus heterogeneity and the necessary presence of the client for most of the services to be executed, explains the difficulty of measuring service capacity, which in turn makes it more difficult to size for adequate servicing.
This technical note touches upon fundamental aspects of service capacity management, including basic strategies and their combination, management of supply and demand as well as yield or revenue management.