MKT 723 Chapter Notes - Chapter 15: Tax Preparation In The United States, Outsourcing, Shortage

• School: Ryerson University
• Department: Marketing
• Course: MKT 723
• Professor: Armand Gervais

Document Summary

Fundamental issue of supply and demand management is the lack of inventory capabilities. Service firms don"t have the abilities to build up inventories during slow periods. Lack of inventory capabilities and fluctuating demand leads to a variety of outcomes. Many services have a fixed capacity, while demand usually fluctuates. Excess demand demand exceeds maximum capacity, resulting in lost business. Demand exceeds optimum capacity no one is turned away, but service quality may suffer. Optimum capacity (demand balances quantity) ideal level. Excess capacity demand is below optimum, resulting in lower profits. Not all firms are equally challenged in terms of managing supply and demand. It depends on the extent of demand fluctuation and supply constraints. For some service businesses, the primary constraint on service production is time (e. g. hairdresser, lawyer). If time is not used productively, profits are lost. In some businesses, labor is a constraint, as in a repair firm.