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Posts Tagged ‘capacity management’

This should not surprise you at all: Christmas is a big deal for Lego. According to the Financial Times, half of the company’s sales come in the month or so before the holiday (Lego makes push to avoid disappointments of Christmas past, Dec 22). But how do they gear up for that big peak in sales? Check out the video below:

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I have been teaching the MBA core operations class this quarter. This week we just wrapped up talking about bottlenecks and capacity. I consequently found an article in The Guardian rather timely (The tube at a standstill: why TfL stopped people walking up the escalators, Jan 16). TfL in the article title refers to “Transport for London” which runs the Underground. The article reports on an experiment run at their Holborn station.

The experiment in question gets to a bit of escalator etiquette. Specifically, when using an escalator, should people stand to one side so those in a hurry (or in need of a work out) can walk up the escalator or should people patiently stand two abreast? Now if you prefer to chug up the stairs, you clearly lose under the second scenario. However, can it be the case that accommodating the walkers cost the system as a whole an unacceptable amount of capacity?

It’s all very well keeping one side of the escalator clear for people in a rush, but in stations with long, steep walkways, only a small proportion are likely to be willing to climb. In lots of places, with short escalators or minimal congestion, this doesn’t much matter. But a 2002 study of escalator capacity on the Underground found that on machines such as those at Holborn, with a vertical height of 24 metres, only 40% would even contemplate it. By encouraging their preference, TfL effectively halves the capacity of the escalator in question, and creates significantly more crowding below, slowing everyone down.

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I always like fun stories about how shifting product mix affects capacity. Today’s example goes with another topic that interests me: rum-based cocktails! From the New York Post (No more mojitos!, Aug 7)

This summer, those behind the bar are taking a stand by deleting the cocktail — made with rum, muddled mint, sugar and lime juice — from the menu, or refusing to make it. The reason is twofold: The drink is simply too time-consuming to make, while at labor-intensive cocktail bars, it’s been deemed out of fashion.

“The [mojito] has always been the bane of bartenders, as it is a time-consuming drink to prepare well,” explains cocktail guru Eben Freeman, director of bar operations for chef Michael White’s Altamarea Group.

It’s a matter of basic economics, says Freddy Thomas, 41, a bartender at a bustling downtown spot where groups of tourists and high-heeled young women often order the drink en masse, much to his chagrin.

“Time is money. You can make six or seven other drinks in the same time [it takes to] make three mojitos,” he says.

So mojitos hammer capacity. But is simply refusing to make them the right answer? (more…)

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So we have written in the past about Uber, the San Francisco based company that lets you hail a car service from your smart phone. Now both Fast Company (Stop Hailing A Taxi And Come Ride With Uber CEO Travis Kalanick, Jun 13) and Wired (For Limo Service Uber, Downtime and Idle Resources Are Fuel for Profits, Jun 22) have stories about them. The former has a nice video showing how the service works. Go here to see it (sorry, I couldn’t get it play properly here). The latter has some information on how the system works for drivers.

For its customers, Uber is a pleasant splurge, but for its drivers the service is a godsend, a ticket to a whole new standard of living. Uber doesn’t employ the drivers directly, but what it does is arguably better: It taps into the luxury rides and professional chauffeurs already employed by existing car services. Because of the inefficiency of typical dispatch systems, those cars can be empty for much of the day, even when their owners—sometimes the drivers themselves and sometimes small businesses—would love for them to be carrying fares. (Jankosky’s vehicle is part of a seven-car fleet owned by a firm called 7×7 Executive Transportation.) Uber can fill those fallow hours with brilliant efficiency. One San Francisco chauffeur estimates that the work he gets through Uber nets him more than $45 per hour, on average. Another says that his total earnings are now roughly $2,100 a week, with $920 of that coming from the service. Since the cars are already paid for and the drivers want to work, Uber is like found money for everyone: the drivers, the owners, and of course Uber itself, which takes 20 percent off the top of every ride.

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I once long ago interviewed at a prominent Midwestern university (not my current employer) and had an associate dean opine “We are the only prominent business school at which parking is not a problem.” My immediate thought (which went unuttered) was “I’m not sure that is anything to brag about.”

In any event, university parking presents an interesting capacity management problem. There are multiple classes of users who have varying needs and varying abilities to pay. But land and thus parking spots (or at least convenient parking spots) are always limited. Northwestern deals with this in part by assigning lots to faculty vs. students, charging different prices, and having different rules depending on the time of day. Indeed, if you live too close to campus you may not be allowed to buy a parking pass.

The one thing that NU doesn’t do is run an auction. That gets us Chapman University which does in fact auction parking permits. In this video (from reason.tv), David Porter, an econ professor from Chapman who helped design the auction, talks about their experience with this mechanism. It is an interesting discussion of both demand management as well as managing expectations in a service environment.

That last phrase is, of course, a way of saying they pissed off faculty.

Vodpod videos no longer available.

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