Understanding Demand Patterns

By Priya Chetty on October 30, 2010

To manage fluctuating demand in a service business, it is imperative to have a clear understanding of demand patterns, why they wary, and the market segments that comprise demand at different points in time.

Charting Demand Patterns

First, the organization needs to chart the level of demand over relevant time periods. Organizations that have good computerized customer information systems can do this very accurately. The others may need to chart demand patterns more informally.

Predictable Cycles

In looking at the graphic representation of demand levels, is there  a predictable cycle daily (variations occur by hours), weekly (variations occur by day), monthly (variations occur by the month), and/or yearly (variations occur according to months or seasons)?

If there is a predictable cycle , what are the underlying causes? This can help a service provider in dealing with the customers in a much better way.

Random Demand Fluctuations

Sometimes the patterns of demand appear to be random—there is no apparent predictable cycle. Yet even in this case, causes can often be identified. For example. day to-day changes in the weather may affect use of recreational, shopping, or entertainment facilities. Although the weather cannot be predicted far in advance, it may be possible to anticipate demand a day or two ahead. Health-related events also cannot be predicted. Accidents, heart attacks, and births all increase demand for hospital services, but the level of demand cannot generally be determined in advance. Natural disasters such as floods, fires, and hurricanes can dramatically increase the need for such services as insurance, telecommunications, and health care. Acts of war and terrorism such as that experienced in the United States on September 11, 2001, general instantaneous need for services that can’t be predicted.

AT&T was faced with a sudden increase in demand for services to the mi1i during the Gulf War. During this period, 500,000 U.S. troops were deployed to the  Middle East, many without advance warning. Before their deployment these men and women had little time to attend to personal business, and all of them left behind concerned family and friends. With mail delivery between the United States and the Middle East taking more than six weeks, troops needed a quick way to communicate with their families and to handle personal business. Communications with home were determined by the military to be essential to troop morale. AT&T’s ingenuity. responsiveness, and capacities were challenged to meet this unanticipated communication  need. During and after the Gulf War crisis more than 2.5 million calls were placed over temporary public phone installations, and AT&T sent more than 1.2 million free to family and friends of service men and women.

Demand Patterns by Market Segment

If an organization has detailed records on customer transactions, it may be able to disaggregate demand by market segment, revealing patterns within patterns. Or the analysis may reveal that demand from one segment is predictable while demand from another segment is relatively random.

For example, for a bank, the visits from its commercial accounts may occur daily at a predictable time, whereas personal account holders may visit the bank at seemingly random intervals. Health clinics often notice that walk-in or “care needed today” patients tend to concentrate their arrivals on Mon day, with fewer numbers needing immediate attention on other days of the week. Knowing that this pattern exists, some clinics schedule more future appointments (which they can control) for later days of the week, leaving more of Monday available for same-day appointments and walk-ins.

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