Students should begin by analyzing the capacity of the facility; however, the analysis is not as straightforward as it first may seem. There is an issue of how capacity should be measured. Students should quickly recognize that an overall measure of capacity for the facility isn’t much help in determining if Fitness Plus is capacity constrained. If the service delivery process for each member were homogeneous, such as a cafeteria or airline flight, then an overall measure of capacity, such as the number of members serviced over a given period of time, would be an appropriate measure of capacity.
However, the service delivery process at Fitness Plus is a menu-driven process where each member chooses from a range of services the club provides. Therefore, capacity must be measured for each service item provided. In some areas of the club, such as aerobics, this may be an “output measure” of capacity, such as the number of members per hour that can do aerobics. In other areas, such as the Nautilus equipment, the measure may be an “input measure,” the number of machines available. A second set of complicating issues deals with the impact that management policies and assumptions have on capacity measures.
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In their analysis the students need to determine how many members can be serviced in each area of the club. The number served per hour in the cardiovascular area, for example, will depend on whether management chooses to limit the time on each machine during peak hours of demand. Many health clubs limit the use to 30 minutes per member during periods of heavy load. This would, in effect, double the output measure of capacity per hour, but it would not affect the input measure of total machine hours available. An assumption that could be made is that each member takes one minute for each piece of Nautilus equipment used.
If management arranges the equipment in a sequential flow so that members begin at the first station and continue through the equipment in a set sequence, then the capacity can be measured by cycle times and throughput per hour in a manner much like measuring the capacity of an assembly line. With these issues in mind, the students can develop capacity estimates similar to the following: 1. Aerobics *Assumption: Aerobics classes begin on the hour and last for 50 minutes. *Capacity: 1 class per hour for 35 members 2. Cardiovascular *Assumption: During peak demand times, each piece of equipment is limited to 30 minutes per member. Capacity: With 29 pieces of C-V equipment, 58 members per hour peak capacity 3. Nautilus *Assumptions: Each member takes 1 minute to complete each exercise. The machines are set up so members flow through in a sequential manner. *Capacity: Maximum capacity at a steady state; cycle time 1 minute. 60 members per hour Over the three-hour peak demand period, the Nautilus area may only process 156 members because it will take 24 minutes for the first member to complete the entire 24-machine cycle. These three areas of the club are the major areas of concern due to customer complaints, and they are where students should concentrate their analysis.
The tennis and racquetball areas can service the following number of members per hour: Tennis:12 members/hour for singles 24 members/hour for doubles Racquetball:16 members/hour for singles 32 members/hour for doubles There were no details given in the case to determine the capacity of the free-weight area. So, if we aggregate the individual capacities into an overall measure, the club can accommodate a peak capacity of 181 to 209 members per hour, excluding the free-weight area—far more than the peak demand of 80 per hour.
Of course, what is important is not the aggregate demand level, but rather the demand mix and how this mix matches the individual area capacities. The next step in the analysis is to focus the students on estimating the demands that are placed on the club facilities. Because this is a service being provided, the focus should be on looking at the club’s ability to satisfy peak demand. Students should quickly derive the following estimates of peak demand: Arrival rate at peak=80 members/hour Aerobics @ 30%=24 members/hour Cardiovascular @ 40%=32 members/hour
Nautilus @ 25%=20 members/hour Racquetball @ 15%=12 members/hour Tennis @ 10%=8 members/hour Free-Weights @ 20%=16 members/hour These potential demand rates during the peak times indicate a number of things. First, when compared to the area capacities calculated earlier, there seems to be plenty of excess capacity in all areas of the club. Second, it is obvious that members use more than one area of the club during their visits, as the total potential demand across all areas of the club adds to 112-person hours, impossible with only 80 members arriving per hour.
At this time, the instructor needs to direct the students’ attention and discussion toward the issue of determining the size of capacity cushion that Fitness Plus should target to maintain acceptable service levels for its members. One reason complaints may be occurring, even though the comparison of demands and capacities looks fine, is that a member may enter the club, warm up in the cardiovascular room for a few minutes, then go through a Nautilus workout before doing more cardiovascular training or an aerobics workout.
In effect, we made the inherent assumption in the earlier analysis that members use only one area of the club during their visit and that they work out for only 1 hour. These are simplifying assumptions that ease the burden of analysis. However, assumptions such as these and the use of averages in measuring demands and capacities can lead to an underestimation of the capacity actually required to meet demands at some established service level. Once the discussion of “capacity cushions” has taken place, the final issue of capacity expansion needs to be addressed.
The fact is, members are complaining, and expected service levels are not being met. The analysis should focus on both short-term and long-term solution alternatives and looking at the pros/cons of each. Exhibit TN. 1 gives an example of how to present this analysis. Be sure to tie the alternatives into other operating decisions and discuss how each may impact different competitive priorities, such as convenience and location, full-service range of activities with quality facilities, availability of services in a timely manner, or low costs/price.
Recommendations When this decision case is used as an outside assignment, the instructor should be prepared to respond to three types of recommendations: 1. No action needed: Students who compare the demand rates at peak times with the designed capacity may conclude that there is plenty of excess capacity. These students will not seriously consider the need for a capacity cushion, or conclude that it is already large enough. 2.
Expand the existing facility: The use of short-term measures and the limited expansions of the existing facility are enough to create a reasonable capacity cushion. Some students may recommend adjusting the capacity space allocations among competing areas of the club. This is a short-term, middle-of-the-road type of recommendation. 3. Expand to a new location: This is a more long-term strategic decision that should focus on competitive priorities. Students recommending this course of action are looking to expand into new markets and meet competition head on.