This article analyzes management response to short-run fluctuations in demand and supply (i.e. fluctuations that occur on a daily, weekly, or seasonal basis). Long-run disequilibrium responses owing to the lack of viability of the product in a dynamic marketplace or owing to macro issues such as the business cycle, strikes, or embargoes are outside the parameters of this discussion. For the sake of brevity, we term the management of supply/demand imbalances associated with irregular demand, disequilibrium management.

The rest of the article is organized in four sections. The next section is a background section that sets the contextual framework for the rest of the article. Then, a short section on direct disequilibrium management strategies is provided. The main body of the article deals with two additional categories of disequilibrium management strategies:

1 intelligence enhancement strategies that arm service enterprise managers with the information they need to make the marketing and managerial move

Everyone has, at one time or another, walked into a service or retail establishment with a multitude of salespersons or other customer encounter personnel and no other customers besides yourself (slack demand/over supply). Paying idle employees is expensive and wasteful. Similarly, since services are difficult and expensive to store, firms may experience even more severe misfortune during unforeseen over demand/under supply situations: a turned-away customer may consume a competitor's product and like it better. Indeed, Mabert, (1986) found that service firms tend to design staffing plans based on peak demand situations, resulting in substantial idle time during slack periods. Disequilibrium situations would never occur in a perfect world with omniscient managers who are devoted supplicants to the marketing concept. Even the best planner, however, cannot always prepare a service organization for unpredictable swings in consumer demand, untimely equipment failures, or a sick call contagion.

1 the firm ensures that employees have the same goals as the firm by tying wages to productivity; and

Marketers of physical goods can hold inventories to buffer fluctuations in demand and supply, but services are acts or processes and therefore, difficult or impossible to inventory (Rathmell, 1966; Sasser, 1976). A theater owner cannot take an empty seat from Thursday night and add it to capacity for Friday night's sellout. An insurance agent can inventory her application forms, but not her time. Or, when demand is over-full, loyal customers may be forced to go to another service provider - and they may end up liking the second service provider more. What a tragedy for the old service provider.

1 input scheduling strategies (change supply to fit demand); and

Nevertheless, service enterprises can utilize several strategies which aim to decrease the intensity of the injury incurred during unforeseen demand/supply disequilibrium situations. One such strategy is to pay workers on piece rate or commission. The idea is to increase the ratio of marginal to fixed costs where fixed costs are those which the managers cannot avoid in the short term. Hourly employees who are guaranteed 40 hours a week are a fixed cost to managers because the labor costs are the same, whether the firm is busy or not. Paying workers piece rate or commission makes all labor costs marginal costs - even for the short run (Khumwala et al., 1986). Thus, firms shift risks associated with fluctuations in demand to employees. Automobile and boat repair shops usually pay mechanics a percentage of the shop labor charge. Since labor charges for repair projects are billed according to the book rate, mechanics who perform repairs faster than the norm get paid more than their less proficient comrades. The service enterprise benefits in two ways:

Just as the first strategy for obtaining intelligence about demand trends is more a matter of "willingness to do it" rather than how to do it, the second suggested strategy is very simple, but often overlooked. Marketing managers should mark the calendar for important events that affect demand. Though some will look on the following examples as gross negligence, they are in fact, all too common mistakes.

A similar strategy is to hire part-time, variable schedule employees to sustain demand/supply congruity. Maximum flexibility can be maintained with these employees, even to the point of dismissing them early on days when demand is slack. This strategy may help to prevent layoffs. When demand is slack for an extended period (several weeks), the hours of part-time employees can be cut across the board.

Thus, an inability to synchronize supply and demand impacts the bottom line through lost opportunity when demand is greater than the firm's capacity to satisfy demand and through high costs when demand is insufficient and fixed capacity is wastefully under-utilized. An unused hospital bed, for instance, represents an irretrievable

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Approximate Word count = 4314
Approximate Pages = 17 (250 words per page double spaced)