Balancing Supply and Demand

Abstract

Another crucial and specific front-stage issue concerns the balance between supply and demand. Demand cannot be inventoried as the service is perishable, consumed at the moment of production. To make matters worse, the demand for a service often fluctuates widely — daily, weekly, monthly, yearly. The challenge then is to match the supply of services with a seasonal demand in an unstable environment. For example, when trading online, it can be observed that the hourly trading volume can be three times the average daily volume. But a spike in demand can be three times the average hourly volume. On a spiked day, the daily capacity should be multiplied by nine.