QUESTION ONE $[20]$

Read the extract below and answer the questions that follow:

Many services with limited capacity face wide swings in demand that can be caused by the

change in seasons. The effective use of expensive productive capacity is one of the secrets of

success in such businesses. By working with managers in operations and human resources,

service marketers need to develop strategies to bring demand and capacity into balance, in

ways that create benefits for customers as well as to improve profitability for the business.

Many service organizations are capacity constrained. There is an upper limit to their capacity to

serve additional customers at a particular point in time. With this regard,

$1\mathrm{.}1$ Discuss the fundamental strategies used to balance the demand and capacity in the

supply chain. $(8)$

$1\mathrm{.}2$ Elaborate on the costs incurred due to aggregate planning. $(12)$