What are the risks of over-forecasting service demand in Service Operations?

1 Wasted resources

One of the main risks of over-forecasting service demand is that you may allocate too many resources to your service operations, such as staff, equipment, facilities, or inventory. This can result in wasted costs, idle capacity, and lower productivity. For example, if you hire more employees than you need to serve your customers, you will have to pay them for their time, even if they are not fully utilized. Similarly, if you invest in more equipment or facilities than you need, you will incur higher maintenance and depreciation expenses, as well as opportunity costs of not using them for other purposes. Moreover, if you stock up on more inventory than you need, you will face higher storage and handling costs, as well as the risk of obsolescence or spoilage.

2 Lower quality

Another risk of over-forecasting service demand is that you may compromise the quality of your services, either intentionally or unintentionally. For example, if you expect a high volume of customers, you may reduce the duration or depth of your service encounters, such as consultations, sessions, or appointments. This can lead to lower customer satisfaction, loyalty, and retention. Alternatively, if you have more resources than you need, you may lose focus or motivation to deliver high-quality services, as you may feel less challenged or pressured. This can result in lower employee engagement, performance, and morale.

4 Damaged reputation

A fourth risk of over-forecasting service demand is that you may damage your reputation and credibility among your customers, partners, or stakeholders. For example, if you over-promise and under-deliver on your service quality, availability, or timeliness, you may lose the trust and confidence of your customers, who may perceive you as unreliable, unprofessional, or dishonest. This can lead to negative word-of-mouth, complaints, or lawsuits. Likewise, if you over-estimate and under-achieve on your service performance, revenue, or profit, you may disappoint your partners or stakeholders, who may question your competence, integrity, or accountability. This can lead to lower collaboration, support, or investment.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?