Peak management

Peaks occur when a firm accustomed to operating under market constraint conditions occasionally encounters peaks in market demand that temporarily exceed the firm's supply capacity. This paper defines the demand peak, classifies peak management (PM) conditions and prescribes a framework for PM. The Theory-of-Constraints (TOC) is expanded to handle the PM concept, introducing the two-policy concept: one policy for peak periods and another for non-peak periods. The paper outlines techniques to elevate the firm's peak performance by loading during the peak period. Distinct pricing policies for peak and off-peak periods are presented and a comprehensive methodology is suggested to deal with the PM problem, including labour policy, outsourcing policy and pricing policy. The paper demonstrates the methodology and techniques in a broad range of real-life management situations. Under TOC principles, the present analysis shows the different decision rules for the two periods and their substantial impact on the firm's overall strategy. Finally, the paper discusses the ramifications of operating under two distinct sets of rules, as well as the rules for making the transitions between an off-peak and a peak period.