Optimal Workforce Mix in Service Systems with Two Types of Customers

We consider a service system with two types of customers. In such an environment, the servers can either be specialists (or dedicated) who serve a specific customer type, or generalists (or flexible) who serve either type of customers. Cross‐trained workers are more flexible and help reduce system delay, but also contribute to increased service costs and reduced service efficiency. Our objective is to provide insights into the choice of an optimal workforce mix of flexible and dedicated servers. We assume Poisson arrivals and exponential service times, and use matrix‐analytic methods to investigate the impact of various system parameters such as the number of servers, server utilization, and server efficiency on the choice of server mix. We develop guidelines for managers that would help them to decide whether they should be either at one of the extremes, i.e., total flexibility or total specialization, or some combination. If it is the latter, we offer an analytical tool to optimize the server mix.     

Perceptions and Expected Immediate Reactions to Severe Storm Displays

The National Weather Service has adopted warning polygons that more specifically indicate the risk area than its previous county‐wide warnings. However, these polygons are not defined in terms of numerical strike probabilities (p_s). To better understand people's interpretations of warning polygons, 167 participants were shown 23 hypothetical scenarios in one of three information conditions—polygon‐only (Condition A), polygon + tornadic storm cell (Condition B), and polygon + tornadic storm cell + flanking nontornadic storm cells (Condition C). Participants judged each polygon's p_s and reported the likelihood of taking nine different response actions. The polygon‐only condition replicated the results of previous studies; p_s was highest at the polygon's centroid and declined in all directions from there. The two conditions displaying storm cells differed from the polygon‐only condition only in having p_s just as high at the polygon's edge nearest the storm cell as at its centroid. Overall, p_s values were positively correlated with expectations of continuing normal activities, seeking information from social sources, seeking shelter, and evacuating by car. These results indicate that participants make more appropriate p_s judgments when polygons are presented in their natural context of radar displays than when they are presented in isolation. However, the fact that p_s judgments had moderately positive correlations with both sheltering (a generally appropriate response) and evacuation (a generally inappropriate response) suggests that experiment participants experience the same ambivalence about these two protective actions as people threatened by actual tornadoes.     

AN IMPROVED HEURISTIC FOR STAFFING TELEPHONE CALL CENTERS WITH LIMITED OPERATING HOURS

Many telephone call centers that experience cyclic and random customer demand adjust their staffing over the day in an attempt to provide a consistent target level of customer service. The standard and widely used staffing method, which we call the stationary independent period by period (SIPP) approach, divides the workday into planning periods and uses a series of stationary independent Erlang‐c queuing models—one for each planning period—to estimate minimum staffing needs. Our research evaluates and improves upon this commonly used heuristic for those telephone call centers with limited hours of operation during the workday. We show that the SIPP approach often suggests staffing that is substantially too low to achieve the targeted customer service levels (probability of customer delay) during critical periods. The major reasons for SIPP‘ s shortfall are as follows: (1) SIPP's failure to account for the time lag between the peak in customer demand and when system congestion actually peaks; and (2) SIPP’ s use of the planning period average arrival rate, thereby assuming that the arrival rate is constant during the period. We identify specific domains for which SIPP tends to suggest inadequate staffing. Based on an analysis of the factors that influence the magnitude of the lag in infinite server systems that start empty and idle, we propose and test two simple “lagged” SIPP modifications that, in most situations, consistently achieve the service target with only modest increases in staffing.     

Revenue Management of Reusable Resources with Advanced Reservations

We consider a revenue management problem wherein the seller is endowed with a single type resource with a finite capacity and the resource can be repeatedly used to serve customers. There are multiple classes of customers arriving according to a multi‐class Poisson process. Each customer, upon arrival, submits a service request that specifies his service start time and end time. Our model allows customer advanced reservation times and services times in each class to be arbitrarily distributed and correlated. Upon arrival of each customer, the seller must instantaneously decide whether to accept this customer's service request. A customer whose request is denied leaves the system. A customer whose request is accepted is allocated with a specific item of the resource at his service start time. The resource unit occupied by a customer becomes available to other customers after serving this customer. The seller aims to design an admission control policy that maximizes her expected long‐run average revenue. We propose a policy called the ε‐perturbation class selection policy (ε‐CSP), based on the optimal solution in the fluid setting wherein customers are infinitesimal and customer arrival processes are deterministic, under the restriction that the seller can utilize at most (1 − ε) of her capacity for any ε ∈ (0, 1). We prove that the ε‐CSP is near‐optimal. More precisely, we develop an upper bound of the performance loss of the ε‐CSP relative to the seller's optimal revenue, and show that it converges to zero with a square‐root convergence rate in the asymptotic regime wherein the arrival rates and the capacity grow up proportionally and the capacity buffer level ε decays to zero.     

Will More Purchasing Options Benefit Customers?

This paper considers the sale of a seasonal product in the face of strategic customers. At the beginning of the selling season, the retailer announces both the price p_h at which the product will be sold during the selling season and the post‐season clearance price p<p_h for unsold items. We analyze two operating regimes: The “no reservation regime” allows a buyer either to purchase the product at price p_h when he arrives or to enter a lottery to purchase at price p if the product remains unsold. The “reservation regime” offers each buyer one extra option than the no reservation regime: reserve the product for purchase at the clearance price p. If the buyer reserves the product under the reservation regime and if it remains unsold at the end of the selling season, then he is obligated to purchase it at price p. We consider a situation in which heterogeneous customers with probabilistic valuation arrive in accord with a Poisson process. We characterize the rational purchasing behavior wherein each arriving customer is strategic; each customer takes other customers' purchasing behavior into consideration. By considering the Nash equilibrium of this game, we show that strategic customer behavior can render the customer to be worse off and the retailer to be better off under the reservation regime, despite the fact that this regime offers one extra option (reservation) to a customer. Hence, more purchasing options do not necessarily benefit customers.     

Competition and Coordination in Two‐Tier Public Service Systems under Government Fiscal Policy

As a result of government budgetary limits and rapid market growth, many public service systems—such as health care—are characterized by extensive customer wait times that have become a serious problem. This problem might be solved by allowing private firms to enter these markets, which would provide customers with a choice between a free (governmental) public service provider (SP) and a fee‐charging (or “toll”) private SP. In such a two‐tier service system, the two SPs are differentiated by service quality and cost efficiency. This study focuses on the competition and coordination issues for two‐tier service systems with customers who are sensitive to both service quality and delay. The free system attempts to maximize its expected total customer utility with limited capacity, whereas the toll system attempts to maximize its profit. Neither goal is aligned with the social welfare goal of the public service. To achieve the social welfare goal, the government plays a crucial role in coordinating the two‐tier service system via the budget, the tradeoff of social members' goals, and tax‐subsidy policies. Using a mixed duopoly game, we establish Nash equilibrium strategies and identify the conditions for the existence of the two‐tier service system. We employ several interesting and counter‐intuitive managerial insights generated by the model to show that the public service can be delivered more efficiently via customer choice and SP competition. In addition, we show that a relatively low tax‐subsidy rate can almost perfectly coordinate the two SPs to achieve most of the maximum possible benefit of the two‐tier service system.     

Comparison of Subsidy Schemes for Reducing Waiting Times in Healthcare Systems

This study analyzes subsidy schemes that are widely used in reducing waiting times for public healthcare service. We assume that public healthcare service has no user fee but an observable delay, while private healthcare service has a fee but no delay. Patients in the public system are given a subsidy s to use private service if their waiting times exceed a pre‐determined threshold t. We call these subsidy schemes (s, t) policies. As two extreme cases, the (s, t) policy is called an unconditional subsidy scheme if t = 0, and a full subsidy scheme if s is equal to the private service fee. There is a fixed budget constraint so that a scheme with larger s has a larger t. We assess policies using two criteria: total patient cost and serviceability (i.e., the probability of meeting a waiting time target for public service). We prove analytically that, if patients are equally sensitive to delay, a scheme with a smaller subsidy outperforms one with a larger subsidy on both criteria. Thus, the unconditional scheme dominates all other policies. Using empirically derived parameter values from the Hong Kong Cataract Surgery Program, we then compare policies numerically when patients differ in delay sensitivity. Total patient cost is now unimodal in subsidy amount: the unconditional scheme still yields the lowest total patient cost, but the full subsidy scheme can outperform some intermediate policies. Serviceability is unimodal too, and the full subsidy scheme can outperform the unconditional scheme in serviceability when the waiting time target is long.     

Self‐Service Operations at Retail Stores: The Role of Inter‐Customer Interactions

Inter‐customer interactions are important to the operation of self‐services in retail settings. More specifically, when self‐service terminals are used as part of customers’ checkout processes in retail operations without the explicit involvement of retailers as the direct service providers, inter‐customer interactions become a significant managerial issue. In this article, we examine the impact of inter‐customer interactions at retail self‐service terminals on customers’ service quality perceptions and repeat purchase intentions at retail stores. We conduct a scenario‐based experimental design (N = 674) using a 2 × 2 factorial design in which inter‐customer interactions are divided into “positive” vs. “negative” and occur during the “waiting” or during the actual “transaction” stages of self‐services at a retail store. We use attribution theory to develop the hypotheses. The results demonstrate that, through their interactions, fellow customers can exert influences on a focal customer's quality perceptions and repeat purchasing intentions toward a retail store. Furthermore, these influences were impacted by how customers attribute blame or assign responsibility toward the retail store. Service operations managers should leverage these interactions by designing into self‐service settings the capacities and interfaces that are best suited for customers’ co‐production of their self‐service experiences.     

Equilibrium customer and socially optimal balking strategies in a constant retrial queue with multiple vacations and N-policy

In this paper, equilibrium strategies and optimal balking strategies of customers in a constant retrial queue with multiple vacations and the N-policy under two information levels, respectively, are investigated. We assume that there is no waiting area in front of the server and an arriving customer is served immediately if the server is idle; otherwise (the server is either busy or on a vacation) it has to leave the system to join a virtual retrial orbit waiting for retrials according to the FCFS rules. After a service completion, if the system is not empty, the server becomes idle, available for serving the next customer, either a new arrival or a retried customer from the virtual retrial orbit; otherwise (if the system is empty), the server starts a vacation. Upon the completion of a vacation, the server is reactivated only if it finds at least N customers in the virtual orbit; otherwise, the server continues another vacation. We study this model at two levels of information, respectively. For each level of information, we obtain both equilibrium and optimal balking strategies of customers, and make corresponding numerical comparisons. Through Particle Swarm Optimization (PSO) algorithm, we explore the impact of parameters on the equilibrium and social optimal thresholds, and obtain the trend in changes, as a function of system parameters, for the optimal social welfare, which provides guiding significance for social planners. Finally, by comparing the social welfare under two information levels, we find that whether the system information should be disclosed to customers depends on how to maintain the growth of social welfare.

     

Experience,Service Operations Strategy,and Services as Destinations: Foundations and Exploratory Investigation

This paper explores the customer experience paradigm as it pertains to service operations strategy and design. First, we operationally define and discuss the concept of customer experience. In this context, we propose a reframing of the strategic role of operations strategy as one of choreographing experience‐centric services. We then introduce the concept of services as destinations as an emerging business model for classifying experiential service strategies. Our conceptual typology of experience‐based strategies uses two dimensions: (1) the depth of use of experience as a source of value creation, ranging from brand experience to the services as a destinations business model, and (2) the degree of integration of experience internally within the firm. Using this conceptual typology, we develop five propositions and use multiple cases to illustrate firms' use of these experience strategies. Laying the groundwork for future research, we highlight insights from the qualitative, multiple‐case data as they pertain to service operations strategy and the business model that employs services as destinations. A number of questions for further research are suggested.     

Real‐Time Delay Estimation Based on Delay History in Many‐Server Service Systems with Time‐Varying Arrivals

Motivated by interest in making delay announcements in service systems, we study real‐time delay estimators in many‐server service systems, both with and without customer abandonment. Our main contribution here is to consider the realistic feature of time‐varying arrival rates. We focus especially on delay estimators exploiting recent customer delay history. We show that time‐varying arrival rates can introduce significant estimation bias in delay‐history‐based delay estimators when the system experiences alternating periods of overload and underload. We then introduce refined delay‐history estimators that effectively cope with time‐varying arrival rates together with non‐exponential service‐time and abandonment‐time distributions, which are often observed in practice. We use computer simulation to verify that our proposed estimators outperform several natural alternatives.     

The Influence of Service Orientation on B2B e‐Service Capabilities: An Empirical Investigation

E‐Services, or the company's portfolio of service offerings available to its customers through the Internet, are an emerging area of interest to operations management. Yet little is known about the operations and capabilities needed for provision of business‐to‐business (B2B) e‐services. This paper aims to make a contribution toward closing this gap. First, we develop a new construct of B2B e‐service capability, a term that captures a generic set of five interrelated and complementary dimensions: (1) e‐service recovery, (2) e‐customization, (3) ease of navigation, (4) service portfolio comprehensiveness, and (5) information richness. These combined operational abilities are associated with B2B service delivery, including its portal design, technology architecture, and mix of product and service offerings. They are posited to be necessary for delivering effective B2B e‐services. We also argue that, both service orientation (SO) and customer receptivity to technology, influence B2B e‐service capability. We empirically test a path model using structural equation modeling on a sample of 181 businesses that have deployed B2B e‐services. We find that the influence of SO on performance is not direct but rather mediated by the e‐service capability, a finding that holds for both goods producers and service providers. We suggest that a firm's SO may mitigate industrial customers' resistance toward conducting business online.     

The Value of Supplier Information to Improve Management of a Retailer's Inventory

The distribution of lead time demand is essential for determining reorder points in inventory systems. Usually, the distribution of lead time demand is approximated directly. However, in some cases it may be worthwhile to take the demand per unit time and lead time into account, particularly when specific information is available. This paper deals with the situation where a supplier, who produces on order in fixed production cycles, provides information on the status of the coming production run. The retailer can use this information to gain insight into the lead-time process. A fixed order (s_vQ) strategy is presented, with a set of reorder points s_v depending on the time t until the first possible delivery, which is determined by the information of the supplier. A Markov model that analyzes a given (s_vQ) strategy is used to quantify the value of the information provided by the supplier. Some numerical examples show that the approach may lead to considerable cost savings compared to the traditional approach that uses only one single reorder point, based on a two-moments approximation. Using this numerical insight, the pros and cons of a more frequent exchange of information between retailers and suppliers can be balanced.     

Is There a Curse of Dimensionality for Contraction Fixed Points in the Worst Case?

This paper analyzes the complexity of the contraction fixed point problem: compute an ε‐approximation to the fixed point V*Γ(V*) of a contraction mapping Γ that maps a Banach space B_d of continuous functions of d variables into itself. We focus on quasi linear contractions where Γ is a nonlinear functional of a finite number of conditional expectation operators. This class includes contractive Fredholm integral equations that arise in asset pricing applications and the contractive Bellman equation from dynamic programming. In the absence of further restrictions on the domain of Γ, the quasi linear fixed point problem is subject to the curse of dimensionality, i.e., in the worst case the minimal number of function evaluations and arithmetic operations required to compute an ε‐approximation to a fixed point V*∈B_d increases exponentially in d. We show that the curse of dimensionality disappears if the domain of Γ has additional special structure. We identify a particular type of special structure for which the problem is strongly tractable even in the worst case, i.e., the number of function evaluations and arithmetic operations needed to compute an ε‐approximation of V* is bounded by Cε^−p where C and p are constants independent of d. We present examples of economic problems that have this type of special structure including a class of rational expectations asset pricing problems for which the optimal exponent p1 is nearly achieved.     

Social Optimal Location of Facilities with Fixed Servers,Stochastic Demand,and Congestion

We consider two capacity choice scenarios for the optimal location of facilities with fixed servers, stochastic demand, and congestion. Motivating applications include virtual call centers, consisting of geographically dispersed centers, walk‐in health clinics, motor vehicle inspection stations, automobile emissions testing stations, and internal service systems. The choice of locations for such facilities influences both the travel cost and waiting times of users. In contrast to most previous research, we explicitly embed both customer travel/connection and delay costs in the objective function and solve the location–allocation problem and choose facility capacities simultaneously. The choice of capacity for a facility that is viewed as a queueing system with Poisson arrivals and exponential service times could mean choosing a service rate for the servers (Scenario 1) or choosing the number of servers (Scenario 2). We express the optimal service rate in closed form in Scenario 1 and the (asymptotically) optimal number of servers in closed form in Scenario 2. This allows us to eliminate both the number of servers and the service rates from the optimization problems, leading to tractable mixed‐integer nonlinear programs. Our computational results show that both problems can be solved efficiently using a Lagrangian relaxation optimization procedure.     

The Critical Few Minutes in Scheduling Time‐Varying Queuing Systems

For nonstationary queuing systems where demand varies over time, an important practical issue is scheduling the number of servers to be available at various times of the day. Widely used scheduling procedures typically involve adding servers at natural time points (e.g., on the hour or at half past the hour) during peak demand periods. Scheduling is often complicated by restrictions on the minimum amount of time (human) servers must work, the earliest (or latest) time a server is available, and limits on the maximum number of servers that can be used at any one time. This paper was motivated by experience with actual queuing systems that embodied such complications. For these systems common scheduling methods that used “natural” starting times for servers resulted in needlessly long customer waits. This research demonstrates that changing the starting times of servers by only a few minutes can have dramatic impacts on customer waiting times for extended periods. In addition, the results highlight the importance of server punctuality.     

An asymptotic PTAS for batch scheduling with nonidentical job sizes to minimize makespan

Motivated by the existence of an APTAS (Asymptotic PTAS) for bin packing problem, we consider the batch scheduling problem with nonidentical job sizes to minimize makespan. For the proportional special version, i.e., there exists a fixed number α such that p _j =α s _j for every 1≤j≤n, we first present a lower bound of 3/2 for the approximation ratio and then design an APTAS. Supported by NNSF of China (No.10671108).     

A Promissory Theory of the Duty to Tip

In this article, I argued that in contexts in which tipping is customary, there is a moral duty to tip or to explicitly tell the server that you will not be tipping. The evidence for this rests on anecdotes about people's mental states, and customers and server's intuitions about duties that would arise were a customer unable to tip his server. The promise is a speech act that is implicit in ordering food. The speech act must be matched by the server's uptake, which is implicit in her taking the order. The promise argument rests on an actual promise and not a merely hypothetical promise. If there is such a duty, then in the absence of an explicit content, its content is likely set by convention. The convention is that customers tip 15–20%. Thus, customers have a duty to tip servers 15–20%. Other purported moral considerations do not ground this duty. These include custom, desirable incentives, role‐relative obligation, and gratitude.     

Design Principles for Flexible Systems

A fundamental aspect of designing systems with dedicated servers is identifying and improving the system bottlenecks. We extend the concept of a bottleneck to networks with heterogeneous, flexible servers. In contrast with a network with dedicated servers, the bottlenecks are not a priori obvious, but can be determined by solving a number of linear programming problems. Unlike the dedicated server case, we find that a bottleneck may span several nodes in the network. We then identify some characteristics of desirable flexibility structures. In particular, the chosen flexibility structure should not only achieve the maximal possible capacity (corresponding to full server flexibility), but should also have the feature that the entire network is the (unique) system bottleneck. The reason is that it is then possible to shift capacity between arbitrary nodes in the network, allowing the network to cope with demand fluctuations. Finally, we specify when certain flexibility structures (in particular chaining, targeted flexibility, and the “N” and “W” structures from the call center literature) possess these desirable characteristics.     

Waiting: integrating social and psychological perspectives in operations management

Waiting time is an important issue in service operations management because of its impact on customer satisfaction and operations capabilities. This paper examines waiting time from a social and psychological perspective. It provides a conceptual framework which identifies social and psychological factors that affect perceptions of waiting. The conceptual framework enables service managers to rethink operational issues, such as layout design, process choices, and service delivery from customers’ perceptions of waiting. Assimilation–contrast theory suggests that perceived waiting time be linked to expected waiting time and its gap leads to customers’ overall evaluation of service. A customer’s willingness to accept delay is related to the causes for delay as explained by attribution theory. Approaching waiting time from a stress management theory, this paper provides service managers with various stress-reduction mechanisms such as giving customers advance notice of expected waiting time, speeding up pre-process waiting time, and acknowledging customers’ rights to quick service. These practical suggestions can aid service managers in reducing perceived waiting time, enhancing customers’ waiting experience, and improving queue management.