MANAGERIAL ECONOMICS & DECISION SCIENCES; OPERATIONS
Assistant Professor of Managerial Economics & Decision Sciences
Service Management
- Recent Media Coverage
Economist Intelligence Unit: Executive Briefing: Firm size and service level: When is it advantageous for a service-oriented firm to differentiate itself along service quality dimensions? - 10/1/2008
See all Kellogg in the Media
The literature on many-server approximations provides significant simplifications towards the optimal capacity sizing of large-scale monopolists but falls short of providing similar simplifications for a competitive setting in which each firm’s decision is affected by its competitors’ actions. In this paper, we introduce a framework that combines many-server heavy-traffic analysis with the notion of epsilon-Nash equilibrium and apply it to the study of equilibria in a market with multiple large-scale service providers that compete on both prices and response times. In an analogy to fluid and diffusion approximations for queueing systems, we introduce the notions of fluid game and diffusion game. The proposed framework allows us to provide first-order and second-order characterization results for the equilibria in these markets. We use our results to provide insights into the price and service-level choices in the market and, in particular, into the impact of the market scale on the interdependence between these two strategic decisions.
Motivated by telephone call centers, we study large-scale service systems with multiple customer classes and multiple agent pools, each with many agents. To minimize sta±ng costs subject to service-level constraints, where we delicately balance the service levels (SLs) of the di®erent classes, we propose a family of routing rules called Fixed-Queue-Ratio (FQR) rules. With FQR, a newly available agent next serves the customer from the head of the queue of the class (from among those he is eligible to serve) whose queue length most exceeds a speci¯ed proportion of the total queue length. The proportions can be set to achieve desired SL targets. The FQR rule achieves an important state-space collapse (SSC) as the total arrival rate increases, in which the individual queue lengths evolve as ¯xed proportions of the total queue length. In the current paper we consider a variety of service-level types and exploit SSC to construct asymptotically optimal solutions for the sta±ng-and-routing problem. The key assumption in the current paper is that the service rates depend only on the agent pool.
We study cross-selling operations in call centers. The following question is addressed: How many customer-service representatives are required (staffing) and when should cross-selling opportunities be exercised (control) in a way that will maximize the expected profit of the center while maintaining a pre-specified service level target. We tackle this question by characterizing control and staffing schemes that are asymptotically optimal in the limit, as the system load grows large. Our main finding is that a threshold priority (TP) control, in which cross-selling is exercised only if the number of callers in the system is below a certain threshold, is asymptotically optimal in great generality. The asymptotic optimality of TP reduces the staffing problem to a solution of a simple deterministic problem, in one regime, and to a simple search procedure in another. We show that our joint staffing and control scheme is nearly optimal for large systems. Furthermore, it performs extremely well even for relatively small systems.
Motivated by call centers, we study large-scale service systems with multiple customer classes and multiple agent pools, each with many agents. We propose a family of routing rules called Queue-and- Idleness-Ratio (QIR) rules. A newly available agent next serves the customer from the head of the queue of the class (from among those he is eligible to serve) whose queue length most exceeds a specified state-dependent proportion of the total queue length. An arriving customer is routed to the agent pool whose idleness most exceeds a specified state-dependent proportion of the total idleness. We identify regularity conditions on the network structure and system parameters under which QIR produces an important state-space collapse (SSC) result in the Quality-and-Efficiency-Driven (QED) many-server heavy-traffic limiting regime. The SSC result is applied here to prove stochastic-process limits and in subsequent papers to solve important staffing and control problems for large-scale service systems.
In a recent paper we introduced the fixed-queue-ratio (FQR) family of routing rules for many-server service systems with multiple customer classes and server pools. A newly available server next serves the customer from the head of the queue of the class (from among those he is eligible to serve) whose queue length most exceeds a specified proportion of the total queue length. Under fairly general conditions, FQR produces an important state-space collapse as the total arrival rate and the numbers of servers increase in a coordinated way. That state-space collapse was previously used to delicately balance service levels for the different customer classes. In this sequel, we show that a special version of FQR stochastically minimizes convex holding costs in a finite-horizon setting when the service rates are restricted to be pool-dependent. Under additional regularity conditions, the special version of FQR reduces to a simple policy: Linear costs produce a priority-type rule, in which the least-cost customers are given low priority. Strictly convex costs (plus other regularity conditions) produce a many-server analogue of the generalized-c¹ (Gc¹) rule, under which a newly available server selects a customer from the class experiencing the greatest marginal cost at that time.
Cross-selling is becoming an increasingly prevalent practice in call centers, due, in part, to its unique capability to allow firms to dynamically segment their callers and customize their product offerings accordingly. This paper considers a call center with cross-selling capability that serves a pool of customers that are differentiated in terms of their revenue potential and delay sensitivity. It studies the operational decisions of staffing, call routing, and cross-selling under various forms of customer segmentation. It derives near-optimal controls in each of the settings analyzed, and characterizes the impact of a more refined customer segmentation on the structure of these policies and the center’s profitability.
Delay announcements informing customers about anticipated service delays are prevalent in service-oriented systems. How to use delay announcements to manage the service system in an efficient manner is a complex problem which depends on both the dynamics of the underlying queueing system and on the customer behavior.We examine this problem of information communication by considering a model in which both the firm and the customers act strategically: the firm in choosing its delay announcement while anticipating customer response, and the customers in interpreting these announcements and in making the decision about when to join the system and when to balk. We characterize the equilibrium language that emerges between the service provider and her customers. The analysis of the emerging equilibria provides new and interesting insights into customer-firm information sharing. We show that even though the information provided to customers is non-verifiable and non-credible, it improves the profits of the firm and the expected utility of the customers. Further, the information could be as simple as “High Congestion”/“Low Congestion” announcements, or could be as detailed as the true state of the system. We also show that firms may choose to shade some of the truth by using intentional vagueness to lure customers.
This course counts toward the following majors:Operations.
Operations management is the management of business processes--that is, the management of the recurring activities of a firm. This course aims to familiarize students with the problems and issues confronting operations managers, and to provide the language, concepts, insights and tools to deal with these issues to gain competitive advantage through operations. We examine how different business strategies require different business processes and how different operational capabilities allow and support different strategies to gain competitive advantage. A process view of operations is used to analyze different key operational dimensions such as capacity management, cycle time management, supply chain and logistics management, and quality management. Finally, we connect to recent developments such as lean or world-class manufacturing, just-in-time operations, time-based competition and business re-engineering.
Prerequisite: DECS-433 or DECS-436.
This course counts toward the following majors: Operations.
This course provides doctoral students the foundations of applied probability and stochastic modeling. The first part of the course covers basic concepts in probability, such as the Borel Cantelli Lemma and the strong law of large numbers; the second part covers renewal and regenerative processes including Markov chains; and the last part covers Martingales and Brownian motion. Throughout, we will be applying some of the theoretic results to the analysis of queues. Students are expected to have some background in probability (such as IEMS 202) and stochastic processes; no measure theory background is required.
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