Operations Management & Performance Modeling

1 Operations Strategy 2 Process Analysis 3 Lean Operations 4 Supply Chain Management 5 Capacity Management in Services – Class 6b: Capacity Analysis and Queuing – Class 7a: Applications » Specialization vs. Flexibility » Analysis of service systems: Sof-Optics 6 Total Quality Management 7 Business Process Reengineering OM&PM/Class 7a 1

Example 2: MBPF Calling Center limited

buffer size

 In reality only a limited number of people can be put on hold (this depends on the phone system in place) after which a caller receives busy signal. Assume that at most 5 people can be put on hold. Any caller receiving a busy signal simply calls a competitor resulting in a loss of $100 in revenue. – # of servers

c

= – buffer size

K

=  What is the hourly loss because of callers not being able to get through?

OM&PM/Class 7a 2

Example 3: MBPF Calling Center Resource Pooling

  2 phone numbers – MBPF hires a second CSR who is assigned a new telephone number. Customers are now free to call either of the two numbers. Once they are put on hold customers tend to stay on line since the other may be worse..

1 phone number: pooling – both CSRs share the same telephone number and the customers on hold are in a single queue 50% 50% Queue Server Queue Server Queue Servers OM&PM/Class 7a 3

Example 4: MBPF Calling Center Staffing

 Assume that the MBPF call center has a total of 6 lines. With all other data as in Example 2, what is the optimal number of CSRs that MBPF should staff the call center with?

OM&PM/Class 7a 4

Process Structure & Resource Capabilities: Specialization Vs. Flexibility

  Aggregation – single server averaging 10 minutes for service. Poisson arrivals with a mean of 5/hr.

Specialization – Service divided into two segments (one server at each segment), each averaging 5 minutes  Flexibility – Second server added, with each server performing entire service Queue Server Queue Server Queue Server Queue Servers OM&PM/Class 7a 5

Sof-Optics, Inc. = Managing the operations of a customer service department

OM&PM/Class 7a 6

Capacity Management at Sof-Optics

100 90 30 20 10 0 80 70 60 50 40 Demand (# Calls/30min) Current Supply/Capacity (# Calls/30min) Optimized Supply w/o demand mgt or capital investment OM&PM/Class 7a 7

Call Centers

 In U.S.: $10B, > 70,000 centers, > 3M people (>3% of workforce)  Most cost-effective channel to serve customers  Strategic Alignment – accounting: 90% are cost centers, 10% are revenue centers – role: 60% are viewed as cost, 40% as revenue generators – staffing: 60% are generalists, 40% specialists – Trend: more towards profit centers & revenue generators  Trade-off: low cost (service) vs. high revenue (sales) Source: O. Zeynep Aksin 1997 OM&PM/Class 7a 8

Levers for Reducing Flow Time

 “is to decrease the work content of (

only ?

) critical activities”,  and/or move it to non critical activities.

 Reduce waiting time: – reduce variability » arrivals & service requests » synchronize flows within the process – increase safety capacity » lower utilization » Pooling – Match resource availability with flows in and out of process OM&PM/Class 7a 9

E.g.: Analysis of Service Systems

   Divide day into blocks based on arrival rates For each block evaluate performance measures given current staffing Quantify financial impact of each action –

Workforce training

: reduces mean and variability of service time – –

Work flexibility from workforce Time flexibility from workforce

: pools available capacity : better synchronization – – –

Retain experienced employees Additional workforce

: increased safety capacity : Increases safety capacity

Improved Scheduling

: better synchronization – –

Incentives to affect arrival patterns

– Increase maximum queue capacity : better synchronization

Decrease product variety

: reduces variability of service time – Consignment program, fax, e-mail etc.

S D

OM&PM/Class 7a 10

Framework for Process Flow Management

Flow Chart Process Identify Bottlenecks Identify Critical Path Maximal Flow Rate Minimal Flow Time mean Demand Pattern variability Macro Average Performance Competitive?

Micro Variability Performance Yes Competitive?

Yes No Process Re-Design No Demand & Supply Mgt Continuous Improvement OM&PM/Class 7a 11

Class 7a Learning objectives

 Capacity Management under Uncertainty (variability): – the merits of safety capacity  Demand and Supply Management.

OM&PM/Class 7a 12

Automatic Call Distributors

A telephone call to a hospital in Southern California triggered this recorded message: “Thank you for calling. All our lines are busy at the moment, your call will be answered in the order in which it was received. Please have your hospital membership card ready. If you wish to schedule an eye appointment, call #.... If you wish to schedule a physical examination, call #.... If you wish to make an appointment with the family practice department, call # ....

If this is a life-threatening situation, call #...”

Source: Service America by Albretch and Zemke.

OM&PM/Class 7a 13