Operations Management & Performance Modeling

1. Operations Management & Performance Modeling 1 OperationsStrategy 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

2. 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

3. 50% Queue Server 50% Queue Server Queue Servers 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 OM&PM/Class 7a

4. 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

5. Queue Server Queue Server Queue Server Queue Servers 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 OM&PM/Class 7a

6. Sof-Optics, Inc. = Managing the operations of a customer service department OM&PM/Class 7a

7. 100 90 80 70 60 50 40 Demand (# Calls/30min) 30 Current Supply/Capacity (# Calls/30min) 20 Optimized Supply w/o demand mgt or capital investment 10 0 7:30 6:30 8:30 9:30 10:30 14:30 15:30 16:30 17:30 11:30 12:30 13:30 Capacity Management at Sof-Optics OM&PM/Class 7a

8. 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

9. 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

10. 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: pools available capacity • Time flexibility from workforce: better synchronization • Retain experienced employees: increased safety capacity • Additional workforce: Increases safety capacity • Improved Scheduling: better synchronization • Incentives to affect arrival patterns: better synchronization • Decrease product variety: reduces variability of service time • Increase maximum queue capacity • Consignment program, fax, e-mail etc. S D OM&PM/Class 7a

11. Framework for Process Flow Management Flow Chart Process Identify Bottlenecks Maximal Flow Rate Identify Critical Path Minimal Flow Time mean Macro Average Performance Process Re-Design No Competitive? Demand Pattern Yes Micro Variability Performance Demand & Supply Mgt No Competitive? variability Continuous Improvement Yes OM&PM/Class 7a

12. Class 7a Learning objectives • Capacity Management under Uncertainty (variability): • the merits of safety capacity • Demand and Supply Management. OM&PM/Class 7a

13. 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