OM&PM/Class 7a1 Operations Management & Performance Modeling 1Operations Strategy 2Process Analysis 3Lean Operations 4Supply Chain Management 5Capacity Management in Services –Class 6b: Capacity Analysis and Queuing –Class 7a: Applications »Specialization vs. Flexibility »Analysis of service systems: Sof-Optics 6Total Quality Management 7Business Process Reengineering

OM&PM/Class 7a2 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 7a3 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 Servers Queue ServerQueue ServerQueue 50%

OM&PM/Class 7a4 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 7a5 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 Servers Queue ServerQueueServerQueueServerQueue

OM&PM/Class 7a6 Sof-Optics, Inc. = Managing the operations of a customer service department

OM&PM/Class 7a7 Capacity Management at Sof-Optics Demand (# Calls/30min) Current Supply/Capacity (# Calls/30min) Optimized Supply w/o demand mgt or capital investment

OM&PM/Class 7a8 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 7a9 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 7a10 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, etc. S D

OM&PM/Class 7a11 Framework for Process Flow Management Competitive? No Flow Chart Process Identify Bottlenecks Maximal Flow Rate Identify Critical Path Minimal Flow Time Demand Pattern Macro Average Performance Process Re-Design Competitive? No Micro Variability Performance Demand & Supply Mgt Continuous Improvement mean variability Yes

OM&PM/Class 7a12 Class 7a Learning objectives  Capacity Management under Uncertainty (variability): –the merits of safety capacity  Demand and Supply Management.

OM&PM/Class 7a13 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.