Optimal staffing in nonstationary service centers with constraints. (26th December 2016)

• Record Type: Journal Article
• Authors: Niyirora, Jerome; Pender, Jamol
• Is Part Of: Naval research logistics. Volume 63:Number 8(2016:Dec.)
• Page Start: 615
• Page End: 630
• Publication Date: 2016-12-26
• Subjects: service center -- dynamic queue -- optimal control; Logistics, Naval -- Periodicals; Supplies and stores -- Periodicals; 359.07
• DOI: 10.1002/nav.21723
• Languages: English
• ISSNs: 0894-069X

Abstract

Abstract: This paper considers optimal staffing in service centers. We construct models for profit and cost centers using dynamic rate queues. To allow for practical optimal controls, we approximate the queueing process using a Gaussian random variable with equal mean and variance. We then appeal to the Pontryagin's maximum principle to derive a closed form square root staffing (SRS) rule for optimal staffing. Unlike most traditional SRS formulas, the main parameter in our formula is not the probability of delay but rather a cost‐to‐benefit ratio that depends on the shadow price. We show that the delay experienced by customers can be interpreted in terms of this ratio. Throughout the article, we provide theoretical support of our analysis and conduct extensive numerical experiments to reinforce our findings. To this end, various scenarios are considered to evaluate the change in the staffing levels as the cost‐to‐benefit ratio changes. We also assess the change in the service grade and the effects of a service‐level agreement constraint. Our analysis indicates that the variation in the ratio of customer abandonment over service rate particularly influences staffing levels and can lead to drastically different policies between profit and cost service centers. Our main contribution is the introduction of new analysis and managerial insights into the nonstationary optimal staffing of service centers, especially when the objective is to maximize profitability. © 2016 Wiley Periodicals, Inc. Naval Research Logistics 63: 615–630, 2017