Introduction to Operations Management:

Session 4
Professor Gad Allon
Kellogg School of Management, Northwestern University

G. Allon
In this Session
}  What are the performance measures for a service
process?

2 G. Allon
In this Session
}  What are the performance measures for a service
process?
}  How to model this as a process?

3 G. Allon
In this Session
}  What are the performance measures for a service
process?
}  How to model this as a process?
}  What drives performance?

4 G. Allon
In this Session
}  What are the performance measures for a service
process?
}  How to model this as a process?
}  What drives performance?
}  What decisions must managers make?

5 G. Allon
McDonald’s Drive Thru
Service as a Process

G. Allon
Queuing Systems to model Service Processes:
A Simple Process
Queuing Systems to model Service Processes:
A Simple Process

Incoming calls
Queuing Systems to model Service Processes:
A Simple Process

Incoming calls Sales Reps

processing
calls
Queuing Systems to model Service Processes:
A Simple Process

Queue
“buffer”
Incoming calls
Calls
on Hold
Queuing Systems to model Service Processes:
A Simple Process

Queue
“buffer”
Incoming calls
Calls
on Hold

Blocked Calls
(Busy signal)
Queuing Systems to model Service Processes:
A Simple Process

Queue
“buffer”
Incoming calls
Calls
on Hold

Blocked Calls Abandoned Calls

(Busy signal) (Tired of waiting)
Queuing Systems to model Service Processes:
A Simple Process

Queue
“buffer”
Incoming calls Sales Reps
Calls processing
on Hold calls

Blocked Calls Abandoned Calls

(Busy signal) (Tired of waiting)
Queuing Systems to model Service Processes:
A Simple Process

Queue
“buffer”
Incoming calls Sales Reps Answered Calls
Calls processing
on Hold calls

Blocked Calls Abandoned Calls

(Busy signal) (Tired of waiting)
Performance Measures

}  Sales
}  Throughput R

}  Abandonment Ra
Performance Measures

}  Sales
}  Throughput R

}  Abandonment Ra

}  Cost
}  Server utilization ρ
}  Inventory/WIP : # in queue Ii /system I
Performance Measures

}  Sales
}  Throughput R

}  Abandonment Ra

}  Cost
}  Server utilization ρ
}  Inventory/WIP : # in queue Ii /system I

}  Customer service

}  Waiting/Flow Time: time spent in queue Ti /system T
}  Probability of blocking Rb
Why Do Queues Form?

G. Allon
Waiting in line for passport checks:
Insufficient Capacity

21 G. Allon
Why Do Queues Form, Even When There is
Sufficient Capacity?

G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

23 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time
0

24 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time Start Time

0 0

25 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time Start Time Completion Time

0 0 2

26 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time Start Time Completion Time

0 0 2
2 2 4

27 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time Start Time Completion Time

0 0 2
2 2 4
4 4 6

28 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time Start Time Completion Time

0 0 2
2 2 4
4 4 6
6 6 8

29 G. Allon
Why Do Queues Form?
Arrival:
One
customer Service:
every two Two
minutes minutes
per
customer

Arrival Time Start Time Completion Time

0 0 2
2 2 4
4 4 6
6 6 8
8 8 10

30 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time

31 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time

0 0 3

32 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time

0 0 3
2

33 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time

0 0 3
2 3 4

34 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 3 0
2 3 4 1

35 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 3 0
2 3 4 1
4 4 7 0

36 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 3 0
2 3 4 1
4 4 7 0
6 7 8 1

37 G. Allon
Why Do Queues Form?
Arrival: Service:
One Two
customer minutes
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 3 0
2 3 4 1
4 4 7 0
6 7 8 1
8 8 11 0

38 G. Allon
Why Do Queues Form?
Arrival: Service:
One One
customer Minute
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

39 G. Allon
Why Do Queues Form?
Arrival: Service:
One One
customer Minute
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 0.5 0

40 G. Allon
Why Do Queues Form?
Arrival: Service:
One One
customer Minute
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 0.5 0
2 2 3.5 0

41 G. Allon
Why Do Queues Form?
Arrival: Service:
One One
customer Minute
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 0.5 0
2 2 3.5 0
4 4 5.5 0

42 G. Allon
Why Do Queues Form?
Arrival: Service:
One One
customer Minute
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 0.5 0
2 2 3.5 0
4 4 5.5 0
6 6 6.5 0

43 G. Allon
Why Do Queues Form?
Arrival: Service:
One One
customer Minute
every two per
minutes customer
(on
average)

Arrival Time Start Time Completion Time Wait Time

0 0 0.5 0
2 2 3.5 0
4 4 5.5 0
6 6 6.5 0
8 8 8.5 0

44 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

45 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

46 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

47 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

48 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

49 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization = % Time Agent is Busy

50 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization = % Time Agent is Busy

“Safety Capacity” = % Time Agent is Idle

51 G. Allon
Why Do Queues Form?
Queueing theory

G. Allon
Queuing Theory:
Variability + Utilization = Waiting

PK Formula for average wait in queue:

2 2
1 ρ Ci + C p
Ti =
Rp 1 − ρ 2
Queuing Theory:
Variability + Utilization = Waiting

PK Formula for average wait in queue:

2 2
1 ρ Ci + C p
Ti =
Rp 1 − ρ 2
mean service
time
Queuing Theory:
Variability + Utilization = Waiting

PK Formula for average wait in queue:

2 2
1 ρ Ci + C p
Ti =
Rp 1 − ρ 2
mean service x" utilization effect
time
Queuing Theory:
Variability + Utilization = Waiting

PK Formula for average wait in queue:

2 2
1 ρ Ci + C p
Ti =
Rp 1 − ρ 2
mean service x" utilization effect x"variability
time effect
Queuing Theory:
Variability + Utilization = Waiting
Waiting time
1.2

1.0
Waiting Time

0.8

0.6

0.4

0.2

0.0
0 0.1 0.2 0.3 0.4 0.5 0.6

Utilization

1 ρ Ci2 + C p2
Ti =
Rp 1 − ρ 2
mean service x" utilization effect x"variability
time effect
Queuing Theory:
Variability + Utilization = Waiting
Waiting time
1.2

1.0
Waiting Time

0.8

0.6 0.5
Ti = =1
0.4 1− 0.5
0.2

0.0
0 0.1 0.2 0.3 0.4 0.5 0.6

Utilization

ρ
Ti = 1 1
1− ρ

utilization effect
Queuing Theory:
Variability + Utilization = Waiting

Waiting time
3.5
Waiting Time

3.0

2.5

2.0

1.5

1.0

0.5

0.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Utilization

ρ
Ti = 1 1
1− ρ

utilization effect
Queuing Theory:
Variability + Utilization = Waiting

Waiting time
4.5
4.0
Waiting Time

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Utilization

ρ
Ti = 1 1
1− ρ

utilization effect
Queuing Theory:
Variability + Utilization = Waiting
Waiting time
10.0
9.0
Waiting Time

8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Utilization

ρ
Ti = 1 1
1− ρ

utilization effect
Queuing Theory:
Variability + Utilization = Waiting

  Throughput-Delay curve:

}  PK Formula for average wait in queue:

1 ρ Ci2 + C p2
Ti =
Rp 1 − ρ 2
mean service x" utilization effect x"variability
time effect
Queuing Theory:
Variability + Utilization = Waiting

  Throughput-Delay curve: Actual

Average
Flow
Variability
Time,T

Theoretical
Tp Flow Time

100% Utilizationρ

}  PK Formula for average wait in queue:

1 ρ Ci2 + C p2
Ti =
Rp 1 − ρ 2
mean service x" utilization effect x"variability
time effect
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

64 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

Service Arrivals Service Arrivals

65 G. Allon
How Can we Reduce Waiting Time

G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

Service Arrivals

67 G. Allon
Levers to reduce waiting and increase QoS:
Safety Capacity

Safety Capacity = capacity carried in excess of expected

demand to cover for system variability
}  it provides a safety net against higher than expected arrivals
or services and reduces waiting time
Levers to reduce waiting and increase QoS:
Safety Capacity

Safety Capacity = capacity carried in excess of expected

demand to cover for system variability
}  it provides a safety net against higher than expected arrivals
or services and reduces waiting time
McDonald’s Drive Thru
McDonald’s Drive Thru
McDonald’s Drive Thru
McDonald’s Drive Thru
Reducing Utilization During Peak Times by
Shifting Demand: Pricing

74 G. Allon
Shifting Demand

75 G. Allon
Shifting Demand

76 G. Allon
Shifting Demand: Texting Your Customers

77 G. Allon
 Why Do queues Form?

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

Service Arrivals

78 G. Allon
Reducing Arrival Variability: 
Appointments and Reservation

79 G. Allon
Reducing Service Variability: Scripting

80 G. Allon
When Multiple Lines Work?
TSA “Ski Slope” Lanes
Managing Service Processes

G. Allon
Summary

Statistical Dependent
Queues
Fluctuations Events

83 G. Allon
 Summary

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

84 G. Allon
 Summary

Statistical Dependent
Queues
Fluctuations Events

Unpredictable Variability Utilization

Service Arrivals Service Arrivals

85 G. Allon
Next:
Supply Chain Management

G. Allon