Three essays on service operations

• Main Author: Chen, Manlu
• Other Authors: Chen Chien-Ming
• Format: Thesis-Doctor of Philosophy
• Language: English
• Published: Nanyang Technological University 2021
• Subjects: Business::Operations management
• Online Access: https://hdl.handle.net/10356/147401
• Institution: Nanyang Technological University

My dissertation work focuses on service operations management problems, with the presence of information technologies and strategic customers. Information technology is a game-changer, both as an enabler and a disruptor. It creates new business opportunities, reshapes the interactions of the stakeholders, and provides additional information. However, the benefit conferred by these new business models and additional information is unclear. For example, the explosion of information technology has enabled the food delivery business to expand so that more customers have access to it. Delivery platforms claim that they generate demand, but some restaurants feel differently. Chapter 1 investigates the long-term impact of food delivery services on the restaurant industry. We model a restaurant serving food to customers as a stylized single-server queue with two streams of customers: tech-savvy customers who have access to a delivery platform, and traditional customers who only have the walk-in option. We show that the platform does not necessarily increase demand for the restaurant. Furthermore, when the delivery service is sufficiently convenient, more customers having access to the platform may hurt the platform itself and the society. This is because the restaurant can become a delivery-only kitchen and raise its food price, leaving little surplus for the platform and consumers. But this would not happen when the pool of delivery workers could be capped. It is implied that limiting the labor pool size provides a simple yet effective means for the platform to improve its profit and meanwhile the social welfare. Besides the restaurant and food delivery industry, information technologies have been broadly applied in healthcare systems. In Chapter 2, we study how to improve the waits in an open-shop service system using information technology and analytics. Our work is motivated by a large healthcare clinic that implemented two information technology systems (auto-routing and SMS systems) to improve waits. We empirically evaluate the clinic's automation efforts and find that its IT implementations have negligible impacts on wait times. We identify two reasons: neither the project fundamentally changed the clinic's operation while the new IT allows immediate customer routing. Such immediate decisions reduce the system's flexibility and cause unproductive idleness. The clinic continued to use a station-level first-come-first-served (FCFS) priority policy. Then, customers tend to experience long delays at their last few stations. We use a stylized queueing model and simulations to demonstrate that priority policies considering customers' system-level characteristics outperform the FCFS discipline. Furthermore, to overcome the tension between pooling, which allows postponement of decisions, and behavioral considerations, which prefer early decisions that smooth transfer between stations, we propose a buffer strategy that enables the system to gather and effectively use more information for decision making. Chapters 1 and 2 show that with the increasing use of IT in service operations, service providers and social planners need to understand how IT reshapes and influences the service system so that they can derive maximum benefits from the emerging IT. In addition to the system efficiency, another important factor in service operations that service providers must pay attention to is customers' waiting experience. Customers' waiting experience depends on the total wait and how it is distributed over the entire service process. Therefore, in Chapter 2, we consider the wait time from both macro system-level perspective, such as total wait, and micro station-level perspective, such as excessive waits at stations. We demonstrate the efficacy of our proposed policies in shortening macro- and micro-level delays. Moreover, service providers can manage the waiting experience by creating a pleasant waiting area, providing distractions, and other strategies. Chapter 3 studies how can a service provider use entertaining activities with discounts to distract and delight waiting customers. We model this phenomenon by considering an M/M/1 queue operated by a profit-maximizing service provider that offers discounts through entertaining activities to strategic customers. We identify the profit-maximizing discount follows a threshold strategy and show that the service provider benefits from this strategy only if price-sensitive customers' demand is sufficiently large. Moreover, such a discount strategy should be implemented with probability 1 to the entire market.