The cost of service capacity is determined by
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Abstract In this article, a market for access to trading partners arises through the operation of a competitive market in which consumers queue for goods at firms. Equilibrium occurs when firms and buyers face the same trade-off between price and wait time. The trade-off measures the cost to firms of more customers and the cost to customers of a shorter expected wait time. The queuing model is related to mechanisms that ration goods among potential buyers and to models in which the good is characterized by price and by a second variable reflecting likelihood of or delay in transaction. Show Journal Information The International Economic Review was established in 1960 by two of the most active and acclaimed scholars in the economics profession: Michio Morishima, who was then at Osaka University's Institute of Social Economic Research (ISER), and Lawrence R. Klein, who was then at the University of Pennsylvania's Wharton School and Department of Economics. 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Chapter 13:Capacity Planningand Queuing Models Learning Objectives•Discuss the strategic role of capacity planning.•Describe a queuing model using A/B/C notation.•Use queuing models to calculate system performancemeasures.•Describe the relationships between queuing systemcharacteristics.•Use queuing models and various decision criteria forcapacity planning. Capacity Planning•Capacity is the ability to deliver service over aparticular time period.•Capacity is determined by the resources available tothe organization, e.g. facilities, equipment, and labor.•Capacity planning is the process of determining thetype and amounts of resources that are required toimplement an organization’s strategic business plan.•The capacity planning decision involves a trade-offbetween the cost of providing a service and the costof inconvenience of customer waiting. Economic Trade-off in CapacityPlanning Queuing System Cost TradeoffLet:Cw= Cost of one customer waiting in queue for anhourCs= Hourly cost per serverc= Number of serversTotal Cost/hour = Hourly Service Cost +Hourly Customer Waiting Cost= Csc + CwLqNote: Only consider systems where.c Capacity Planning Challenges•Inability to create a steady flow of demand to fullyutilize capacity.•Idle capacity always a reality for services.•Customer arrivals fluctuate and service demands alsovary.•Customers are participants in the service and thelevel of congestion impacts on perceived quality.•Inability to control demand results in capacitymeasured in terms of inputs (e.g. number of hotelrooms rather than guest nights). Strategic Role of Capacity Decisions•Using long range capacity as a preemptive strikewhere market is too small for two competitors (e.g.building a luxury hotel in a mid-sized city).•Lack of short-term capacity planning can generatecustomers for competition (e.g. restaurant staffing).•Capacity decisions balance costs of lost sales ifcapacity is inadequate against operating losses ifdemand does not reach expectations.•Strategy of building ahead of demand is often taken toavoid losing customers. Capacity Planning for Cookies andCream - Naive Approach•An enterprising student is considering opening a “Cookies andIce Cream” shop in space that has become available in a foodcourt. Observations of traffic during lunch hour suggest apotential peak demand of 50 customers, each ordering anaverage one ice cream sundae, 6 baked-to-order cookies, anda soft drink and spending 20 minutes at a table.•A cookie sheet can accommodate a dozen (12) cookies andbaking time 10 minutes. One server requires on average 6minutes to take an order, mix a batch of cookies, etc.•Capacity requirements are determined by calculating the unitsof facility, equipment, and labor needed to accommodate theanticipated peak demand. •Facility requirementsinclude the seats necessary toaccommodate diners. We will use a relationshipcalled “Little’s Law”.• Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 39 pages? Upload your study docs or become a Course Hero member to access this document Tags Queueing theory, Queuing Models How do you calculate average service cost? The reciprocal, 1/h, of the average rate of service is the average time required to serve one customer. For example, if a server can serve h = 3 customers per hour, on average, then 1/h = 1/3 hr = 20 min is the average service time for one customer.
What are the objectives of Queen theory?Queuing theory aims to design balanced systems that serve customers quickly and efficiently but do not cost too much to be sustainable.
What is waiting cost in queuing theory?Initially, the cost of waiting in line is at a maximum when the organization is at minimal service capacity. As service capacity increases, there is a reduction in the number of customers in the line and in their wait times, which decreases queuing cost.
What is jockeying in operations research?Jockeying can be described as the movement of of a waiting customer from one queue to another (of shorter length or which appears to be moving faster, etc.) in anticipation of a shorter delay.
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