Capacity sizing under parameter uncertainty: Safety staffing principles revisited

Achal Bassamboo*, Ramandeep S. Randhawa, Assaf Zeevi

*Corresponding author for this work

Research output: Contribution to journalArticle

44 Scopus citations

Abstract

We study a capacity sizing problem in a service system that is modeled as a single-class queue with multiple servers and where customers may renege while waiting for service. A salient feature of the model is that the mean arrival rate of work is random (in practice this is a typical consequence of forecasting errors). The paper elucidates the impact of uncertainty on the nature of capacity prescriptions, and relates these to well established rules-of-thumb such as the square-root safety staffing principle. We establish a simple and intuitive relationship between the incoming load (measured in Erlangs) and the extent of uncertainty in arrival rates (measured via the coefficient of variation) that characterizes the extent to which uncertainty dominates stochastic variability or vice versa. In the former case it is shown that traditional square-root safety staffing logic is no longer valid, yet simple capacity prescriptions derived via a suitable newsvendor problem are surprisingly accurate.

Original languageEnglish (US)
Pages (from-to)1668-1686
Number of pages19
JournalManagement Science
Volume56
Issue number10
DOIs
StatePublished - Oct 1 2010

Keywords

  • Capacity sizing
  • Parameter uncertainty
  • Service systems

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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