Operations in the On-Demand Economy: Staffing Services with Self-Scheduling Capacity

Itai Gurvich*, Martin Lariviere, Antonio Moreno-Garcia

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapter

46 Scopus citations

Abstract

Motivated by recent innovations in service delivery such as ride-sharing services and work-from-home call centers, we study capacity management when workers self-schedule. Our service provider chooses capacity to maximize its profit (revenue from served customers minus capacity costs) over a horizon. Because demand varies over the horizon, the provider benefits from flexibility to adjust its capacity from period to period. However, the firm controls its capacity only indirectly through compensation. The agents have the flexibility to choose when they will or will not work and they optimize their schedules based on the compensation offered and their individual availability. To guarantee adequate capacity, the firm must offer sufficiently high compensation. An augmented newsvendor formula captures the tradeoffs for the firm and the agents. If the firm could keep the flexibility but summon as many agents as it wants (i.e., have direct control) for the same wages it would not only generate higher profit, as is expected, but would also provide better service levels to its customers. If the agents require a “minimum wage” to remain in the agent pool they will have to relinquish some of their flexibility. To pay a minimum wage the firm must restrict the number of agents that can work in some time intervals. The costs to the firm are countered by the self-scheduling firm’s flexibility to match supply to varying demand. If the pool of agents is sufficiently large relative to peak demand, the firm earns more than it would if it had control of agents’ schedules but had to maintain a fixed staffing level over the horizon.

Original languageEnglish (US)
Title of host publicationSpringer Series in Supply Chain Management
PublisherSpringer Nature
Pages249-278
Number of pages30
DOIs
StatePublished - 2019

Publication series

NameSpringer Series in Supply Chain Management
Volume6
ISSN (Print)2365-6395
ISSN (Electronic)2365-6409

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Management Science and Operations Research
  • Control and Optimization

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