The Value Of Information Sharing In Capacity Allocation In Serial Service Operations

Abstract

In this study, we investigate the value of information sharing in serial service operations. When services are offered sequentially in two stages, we may use the demand information from the previous period in assigning servers at each stage. This study compares an information-based policy with a basic policy for capacity allocation in serial service operations in order to explore the value of information shared between the two stages. Among several possible candidates for an information-based policy, we chose an assigning rule such that the number of servers at the latter stage is determined by the number of customers served out of the prior stage in the previous period. On the other hand, the basic policy is designated as an assigning rule such that the two stages have the same constant number of servers through all periods. Assuming independent and identically distributed Normal demands with various parameters, we conducted computational experiments to compute the cost savings from using the information-based policy over the basic policy. The cost of using each policy includes the labor cost and the waiting cost. The results show that the cost savings of information sharing are relatively low and that the value of information sharing increases with demand variability or with unit waiting cost. These results give us some managerial insights on capacity allocation in serial service operations.