ISOM 2700: Operations Management

Session 9: Service Management I

Dongwook Shin
Dept. ISOM, HKUST Business School
Course Roadmap
Bottleneck
Little’s law
Utilization

Control chart
Acceptance sampling
Six sigma

Maximize
Profits

Decision tree method

Linear programming

Waiting time
Server utilization
1
What is Special About Service
Operations?

Capacity of service cannot be stored

and carried over!

2
The Process View (Previous Class)

Input Output

Waiting Work-in-process

Flow Time

Airline Waiting for Office Hours 3

Where the Time Goes?

In a life time, the average

American will spend--

SIX MONTHS: Waiting at stoplights

EIGHT MONTHS: Opening junk mail

ONE YEAR: Looking for misplaced objects

TWO YEARS: Unsuccessfully returning phone calls

FOUR YEARS: Doing housework

FIVE YEARS: Waiting in line

SIX YEARS: Eating

Source: US News & World Report, January 30, 1989, p. 81.

4
Managerial Implications of Long Waiting

5
Waiting Lines and Queueing Systems
• Where?
• Call centers
• Theme parks
• Fast food restaurant
• Supermarket
• …

• Questions:
• What are the root causes of waiting?
• How to reduce the waiting time?

6
Learning Objectives: Session 9

• Root causes of waiting in service operations

• Fundamentals of queueing models

7
Subway Sandwich at HKUST
• A server makes a sandwich exactly for 3 minutes
• Scenario 1: customers arrive exactly every 3 minutes

Buffer Server

• Scenario 2: customers arrive randomly (but with the

same average)

Buffer Server

Simulation Visualization
8
 Variability: Where Does It Come From?
Processing times:
• Inherent variation
• Lack of SOPs
• Quality (scrap / rework)

Task /
Buffer
Activity
Input:
• Random arrival
(randomness is
Resources:
the rule, not the
• Breakdown / Maintenance
exception)
• Operator absence
• Set-up times

Variability of arrival process Variability of service time

9
An Example of a Simple Queueing System

Call center

Incoming Answered
calls calls
Calls Sales staffs
on
Hold

Blocked calls: Abandoned calls:

At peak, 80% of Customers tired of Financial consequence:
calls receives a waiting abandons Loss in Revenue $$$
busy signal the queue

10
Root Causes of Waiting
• Why do queues exist?
• Variability of arrival process
• Variability of service time

• How to reduce waiting time?

• Reduce variability of arrival process
• Reduce variability of service time

• Examples: Disney land, Hospital

11
Learning Objectives: Session 9

• Root causes of waiting in service operations

• Fundamentals of queueing models

12
 Elements of Queueing Models

Service provided here

Customers leave the
Customers Arrive system
Servers
Queue

• Inter-arrival time: time between two consecutive arrivals (random)

…
Time
a1 a2 a3 a4 a5 a6 a7 …

• Service time: time taken to serve one customer (random)

Time
s1 s2 s3 s4 s5 s6 s7
13
Modeling Random Inter-arrival and
Service Times: Exponential Distribution
• Inter-arrival time a ∼ Exponential(λ)
• Service time s ∼ Exponential(μ)
We call that
1
a random variable X is
exponentially
0.8
distributed with
rate ! if
0.6
" #≤%
P(X £ t)

= 1 − exp(−!%)
0.4

0.2 If X ~ Exponential(!),
then E(X)=1/!
0
Time t

14
Poisson Arrival Process

Inter-arrival time # of arrivals per period

Exponential
distribution
= Poisson
Distribution

Inter-arrival time Number of arrivals

~ Exponential(3) per unit time
~ Poisson(3)

15
 M/M/s Model
Service rate at each server
µ customers/min
Arrival rate
l customers/min Customers Experience /
System Performance
FCFS Servers
Queue

• Input of the queue

• Exponential inter-arrival time: arrival rate = l
• Exponential service time: service rate at each server = µ M/M/s
• Number of servers = s
queue
• Assumption: one queue; FCFS; l < sµ
• Output of the queue (System performance measures)
• Average number of customers in the queue Lq (or in the system L)
• Average time spent in the queue Wq (or in the system W)
• Probability of waiting
• Utilization of the server ρ
16
 Elements of Queueing Models

Service provided here

Customers leave the
Customers Arrive system
Servers
Queue

• Kendall’s notation

X/X/X

Number of servers
Service time distribution
Inter-arrival distribution
17
Remember: ! And " Are Rates

• l = Average number of If average service time is

arrivals per time period 15 minutes, then μ is 4
customers/hour
• e.g., 3 units/hour

• µ = Average number of
people or items served per
time period
• e.g., 4 units/hour
• 1/ µ = 15 minutes/unit

18
 Server Utilization #
Service Rate "
per each server

Inter-arrival Rate !
Buffer s Servers

= min(capacity,inter-arrival rate)
• Condition: " < $% = min(sMIU,LAMBDA)
Flow Rate λ
Utilization ρ= = < 100%
Capacity $µ
• (EX) There are 2 servers. The average arrival rate is 10
customers per hour. The average service time per
customer is 10 minutes. Server utilization = ?

Server utilization is the average fraction of time a server is busy

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 Stable and Unstable Queues

200 200
! = 1/35 ! = 1/35
180 180
" = 1/120 " = 1/120
160 160

Total number of customers in the system

Total number of customers in the system

140
s=4 140
s=3

120
Utilization = 86% 120
Utilization = 114%
100 100

80 80

60 60

40 40

20 20

0 0
0 5000 10000 15000 20000 25000 30000 0 5000 10000 15000 20000 25000 30000
Time (seconds) Time (seconds)

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Little’s Law Revisited
Waiting Time = "! Service Time = !

Inter-arrival Rate ! Transformation

Buffer Process Server

• Little’s law:
Avg. Number Flow Rate Flow Time
= ×
in System of System of System

21
Little’s Law Revisited

Inter-arrival Rate !
Single
Buffer
Server

Avg. Waiting Time Avg. Service Time

!! !" = 1/'

Avg. Number Waiting Avg. Number in Service

"! = $!! "" = $!" = $/' = (

22
Formulas for M/M/1 Queueing Model
• Given: arrival rate = !, service rate = 0
Condition
• Probability of exactly n customers in the system !<0
"
"" = 1 (1 − 1) P(need to wait)
= 1 - P0 <- no customer in the system
• Average number of customers in the system = 1 - (1 - u)
! 1 =u
2= =
0−! 1−1
• Average number of customers in queue
!! 1!
2# = =
0(0 − !) 1 − 1
• Average time in the system
2 1
3= =
! 0−!
• Average time in the queue
2# 1
3# = =
! 0−!
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Example: Pizza Hut
At a take-away only Pizza Hut
branch,

• Customers arrive randomly at the

average rate of 25 per hour

• There is one employee who can, on

average, serve one customer every 2
minutes

M/M/1 Queue

1 Employee
Exponential Service Time
Exponential Inter-arrival Time
24
Example: Pizza Hut (continued)
1) Average utilization of the employee
" 25 /0$1/ℎ4
= = 0.8333
% 30 /0$1/ℎ4

2) Average Queue Length

"* 25*
8) = = = 4.167
%(% − ") 30(30 − 25)

3) Average number of customers in the system

" 25
8+ = = =5
% − " 30 − 25
25
Example: Pizza Hut (continued)

4) Average Waiting Time in Line

8)
?) = = 0.1667 ℎ4$ = 10 @AB$
"

5) Average Amount of Time in the System

8
? = = 0.2 ℎ4$ = 12 @AB$
"
= Avg. waiting time + Avg. service time
= 10 + 2
= 12 mins

26
Congestion vs. System Utilization
100 For the M/M/1 model, avg.
number in the system is:
C
8=
1−C
10
1 2
8
2 0 0
6
0.2 0.25
4
0.5 1
2
0.8 4
0 0.9 9
0 1.0
0.99 99
1
0.999 999
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 Example: Pizza Hut Extended
At a take-away only Pizza Hut
branch,

• Customers arrive randomly at the

average rate of 25 per hour

• There is one employee who can, on

average, serve one customer every 2
minutes

If an extra employee (with the same training and hence the same
service rate) works in this branch, what will happen?

28
Example: Pizza Hut Extended
• Customers arrive randomly at the average rate of 25 per
hour
• There are 2 employees who can, on average, serve one
customer every two minutes

M/M/2 Queue

2 Employees
Exponential Service Time
Exponential Inter-arrival Time

29
Formulas for M/M/s Queueing Model
• Given: Arrival rate = !, Service rate = 0 Condition:
! < 50

• Probability of waiting
50
"$ = 2" −1
!
• Average number of customers in the system
!
2 = 2" +
0
• Average time in the system
2
3=
!
• Average time in the queue
2"
3" =
!
30
 Table for
Values of 8)

31
Example: Pizza Hut Extended (continued)

• Number of customers in the queue

8) ≈ 0.176

• Number of customers in the system

8 ≈ 1.009

• Average waiting time in queue

8) 0.176 /0$1
?) = = = 0.007 ℎF04 = 0.4 @AB
" 25 /0$1/ℎF04

32
 Example: Pizza Hut Extended (continued)
• What is the benefit of adding an extra employee?

1 Employee 2 Employees
Probability of waiting in 0.833 0.245
line
Average Queue 4.167 0.176
Length
Average Number of
Customers in the system 5 1.009

Average Waiting 10 min 0.4 min

Time
33
Queueing System Cost Tradeoff
Cw = Cost of waiting per customer per hour
Lq = Mean number of waiting customers
Cs = Cost of service per server per hour
s = Number of servers

Total cost per hour = service cost + customer waiting cost

= G+ ×$ + G, ×8)

34
Queueing System Cost Tradeoff

35
Takeaways
• Variability causes congestion
• Reducing variability reduces waiting time
• M/M/s model to analyze average waiting time and the
number of customers in the system

Model parameters Performance measures

l
µ 1, 3" , 3, 2" , 2

• Next class: More on queueing models

36