Improving operations by leveraging flexibility in internal and outsourced resources and customer behaviour

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The objective of the proposed research is to provide insights into the tradeoffs between the costs and performance improvements of either building flexibility (redundancy) into systems or exploiting latent flexibility in a system. The goal is to prepare for uncertainty in the environment in which the system is operating, in other words, one would like to have systems which respond quickly to changes in demand, supply or resource availability. The issue of identifying when significant performance gains can be gained as a result of low flexibility is of particular interest. The first goal is to examine the benefits of exploiting latent customer flexibility. In a previous paper, simple models suggested that the maximum improvement in mean waiting times is achieved for arbitrarily small levels of flexibility. There is much that needs to be done in further developing these insights, in particular to examine whether these insights extend to models more closely matching reality. There has been a significant amount of work done in supply chain and call centre management on the gains that can be made by using particular forms of limited flexibility (e.g. the so-called "chaining" approach). The second goal of this proposal is to identify a minimal set of capabilities a set of servers should have to maintain high throughput in the face of uncertainties in the environment. The third focus is how an organization can exploit flexibility due to outsourced capacity. There are two key questions. The first is on a strategic level. Given cost and resource models and an organization's fixed resources, how should one exploit this available capacity (in real-time)? The second question is given the solution of the strategic control problem above, how much should the organization invest in fixed resources?