Department of Economics and Business Economics

Quandary of Service Logistics: Fast or Reliable?

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Standard

Quandary of Service Logistics : Fast or Reliable? / Marand, Ata Jalili; Tang, Ou; Li, Hongyan Jenny.

In: European Journal of Operational Research, Vol. 275, No. 3, 2019, p. 983-996.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Marand, AJ, Tang, O & Li, HJ 2019, 'Quandary of Service Logistics: Fast or Reliable?', European Journal of Operational Research, vol. 275, no. 3, pp. 983-996. https://doi.org/10.1016/j.ejor.2018.12.007

APA

Marand, A. J., Tang, O., & Li, H. J. (2019). Quandary of Service Logistics: Fast or Reliable? European Journal of Operational Research, 275(3), 983-996. https://doi.org/10.1016/j.ejor.2018.12.007

CBE

Marand AJ, Tang O, Li HJ. 2019. Quandary of Service Logistics: Fast or Reliable?. European Journal of Operational Research. 275(3):983-996. https://doi.org/10.1016/j.ejor.2018.12.007

MLA

Vancouver

Marand AJ, Tang O, Li HJ. Quandary of Service Logistics: Fast or Reliable? European Journal of Operational Research. 2019;275(3):983-996. https://doi.org/10.1016/j.ejor.2018.12.007

Author

Marand, Ata Jalili ; Tang, Ou ; Li, Hongyan Jenny. / Quandary of Service Logistics : Fast or Reliable?. In: European Journal of Operational Research. 2019 ; Vol. 275, No. 3. pp. 983-996.

Bibtex

@article{4c99d963bccb4786ba957b30c6485da8,
title = "Quandary of Service Logistics: Fast or Reliable?",
abstract = "Delivery time and delivery reliability are two top-level measures of delivery performance, and they both influence customers{\textquoteright} perception of service value. However, the classic queue-pricing literature emphasizes the former and ignores the latter. In order to bridge the gap between research and practice, this study addresses the interactive impact of price, delivery time, and delivery-reliability level on the equilibrium behavior of rational customers and the optimal decisions of a revenue-maximizing service provider. We assume that the customers{\textquoteright} sensitivity to the delivery-reliability level is characterized by an increasing concave service value function. We model the operations of the service provider as an M/M/1 queue. Two cases are investigated: homogeneous customers and heterogeneous customers. For the homogeneous customers case, we analytically characterize the service provider{\textquoteright}s optimal price, delivery time, and delivery-reliability level decisions. We show how the service provider{\textquoteright}s decisions on whether to provide faster or more reliable service are affected when different problem parameters are subject to variation. For instance, when customers become more sensitive to the delivery-reliability level, the service provider increases the delivery-reliability level at the expense of a longer delivery time. However, the optimal price may either increase or decrease depending on a benchmark value for the delivery-reliability level. For the heterogeneous customers case, our results suggest that when the potential arrival rate is sufficiently high, the service provider always benefits from markets with higher levels of customer heterogeneity.",
keywords = "OR in Service Industries, Revenue Management, Pricing, Delivery Reliability, Queueing, Delivery reliability, Revenue management, OR in service industries",
author = "Marand, {Ata Jalili} and Ou Tang and Li, {Hongyan Jenny}",
year = "2019",
doi = "10.1016/j.ejor.2018.12.007",
language = "English",
volume = "275",
pages = "983--996",
journal = "European Journal of Operational Research",
issn = "0377-2217",
publisher = "Elsevier BV",
number = "3",

}

RIS

TY - JOUR

T1 - Quandary of Service Logistics

T2 - Fast or Reliable?

AU - Marand, Ata Jalili

AU - Tang, Ou

AU - Li, Hongyan Jenny

PY - 2019

Y1 - 2019

N2 - Delivery time and delivery reliability are two top-level measures of delivery performance, and they both influence customers’ perception of service value. However, the classic queue-pricing literature emphasizes the former and ignores the latter. In order to bridge the gap between research and practice, this study addresses the interactive impact of price, delivery time, and delivery-reliability level on the equilibrium behavior of rational customers and the optimal decisions of a revenue-maximizing service provider. We assume that the customers’ sensitivity to the delivery-reliability level is characterized by an increasing concave service value function. We model the operations of the service provider as an M/M/1 queue. Two cases are investigated: homogeneous customers and heterogeneous customers. For the homogeneous customers case, we analytically characterize the service provider’s optimal price, delivery time, and delivery-reliability level decisions. We show how the service provider’s decisions on whether to provide faster or more reliable service are affected when different problem parameters are subject to variation. For instance, when customers become more sensitive to the delivery-reliability level, the service provider increases the delivery-reliability level at the expense of a longer delivery time. However, the optimal price may either increase or decrease depending on a benchmark value for the delivery-reliability level. For the heterogeneous customers case, our results suggest that when the potential arrival rate is sufficiently high, the service provider always benefits from markets with higher levels of customer heterogeneity.

AB - Delivery time and delivery reliability are two top-level measures of delivery performance, and they both influence customers’ perception of service value. However, the classic queue-pricing literature emphasizes the former and ignores the latter. In order to bridge the gap between research and practice, this study addresses the interactive impact of price, delivery time, and delivery-reliability level on the equilibrium behavior of rational customers and the optimal decisions of a revenue-maximizing service provider. We assume that the customers’ sensitivity to the delivery-reliability level is characterized by an increasing concave service value function. We model the operations of the service provider as an M/M/1 queue. Two cases are investigated: homogeneous customers and heterogeneous customers. For the homogeneous customers case, we analytically characterize the service provider’s optimal price, delivery time, and delivery-reliability level decisions. We show how the service provider’s decisions on whether to provide faster or more reliable service are affected when different problem parameters are subject to variation. For instance, when customers become more sensitive to the delivery-reliability level, the service provider increases the delivery-reliability level at the expense of a longer delivery time. However, the optimal price may either increase or decrease depending on a benchmark value for the delivery-reliability level. For the heterogeneous customers case, our results suggest that when the potential arrival rate is sufficiently high, the service provider always benefits from markets with higher levels of customer heterogeneity.

KW - OR in Service Industries

KW - Revenue Management

KW - Pricing

KW - Delivery Reliability

KW - Queueing

KW - Delivery reliability

KW - Revenue management

KW - OR in service industries

UR - http://www.scopus.com/inward/record.url?scp=85059838425&partnerID=8YFLogxK

U2 - 10.1016/j.ejor.2018.12.007

DO - 10.1016/j.ejor.2018.12.007

M3 - Journal article

VL - 275

SP - 983

EP - 996

JO - European Journal of Operational Research

JF - European Journal of Operational Research

SN - 0377-2217

IS - 3

ER -