Sameer Hasija

Call Center Outsourcing Contracts Under Information Asymmetry

In this paper, we examine contracts to coordinate the capacity decision of a vendor who has been hired by a client to provide call center support. We consider a variety of contracts, all based on our observations of contracts used by one large vendor. We examine the role of different contract features such as pay-per-time, pay-per-call, service-level agreements, and constraints on service rates and abandonment. We show how different combinations of these contract features enable client firms to better manage vendors when there is information asymmetry about worker productivity. In particular, we focus on how different contracts can coordinate by yielding the system-optimal capacity decision by the vendor and consider how profits are allocated between the client and the vendor.

Scheduling in flowshops to minimize total tardiness of jobs

The problem of scheduling in static flowshops is considered with the objective of minimizing mean or total tardiness of jobs. A heuristic algorithm based on the simulated annealing (SA) technique is developed. The salient features of the proposed SA algorithm are the development of two new perturbation schemes for use in the proposed SA algorithm and a new improvement scheme to improve the quality of the solutions. The proposed algorithm is evaluated by using the benchmark problems available in the literature. The performance of the proposed SA algorithm is found to be very good, and the proposed heuristic performs better than the existing heuristics.

Newsvendor pull-to-center reconsidered

In the newsvendor problem, a pull-to-center effect has been asserted, whereby subjects are said to order a quantity between the mean of the demand distribution and the expected profit-maximizing quantity. These claims have only been examined using group-level aggregate statistics. Looking at individual-level data from a previously published study and a new experiment, the current paper shows that while pull-to-center is present in aggregate data, it does not adequately describe the population of individual decision makers, who are found to be highly heterogeneous. Methodological implications and future research directions are discussed.

A comparison of milestone-based and buyout options contracts for coordinating R&D partnerships

We analyze optimal contractual arrangements in a bilateral research and development (R&D) partnership between a risk-averse provider that conducts early-stage research followed by a regulatory verification stage and a risk-neutral client that performs late-stage development activities, including production, distribution, and marketing. The problem is formulated as a sequential investment game with the client as the principal, where the investments are observable but not verifiable. The model captures the inherent incentive alignment problems of double-sided moral hazard, risk aversion, and holdup. We compare the efficacy of milestone-based options contracts and buyout options contracts from the clients perspective and identify conditions under which they attain the first-best outcome for the client. We find that milestone-based options contracts always attain the first-best outcome for the client when the provider has some bargaining power in renegotiation and identify their applicability to different R&...

Joint Product Improvement by Client and Customer Support Center: The Role of Gain-Share Contracts in Coordination

We study the role of different contract types in coordinating the joint product improvement effort of a client and a customer support center. The customer support centers costly efforts at joint product improvement include transcribing and analyzing customer feedback, analyzing market trends, and investing in product design. Yet this cooperative role must be adequately incentivized by the client, since it could lead to fewer service requests and hence lower revenues for the customer support center. We model this problem as a sequential game with double-sided moral hazard in a principal-agent framework in which the client is the principal. We follow the contracting literature in modeling the effort of the customer support center, which is the first mover, as either unobservable or observable; in either case, the efforts are unverifiable and so cannot be contracted on directly. We show that it is optimal for the client to offer the customer support center a linear gain-share contract when efforts are unobservable, even though it can yield only the second-best solution for the client. We also show that the cost-plus contracts widely used in practice do not obtain the optimal solution. However, we demonstrate that if efforts are observable then a gain-share and cost-plus options-based contract is optimal and will also yield the first-best solution. Our research provides a systematic theoretical framework that accounts for the prevalence of gain-share contracts in the IT industrys joint improvement efforts, and it provides guiding principles for understanding the increased role for customer support centers in product improvement.

OM Practice---Work Expands to Fill the Time Available: Capacity Estimation and Staffing Under Parkinson's Law

We develop a method to estimate the capacity of agents who answer e-mail in a contact center, given aggregate historical data that have been distorted both by constraints on work availability and by internal incentives to slow down when true capacity exceeds demand. We use the capacity estimate to find a contact centers optimal daily staffing levels. The implementation results, from an actual contact center, demonstrate that the method provides accurate staffing recommendations. We also examine and test models in which agents exhibit speed-up behavior and in which capacity varies over time. Finally, we use the capacity estimates to examine the implications of solving the staffing problem with two different model formulations, the service-level constraint formulation used by the contact center and an alternate profit-maximization formulation.

An Operational Mechanism Design for Fleet Management Coordination in Humanitarian Operations

We study incentive alignment to coordinate operations in humanitarian settings. Our research focuses on transportation, the second largest overhead cost to humanitarian organizations after personnel. Motivated by field research, we study the fleet size problem from a managerial perspective. In terms of transportation, the objective of humanitarian Programs is to have a vehicle available whenever its needed; the bigger the fleet, the higher the availability (the lower the cost of delay). On the other hand, the bigger the fleet, the higher the fleet cost. Fleet cost is the responsibility of the National Logistics. The different focus of the Programs and the National Logistics creates misaligned incentives that may lead to sub-optimal performance of a decentralized system. At the top of the system, the Headquarter must design incentive mechanisms to balance the operating cost of the fleet with the equity cost represented by cost of delay. The incentive alignment issue is complex in a humanitarian setting as traditional instruments based on financial rewards and penalties are not considered as viable options. The problem is complicated further by information asymmetry in the system due to the disperse geographical location of Programs, National Logistics and Headquarter. We propose a novel mechanism design for the incentive alignment problem where the Programs have private information regarding their true transportation needs. This study contributes to the humanitarian logistics literature and to the incentives in operations management literature.

Single Sourcing Versus Multisourcing: The Role of Effort Interdependence, Metric-Outcome Misalignment, and Incentive Design

We compare two strategies for outsourcing the development of information services projects: multisourcing and single-sourcing. We model these sourcing strategies when incentive contracts are based on a verifiable project metric that may or may not be aligned with the project outcome. We also model the interdependence of client and vendor efforts so that the verifiable metric may or may not be separable in these efforts. When the verifiable metric and the project outcome are aligned, single-sourcing performs better than multisourcing if the client and vendor efforts are interdependent, and as well as multisourcing if the efforts are independent. When the metric and outcome are misaligned: (i) multisourcing performs better than single-sourcing if the client effort is independent of the vendor efforts; (ii) the choice of sourcing strategy is nuanced based on the trade-off between the degree of misalignment and moral hazard if the client and vendor efforts are interdependent.

Information Elicitation and Influenza Vaccine Production

We explore the procurement of influenza vaccines by a government whose objective is to minimize the expected social costs (including vaccine, vaccine administration, and influenza treatment costs) when a for-profit vaccine supplier has production yield uncertainty, private information about its productivity (adverse selection) and potentially unverifiable production effort (moral hazard). Timeliness is important – costs for both the supplier and the government procurer may increase if part of the vaccine order is delivered after a scheduled delivery date. We theoretically derive the optimal menu of output-based contracts to minimize information rent, and numerically identify key drivers of that information rent. We also present a novel way to eliminate that information rent if the manufacturer’s effort is also verifiable, a counter intuitive result because the manufacturer has private productivity information. This provides an upper bound on how much a government should spend to monitor the manufacturer’s effort.

Managing the Outsourcing of Two-Level Service Processes: Literature Review and Integration

The outsourcing of service processes presents several complex management challenges. Services typically have variability in both the pattern of customer arrivals and service times, which make capacity planning challenging. Workers also have discretion over the workflow, and therefore each worker can affect the workload passed to other parts of the system. When a service process is outsourced, this discretion may be in the hands of a vendor who then makes choices that influence the customer experience. A firm must decide upon the design of the process, which parts of the process to outsource, and how to contract with the vendor to overcome issues related to information asymmetry. This paper addresses these questions within the context of a two-level service process where the first level serves as a gatekeeper for experts in the second level. We integrate the results from several papers in the literature to give a comprehensive perspective on how to approach service outsourcing.