Summary: Service Quality versus Efficiency in Tandem
School of Management
State University of New York Binghamton
Binghamton, NY 13902-6000, U.S.A.
SigrŽun AndradŽottir · Hayriye Ayhan
H. Milton Stewart School of Industrial and Systems Engineering
Georgia Institute of Technology
Atlanta, GA 30332-0205, U.S.A.
We study the tradeoff between efficiency and service quality in tandem systems. We
reward efficiency by assuming that a revenue is earned each time a job is completed, and
we penalize poor service quality by incorporating positive holding costs. We study the
dynamic assignment of servers to tasks with the objective of maximizing the long-run
average profit. For systems of arbitrary size, generalist servers, and linear or nonlinear
holding costs, we determine the server assignment policy that maximizes the profit.
For systems with two stations, two specialist servers, and linear holding costs, we
show that the optimal server assignment policy is of threshold type and determine the
value of this threshold as a function of the revenue and holding cost. We also provide