ABSTRACT A major concern for service managers is the determination of how long a customer should wait to be served. Services, due to the customer's direct interaction with the process, must face a trade‐off between minimizing the cost of having a customer wait and the cost of providing good service. A total cost model is presented for determining how long a customer should wait when these two conflicting cost components are considered. An integral part of this model includes a measure of customer satisfaction with waiting time which is used to develop a waiting cost function. The model is then applied to a major fast food chain, using data collected at several locations. Analysis of the data reveals that the “ideal” waiting time for this firm is significantly less than the current corporate waiting time policy. Thus, as indicated by the model, a corporate policy change is recommended to provide much faster service. The adoption of such a policy would result in increased labor costs, and would simultaneously increase the firm's overall profits. Although appearing contradictory, increases in current labor costs and long‐term profits are both possible when management takes the long‐range perspective suggested in this paper.
Decision Sciences – Wiley
Published: Mar 1, 1991
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