Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

11-2002

Publication Source

Operations Research

Volume

50

Issue

6

Start Page

991

Last Page

1006

DOI

10.1287/opre.50.6.991.343

Abstract

We study the employee staffing problem in a service organization that uses employee service capacity to meet random, nonstationary service requirements. The employees experience learning and turnover on the job, and we develop a Markov Decision Process (MDP) model which explicitly represents the stochastic nature of these effects. Theoretical results show that the optimal hiring policy is of a state-dependent “hire-up-to” type, similar to an inventory “order-up-to” policy. For two important special cases, a myopic policy is optimal. We also test a linear programming (LP) based heuristic, which uses average learning and turnover behavior, in stationary environments. In most cases, the LP-based policy performs quite well, within 1% of optimality. When flexible capacity—in the form of overtime or outsourcing—is expensive or not available, however, explicit modeling of stochastic learning and turnover effects may improve performance significantly.

Keywords

Dynamic programming/optimal control, applications: hierarchical model for manpower planning. Organizational studies, manpower planning: MDP staffing model withlearning and turnover

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Date Posted: 27 November 2017

This document has been peer reviewed.