Events

Prof. Tava Olsen
Deputy Dean Faculty of Business and Economics
Professor of Operations and Supply Chain Management
Business School, University of Auckland

We study a lead-time quotation problem for a make-to-order manufacturer or service provider. Unlike previous research in this space, we allow the act of quotation to affect customers’ perceptions of delay. We conduct a controlled experiment that confirms that quotes act as reference points for customers. Based on this evidence, we build static and dynamic models in which customers’ utility explicitly captures the interaction between quotes and waiting times, which the provider then considers when supplying quotes to customers. We use these models to derive optimal static and dynamic quotation policies for a single-server queue. The experiment, which mimics a situation where accuracy in quotation is valued, also demonstrates a negative linear relationship between quote inaccuracy and the participants’ overall satisfaction. Unlike previous work in this area, we find that shorter waits can induce dissatisfaction if service concludes earlier than the lead-time quotation. Based on this empirical finding, we examine a customers’ cost function with a piecewise linear component. We find that is not always optimal to supply quotes higher than the expected waiting times, contrary to the conventional wisdom of “under-promise and over-deliver”.