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Optimal Design of a Stochastic System with Dominating Fixed Costs**

Published online by Cambridge University Press:  19 October 2009

Satinder K. Mullick
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Extract

Executives in a wide variety of formal organizations frequently face decisions involving changes in capacity of service capabilities. Usually these changes mean increases in manpower and/or capital expenditures for new facilities, but due to seasonality, or a decline in business, a decision may also involve the determination of whether to reduce the available capacity. These decisions generally are made by comparing the cost (or savings, which is a negative cost) of changing the service capability with the corresponding costs or risks of not being able to properly meet service requirements. In this paper, the problem described is one in which services are provided, and the cost, or risk, of not being able to meet service requirements is expressed by means of a queuing equation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 1 , Issue 3 , September 1966 , pp. 55 - 74
Copyright
Copyright © School of Business Administration, University of Washington 1966

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