Examining the dynamics of reactive capacity allocation through a chaos lens

Reactive capacity allocation (RCA) may be a good way to raise capacity utilization and customer satisfaction. However, there are unintended consequences that are often overlooked. Inspired by previous studies on complex systems and observations from the authors’ field research, in this paper, the dynamic characteristics of a deterministic service system that adopts an RCA policy in response to customers’ demand, i.e., a demand-based capacity-allocation strategy, are investigated. Particularly, a manager’s level of responsiveness to adjust capacity, consumers’ reneging behavior, social interactions among consumers, and the size of the loyal-customer base are examined. Some theoretical guidance is derived, and the dynamics of the queue length and customer base in the long-run equilibrium through bifurcation plots, Lyapunov exponents, and return maps are characterized. The results show that the very action of improving a system may instead make it more unstable and more difficult to manage. Therefore, it is not always advisable to adopt dynamic, operational policies such as RCA unless there is supporting evidence.