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Service-Level Agreements in Call Centers: Perils and Prescriptions

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  • Joseph M. Milner

    (Joseph L. Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Tava Lennon Olsen

    (John M. Olin School of Business, Washington University in St. Louis, St. Louis, Missouri 63130)

Abstract

Acall center with both contract and noncontract customers was giving priority to the contract customers only in off-peak hours, precisely when having priority was least important. In this paper, we investigate whether this is rational behavior on the part of the call center and what the implications are for customers. In particular, we show that under contracts on the percentile of delay, which are commonly used in the call center industry, this is rational behavior, at least under the approximating asymptotic regime considered in this paper. We then suggest other contracts that do not result in this type of undesirable behavior from a contract customer's perspective. We compare the performance of the different contracts in terms of mean, variance, and outer percentiles of delay for both customer types using both numerical and asymptotic heavy-traffic analyses. We argue that including terms reflecting the second moment of delay in a contract would be beneficial to contract customers and, in a sense, fairer.

Suggested Citation

  • Joseph M. Milner & Tava Lennon Olsen, 2008. "Service-Level Agreements in Call Centers: Perils and Prescriptions," Management Science, INFORMS, vol. 54(2), pages 238-252, February.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:2:p:238-252
    DOI: 10.1287/mnsc.1070.0777
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    References listed on IDEAS

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    Cited by:

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    2. O. Zeynep Akc{s}in & Francis de Véricourt & Fikri Karaesmen, 2008. "Call Center Outsourcing Contract Analysis and Choice," Management Science, INFORMS, vol. 54(2), pages 354-368, February.
    3. Benaroch, Michel & Webster, Scott & Kazaz, Burak, 2012. "Impact of sourcing flexibility on the outsourcing of services under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 219(2), pages 272-283.
    4. Marcel A. Sieke & Ralf W. Seifert & Ulrich W. Thonemann, 2012. "Designing Service Level Contracts for Supply Chain Coordination," Production and Operations Management, Production and Operations Management Society, vol. 21(4), pages 698-714, July.
    5. Sang-Hyun Kim & Morris A. Cohen & Serguei Netessine & Senthil Veeraraghavan, 2010. "Contracting for Infrequent Restoration and Recovery of Mission-Critical Systems," Management Science, INFORMS, vol. 56(9), pages 1551-1567, September.
    6. Wyean Chan & Ger Koole & Pierre L'Ecuyer, 2014. "Dynamic Call Center Routing Policies Using Call Waiting and Agent Idle Times," Manufacturing & Service Operations Management, INFORMS, vol. 16(4), pages 544-560, October.
    7. Opher Baron & Oded Berman & Dmitry Krass & Jianfu Wang, 2017. "Strategic Idleness and Dynamic Scheduling in an Open-Shop Service Network: Case Study and Analysis," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 52-71, February.
    8. Robbins, Thomas R. & Harrison, Terry P., 2010. "A stochastic programming model for scheduling call centers with global Service Level Agreements," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1608-1619, December.
    9. Opher Baron & Joseph Milner, 2009. "Staffing to Maximize Profit for Call Centers with Alternate Service-Level Agreements," Operations Research, INFORMS, vol. 57(3), pages 685-700, June.
    10. Itay Gurvich & Mor Armony & Avishai Mandelbaum, 2008. "Service-Level Differentiation in Call Centers with Fully Flexible Servers," Management Science, INFORMS, vol. 54(2), pages 279-294, February.
    11. Raassens, Néomie & Wuyts, Stefan & Geyskens, Inge, 2014. "The performance implications of outsourcing customer support to service providers in emerging versus established economies," International Journal of Research in Marketing, Elsevier, vol. 31(3), pages 280-292.
    12. Jouini, Oualid & Pot, Auke & Koole, Ger & Dallery, Yves, 2010. "Online scheduling policies for multiclass call centers with impatient customers," European Journal of Operational Research, Elsevier, vol. 207(1), pages 258-268, November.
    13. Li, Na & Stanford, David A. & Sharif, Azaz B. & Caron, Richard J. & Pardhan, Alim, 2019. "Optimising key performance indicator adherence with application to emergency department congestion," European Journal of Operational Research, Elsevier, vol. 272(1), pages 313-323.
    14. Weiwei Chen & Siyang Gao & Wenjie Chen & Jianzhong Du, 2023. "Optimizing resource allocation in service systems via simulation: A Bayesian formulation," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 65-81, January.
    15. Xiaoyan Xu & Yanan Ji & Yiwen Bian & Yanhong Sun, 2017. "Service outsourcing under co-opetition and information asymmetry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(6), pages 666-677, June.
    16. Mustafa Akan & Bar{i}c{s} Ata & Martin A. Lariviere, 2011. "Asymmetric Information and Economies of Scale in Service Contracting," Manufacturing & Service Operations Management, INFORMS, vol. 13(1), pages 58-72, September.
    17. Christopher Dance & Alexei Gaivoronski, 2012. "Stochastic optimization for real time service capacity allocation under random service demand," Annals of Operations Research, Springer, vol. 193(1), pages 221-253, March.

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