Optimizing resource allocation in service systems via simulation: A Bayesian formulation

• Published in: Production and operations management Vol. 32; no. 1; pp. 65 - 81
• Main Authors: Chen, Weiwei, Gao, Siyang, Chen, Wenjie, Du, Jianzhong
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA SAGE Publications 01.01.2023
• Subjects: Bayesian model; optimal computing budget allocation; ranking and selection; resource allocation; service systems; ranking and selection; resource allocation; Bayesian model; optimal computing budget allocation; service systems
• ISSN: 1059-1478; 1937-5956
• DOI: 10.1111/poms.13825

The service sector has become increasingly important in today's economy. To meet the rising expectation of high‐quality services, efficiently allocating resources is vital for service systems to balance service qualities with costs. In particular, this paper focuses on a class of resource allocation problems where the service‐level objective and constraints are in the form of probabilistic measures. Further, process complexity and system dynamics in service systems often render their performance evaluation and optimization challenging and relying on simulation models. To this end, we propose a generalized resource allocation model with probabilistic measures, and subsequently, develop an optimal computing budget allocation (OCBA) formulation to select the optimal solution subject to random noises in simulation. The OCBA formulation minimizes the expected opportunity cost that penalizes based on the quality of the selected solution. Further, the formulation takes a Bayesian approach to consider the prior knowledge and potential performance correlations on candidate solutions. Then, the asymptotic optimality conditions of the formulation are derived, and an iterative algorithm is developed accordingly. Numerical experiments and a case study inspired by a real‐world problem in a hospital emergency department demonstrate the effectiveness of the proposed algorithm for solving the resource allocation problem via simulation.