On the Design of Sparse But Efficient Structures in Operations

Abstract

It is widely believed that little flexibility added at the right place can reap significant benefits for operations. Unfortunately, despite the extensive literature on this topic, we are not aware of any general methodology that can be used to guide managers to design sparse (i.e., slightly flexible) and yet efficient operations.We address this issue using a distributionally robust approach to model the performance of a stochastic system under different process structures. We use the dual prices obtained from a related conic program to guide managers in the design process. This leads to a general solution methodology for the construction of efficient sparse structures for several classes of operational problems.Our approach can be used to design simple yet efficient structures for workforce deployment and for any level of sparsity requirement, to respond to deviations and disruptions in the operational environment. Furthermore, in the case of the classical process flexibility problem, our methodology can recover the k-chain structures that are known to be extremely efficient for this type of problem when the system is balanced and symmetric. We can also obtain the analog of 2-chain for non-symmetrical system using this methodology.