Can flexibility be constraining?

Abstract

Five common options for workforce flexibility and their robustness under uncertain demand are investigated. In the first stage, a firm makes optimal staffing decisions according to estimated demand and a given workforce flexibility policy. In the second stage, it reallocates its workforce to react to demand shocks. Numerical results are presented that show that flexibility can lead a firm to staff with too little slack to be flexible to demand shocks, thus leading to higher total costs, i.e., staffing and inventory costs. The forms of flexibility that give robust benefits are identified and an analysis on how different forms of flexibility interact with each other is performed. [Supplemental materials are available for this article. Go to the publisher's online edition of IIE Transactions for the following supplemental resource: Appendix with additional tables of results.] © 2010 quot;IIEquot;.