Using efficiency frontier to inform operational decision-making

Abstract

Abstract In this study, we introduce Efficiency Frontier, an economic assessment framework for business operations. The proposed framework emphasizes efficiency and sustainability. It aims to help organizations translate a complex metric system into a value index, conduct performance evaluation, and determine efficient resource planning strategies. Unlike the traditional methods that majorly focus on the achievement of performance targets, the proposed framework also accounts for the amount of resource that is invested in the achievement, which encourages managers to implement sustainable strategies that aim for long-term success. To validate the new framework, we systematically study the case of the City of Chicago’s 311 contact center with a base case analysis and a sensitivity analysis. In the base case, an Efficiency Frontier architected by a set of efficient solutions from 2013 to 2016 is used to identify outperforming scenarios given resource constraints. In the sensitivity analysis, we demonstrate the application of Efficiency Frontier in determining optimal resource planning strategies in conservative, moderate, and aggressive business investment scenarios. The base case Efficiency Frontier reveals that the marginal return on investment in improving the performance may diminish as investment increases. The sensitivity study suggests that optimal resource planning strategies should be adjusted according to value propositions. This work builds a framework for business leaders to economically assess their operational decision-making. Article highlights Efficient strategies can be identified by exploring the maximum value increase per unit of resource given cost scenarios The fund of a strategy should be reduced when the marginal return of the strategy begins to diminish. The framework’s ability to suggest cost-saving strategies is especially informative in resource-limited settings.