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How Algorithm-Driven Scheduling Can Hurt Profitability: Research from Scheller Professor Qiuping Yu

The practice of just-in-time scheduling is ubiquitous, especially in the service and retail sectors, which entails managers scheduling their employees “on the fly” based on immediate workplace needs. Thanks to modern scheduling software and more importantly, the volume and the speed by which data becomes available to businesses, just-in-time scheduling practices have become increasingly prevalent.

One benefit of just-in-time scheduling is that it may be effective in reducing the employer’s cost of labor. However, these practices have the potential to create highly unpredictable schedules for workers, which causes a negative impact on the quality of life especially for low-paid or part-time workers. To protect worker well-being, various forms of predictable scheduling laws have been passed in one state and multiple cities in the U.S. since 2015.

Besides workers, just-in-time scheduling also leads to unintended consequences for business according to Qiuping Yu, Georgia Tech Scheller College of Business Assistant Professor of Operations Management, and colleagues Masoud Kamalahmadi, University of Miami, and Yong-Pin Zhou, University of Washington. In fact, their findings in a paper published in Management Science and titled “Call to Duty: Just-in-Time Scheduling in a Restaurant Chain” shows that “real-time” scheduling for which the worker gets no advance notice negatively impacts workers’ sales effort and thus restaurant revenue.

Yu and her colleagues analyzed 1.5 million transactions from 25 restaurants that took place in 2016 to look at the impact that unpredictable work schedules have on server sales efforts and restaurant revenue. They found that, overall, giving an employee a couple of days' notice (short-notice scheduling) doesn’t affect sales efforts, however, real-time scheduling reduces the check size by 4.4%. Their results also show that this is because workers reduce their cross-selling and upselling effort. The authors further noted that the reduction in a server’s sales effort is more profound among less-skilled workers (6.0% vs 2.4%), during the weekend (5.4% vs 3.8%), and during non-rush hours (5.2% vs 2.5%).

Yu and her colleagues also found that moving away from the heavy use of real-time scheduling to schedules with longer advance notice not only provides more predictable schedules for the workers but can also improve a restaurant’s profitability by up to 1%. It represents a significant improvement for the restaurant industry, where the average net profit margin can be as low as 2%.

Check out the Harvard Business Review article on this research, “The Cost of Last-minute Scheduling”.

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