Service Delivery Lead Time Model Based on Customer Demand Characteristics

Abstract

Many service facilities are adopting the strategy of advertising a uniform delivery lead time to attract customers in Time Based Competition. Different kinds of customers have different sensitivities to price and time. How many money are prepared to pay for the service is also different to the customers with the same time or price sensitivity. In this typical guaranteed delivery time strategy, customer demand characteristics based on time sensitivity and reservation payment determine the relationship between demand and delivery lead time. Considering customer consume behavior facing price and lead time, a service delivery lead time model is presented. Based on the model, the impact of price and customer time sensitivity as well as differentiation in customer reservation payment on delivery time decision is analyzed. Finally, a numerical example is given to illustrate the model and gain some useful managerial insights