Integrating Business Partners on Demand: The Effect on Capacity Planning for Cost Driven Support Processes

Capacity planning for business processes is still a major challenge. Technology enabling on demand integration of business partners handling peak load at short notice may help. We model a three-stage supply chain with a service provider receiving demand from its customers usually executed by an in-house unit. Alternatively the demand can be routed to external business partners if these offer capacity and a preferable execution. Then the capacity planning problem of the service provider is examined: In what way does this "on demand integration capability" affect the optimal level of in-house capacity? The model consists of two separate queuing systems (in-house unit and external business partners) along with their relevant cost functions. Furthermore a routing algorithm is developed. It evaluates both systems for every incoming order and decides about routing to the preferable one. To derive results a discrete-event simulation is necessary performed within a case study of the securities trading and settlement process. Three insights are gained: There are situations where on demand integration leads to reduced optimal capacity. Furthermore the risk of allocating an inappropriate amount of capacity can be reduced as well as the total operating costs of the business process.