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Managing Customer Service Levels and Sustainable Growth: A Model for Decision Support

Managing service levels is known to be an important element of customer relationship management. In service industries however, there is no inventory of finished goods that can be used to buffer production and yet maintain superior service levels in the face of uncertain demand patterns. Hence capacity planning for different resources takes on special importance in achieving high customer service levels. In this paper, we focus on the human resource element in a generic service firm. Using the system dynamics methodology, we develop a model of workforce acquisition and training that is driven by target levels of customer service and customer base. The model reveals the significant effects of natural process delays on maintaining service levels, and we demonstrate how it can serve as a decision support tool to achieve growth in the customer base while maintaining service levels. Such analysis can contribute to the collection of activities needed to conduct customer relationship management.