Schedule recovery: Unplanned absences in service operations

Each year the U.S. service sector loses 2.3% of its scheduled labor hours to unplanned absences, with direct and indirect costs approaching 20% of total payroll expense for some employers. To reduce revenue losses due to reneging customers, the capacity lost to unplanned absences is often replaced by other workers willing to accept short-notice overtime or temporary assignments. However, this costly emergency capacity may be constrained by the firm's staffing and scheduling decisions. Simulating unplanned absences in hypothetical service firms that use different absence recovery and staffing/scheduling policies, we find significant differences in the profitability of alternate approaches.