Did you ever think that shrinkage may affect your profitability?  It can.

In this graph, we are holding everything constant, and only varying shrinkage (the same sort of graph that we saw with service level versus profit).  In this case we hold all constant but shrink, and track the profitability of the sales center.  Again we find a profit-maximization point!

My favorite graph is service level versus profitability.  In this graph, we vary service level by adding staff, and track the resulting profitability.  For most revenue producing centers, you should see a shape like the graph below.

This is a textbook, marginal profit curve.  What we produce is a change in profitability by agent, meaning, if I hire one more person, how much will they sell, and what will they cost?  If your goal was a 60% service level, you would be leaving revenue on the table.  If your goal was 90%, you would be paying too much in agent costs relative to the revenue being produced.  If you wanted to run the center as if it were a business, you would run a service level between 75% and 85%, in order to maximize profits.

There is a lot that goes into these graphs (and thank goodness I have CenterBridge to produce this one), but the concept is pretty straightforward.  If the marginal value per call changes, these graphs shift substantially.  I’ve got a few stories about the use of these in the real world, and I’ll try and post these soon.