Managing the supply and demand uncertainty in workforce recruitment: planned or just-in-time acquisition

Abstract

Managing knowledge workers is highly complex because of the need to balance the costs associated with their training and holding costs against the need to meet market demand as quickly as possible. Unlike previous approaches to this problem in the workforce management literature, this paper develops a stochastic optimization model to examine the impact of not only uncertainty of the demand of knowledge services but also that of the supply of knowledge workers on a recruiting strategy. Hypotheses on optimal recruiting decisions that this paper suggests include: (1) high holding and training costs decrease recruitment of apprentices; (2) high mobility of skilled workers decreases recruitment of apprentices; (3) high elasticity of the supply of skilled workers decreases recruitment of apprentices; (4) high volatility of the demand of knowledge services decreases recruitment of apprentices; and (5) in high seasonal effect on the demand, the decision policy based on decision thresholds proportional to seasonal demands outperforms the decision policy based on a constant decision threshold. Suggested hypotheses are supported by a simulation of the model. Model parameters in the simulation are estimated based on the survey of information security consulting service companies in South Korea.

Keywords:

• workforce management
• stochastic modelling
• supply and demand
• recruiting strategy
• simulation

Acknowledgements

This research was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education, Science and Technology (2011-0025512). This research was also supported by Employment-Contract Master Program in Knowledge Information Security funded by the Ministry of Knowledge Economy.