Beating the Bottlenecks in E-Commerce
Skip to content
Operations Strategy Sep 5, 2007

Beating the Bottlenecks in E-Commerce

Effectively allocating Web system capacity

Based on the research of

Wuqin Lin

Zhen Liu

Cathy H. Xia

Li Zhang

It’s the familiar demand of sales and services businesses played out over the Web: Executives want to ensure that their customers obtain maximum satisfaction while keeping the costs of doing business as low as possible. That problem looms particularly large for online organizations. The combination of growing demand for e-commerce and the increasing complexity of the Internet’s infrastructure has put intense pressure on information technology (IT) planners to harmonize the two requirements in inventive ways. An innovative research project headed by Wuqin Lin, associate professor of managerial economics and decision science at the Kellogg School, provides guidance for doing just that.

Lin’s team applied nonlinear programming and probability theory to the issue of allocating Web systems’ capacity most effectively. The result: “We tell people how to solve this problem,” Lin says. “We tell them to focus on bottlenecks. That’s the key idea. Anyone involved in the design of infrastructure for e-commerce can benefit from it.”

The difficulty of both guaranteeing customer satisfaction and holding down e-commerce costs stems from the intricacy of the Internet’s infrastructure. “You have different types of resources—Web browsing servers, application servers, and database servers,” Lin explains. “As an IT planner, you have to decide how many different types of machines you will need to provide a certain quality of service, such as answering 95 percent of customers’ questions within five minutes.”

Satisfying customers in this instance is critical in two ways: First, individuals who wait too long for a vendor’s Web site to respond to their query will likely log off. In addition to a lost sale, it can lead to negative publicity stemming from bad-mouthing by disappointed customers. Time can also equal money; some online vendors offer specific guarantees of service quality and must pay a penalty if they fail to respond in a specified amount of time.

Lin started the project when he was working as an intern at IBM’s Watson Research Center. IBM scientists Zhen Liu, Cathy Xia, and Li Zhang collaborated on the study. The group looked at online customers’ satisfaction from two points of view. First, they studied the traditional measure of service quality—the average amount of time the Web site takes to respond to a customer. They also looked at the “tail distribution” of response times. This focuses on the chance that a customer will have to wait for a reply far longer than the average response time. Lin describes it as “the likelihood that a call will be answered in twenty seconds, twenty minutes, or any other length of time.”

The study’s inclusion of tail distribution is new and significant. “Very few papers on resource allocation of Web systems have studied the tail distribution,” Lin explains.

The significance of this extension can be demonstrated simply: Suppose there are two Web stores, A and B. Each time a customer visits store A, he needs to wait approximately three minutes for a response from the Web site. If a customer visits Web store B, depending on the day, he waits zero, three, or six minutes with probabilities of 10 percent, 80 percent, or 10 percent, respectively. The waiting times and the associated probabilities are summarized in Table 1. The average waiting time for both customers is the same between Web stores A and B. However, if every customer loses their patience and closes their browser after four minutes, store B loses the last 10 percent of their potential sales each day. According to earlier studies, the above two allocations result in the same sales amount but Wuqin Lin and his co-authors show that they are not equivalent, highlighting the importance of bottlenecks.

Table 1: Probability of waiting time for a new customer


That extra measure of customer satisfaction is just one of the complexities the team faced while trying to develop an approach to maximizing service and minimizing cost. A typical e-commerce system consists of multiple clusters of machines, each of which handles a particular service function. Front-end Web servers, for example, deal with requests for static Web pages. Application servers process requests for dynamic pages and obtain or update information from the system’s database server. Each specific transaction can involve multiple visits to multiple clusters.

Each server can also react to customers’ requests in two ways. Some servers use a first come, first served protocol to deal with transactions. Others participate in processor sharing—a form of multitasking that divides a specific job into several components dealt with by different servers. To some extent, designers of Web systems can select which protocol to use. “The choice will have an impact on the performance,” Lin says. “But sometimes you don’t have a choice.”

However the e-commerce system is designed, it has to perform a sequence of several actions in response to a customer’s arrival online. A single visit might involve several browsing search requests followed by an order to buy a product. Interspersed among those actions are delays caused by the network as it processes information or by the customer as he or she thinks about the details of the order.

Lin and his team developed a complete picture of the online service environment by mathematically modeling each facet of the service in turn. Their model gives IT designers a mathematical template that they can apply to individual online systems of different sizes, complexities, and service needs. The modeling also reveals a simple truth. “The performance of the whole system,” explains Lin, “largely depends on the bottlenecks.” So the message for the designer is to identify the bottlenecks and plan the system capacity based on these bottlenecks.

Featured Faculty

Former faculty member in the Department of Managerial Economics & Decision Sciences

About the Writer
Peter Gwynne, a freelance editor based in Sandwich, Massachusetts
About the Research

Lin, Wuqin, Zhen Liu, Cathy H. Xia, and Li Zhang (2005), “Optimal capacity allocation for Web systems with end-to-end delay guarantees,” Performance Evaluation, 62: 400-416.

Most Popular This Week
  1. How Much Do Boycotts Affect a Company’s Bottom Line?
    There’s often an opposing camp pushing for a “buycott” to support the company. New research shows which group has more sway.
    grocery store aisle where two groups of people protest. One group is boycotting, while the other is buycotting
  2. 5 Takeaways on the State of ESG Investing
    ESG investing is hot. But what does it actually deliver for society and for shareholders?
    watering can pouring over windmills
  3. Could Bringing Your "Whole Self" to Work Curb Unethical Behavior?
    Organizations would be wise to help employees avoid compartmentalizing their personal and professional identities.
    A star employee brings her whole self to work.
  4. When Do Open Borders Make Economic Sense?
    A new study provides a window into the logic behind various immigration policies.
    How immigration affects the economy depends on taxation and worker skills.
  5. Which Form of Government Is Best?
    Democracies may not outlast dictatorships, but they adapt better.
    Is democracy the best form of government?
  6. How Has Marketing Changed over the Past Half-Century?
    Phil Kotler’s groundbreaking textbook came out 55 years ago. Sixteen editions later, he and coauthor Alexander Chernev discuss how big data, social media, and purpose-driven branding are moving the field forward.
    people in 1967 and 2022 react to advertising
  7. What Happens to Worker Productivity after a Minimum Wage Increase?
    A pay raise boosts productivity for some—but the impact on the bottom line is more complicated.
    employees unload pallets from a truck using hand carts
  8. Why Do Some People Succeed after Failing, While Others Continue to Flounder?
    A new study dispels some of the mystery behind success after failure.
    Scientists build a staircase from paper
  9. What Went Wrong at AIG?
    Unpacking the insurance giant's collapse during the 2008 financial crisis.
    What went wrong during the AIG financial crisis?
  10. Why Well-Meaning NGOs Sometimes Do More Harm than Good
    Studies of aid groups in Ghana and Uganda show why it’s so important to coordinate with local governments and institutions.
    To succeed, foreign aid and health programs need buy-in and coordination with local partners.
  11. 3 Tips for Reinventing Your Career After a Layoff
    It’s crucial to reassess what you want to be doing instead of jumping at the first opportunity.
    woman standing confidently
  12. How Are Black–White Biracial People Perceived in Terms of Race?
    Understanding the answer—and why black and white Americans may percieve biracial people differently—is increasingly important in a multiracial society.
    How are biracial people perceived in terms of race
  13. Podcast: Does Your Life Reflect What You Value?
    On this episode of The Insightful Leader, a former CEO explains how to organize your life around what really matters—instead of trying to do it all.
  14. Immigrants to the U.S. Create More Jobs than They Take
    A new study finds that immigrants are far more likely to found companies—both large and small—than native-born Americans.
    Immigrant CEO welcomes new hires
  15. In a World of Widespread Video Sharing, What’s Real and What’s Not?
    A discussion with a video-authentication expert on what it takes to unearth “deepfakes.”
    A detective pulls back his computer screen to reveal code behind the video image.
  16. College Campuses Are Becoming More Diverse. But How Much Do Students from Different Backgrounds Actually Interact?
    Increasing diversity has been a key goal, “but far less attention is paid to what happens after we get people in the door.”
    College quad with students walking away from the center
More in Operations