Innovative “Bring-Service-Near-Your-Home” operations under Corona-Virus (COVID-19/SARS-CoV-2) outbreak: Can logistics become the Messiah?

Abstract

The corona virus (COVID-19/SARS-CoV-2) outbreak has created serious disruptions to many business operations. Among them, many service operations, which require customers to travel and visit a place indoor, become almost infeasible to run in a crowded city like Hong Kong. Motivated by a recent reported real case on an innovative service operation in Hong Kong, we build analytical models to explore how logistics and technologies together can transform the "static service operations" to become the "bring-service-near-your-home" mobile service operations. We also highlight how the government may provide the subsidy to support the above mentioned mobile service operation (MSO) to make it financially viable. We specifically show that the government may adopt the fixed-cost-subsidy (FCS) scheme, operations-cost-subsidy (OCS) scheme or safety-technology-support (STS) scheme to help. We further uncover that the OCS scheme would bring a larger consumer surplus than the FCS scheme and is hence more preferable. In the extended models, we first study the case when service fee cannot be changed because of corona virus outbreak (CVO). We then explore the feasibility of adopting MSO in the long run as a financially self-sustainable service operation and derive the analytical conditions under which MSO is a win-win business model for both the service provider and consumers. Finally, we study the optimal safety technology investment problem.

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