Standard Article

Managing Corporate Mobile Voice Expenses: Plan Choice, Pooling Optimization, and Chargeback

  1. Samuel S. Chiu

Published Online: 15 FEB 2011

DOI: 10.1002/9780470400531.eorms0618

Wiley Encyclopedia of Operations Research and Management Science

Wiley Encyclopedia of Operations Research and Management Science

How to Cite

Chiu, S. S. 2011. Managing Corporate Mobile Voice Expenses: Plan Choice, Pooling Optimization, and Chargeback. Wiley Encyclopedia of Operations Research and Management Science. .

Author Information

  1. Stanford University, Department of Management Science and Engineering, Stanford, California

Publication History

  1. Published Online: 15 FEB 2011

Abstract

Mobility communication management spans the spectrum of user choice, device procurement/inventory/replacement, IT security, corporate policy compliance, expense optimization, and billing. Today, there are many vendors providing a subset or a full spectrum of such mobility communication management services to corporate customers, a service collectively (perhaps not quite accurately) known as TEM, telecom expense management. The focus of this article is on mobile voice expense optimization. A mobile voice subscription plan can generally be characterized by three parameters: a monthly fixed charge, a peak minute allowance, and an overage rate when usage exceeds a plan's minute allowance. An (stand-alone) individual user has to decide which plan to choose: too large a base plan will result in unused wasted minutes, while too small a plan will incur expensive overage charges. Similar to family plans, a corporation has different pooling options. A pooling plan allows subscribers in the same pool to share a common pool of minutes. An overage results when the collective usage exceeds the common pool of minutes. We examine the mathematics behind pooling and how to create the best pooling arrangement minimizing mobile voice expenses. The contribution of this paper first lies in the formulation of the problem, making it tractable. This formulation allows an efficient and effective solution to such a complex combinatory pooling optimization problem, using a column generation technique. We provide case studies to illustrate the potential (and actual savings) for the stand-alone plan choice decision as well as the collective pooling optimization; typically resulting in 20–30% of annual savings, which translate into tens of millions of dollars for large corporations. A very important, often a stumbling block to implement a pooling solution, aspect of pooling is chargeback—how to allocate monthly pooled expenses to individual accounts (which often belong to different units in an organization). We share with you a simple and equitable chargeback scheme, which is well received and readily implemented by corporate clients. An actual case study will be presented as well as some concluding remarks.

Keywords:

  • mobile voice expense optimization;
  • pooling optimization;
  • column generation;
  • Dantzig–Wolfe decomposition;
  • restricted master problem;
  • chargeback;
  • allocation of shared cost