74557163 Operations Management TMA Assignment B (1)

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The Warwick MBA
Assignment Cover Sheet
Submitted by: <106950> DL10CW 
Date Sent: 7/24/2011
Module Title: Operations Management Assignment B
Module Code: IB8160
Date/Year of Module: Jan/2011
Submission Deadline: Nov/2011
Word Count:
Number of Pages:3
Question 1: [Please read the North West Constructive 
Bank – The New Mortgage Centre (2) in the textbook 
(pp. 163–6) and answer all the questions at the end of 
the case:
1. Does it matter that Andy and his team cannot 
allocate all the time necessary to process a 
mortgage application to individual activities?] 
To determine whether Andy and his team have sufficient time to process all the Mortgage 
payments we will have to determine the throughput rate and cycle time it takes them to 
process each application and determine whether they are staffed to handle the load of 
76,250 applications in a year.
We can first consider that this application is processed through a Short-fat arrangement 
and all the activities are being completed by a single individual. In that case we know that 
Cycle Time for the Process = Time Available / Number to be processed.
Considering a 52 hour week and 40 hrs a week,
Time Available = 52 * 40 * 60
= 124,800 minutes
Number to be processed = 76,250 applications
Cycle Time = 1.64 Seconds.
Now we look at the Process Capacity in order to meet the Cycle Time of 1.64 
seconds.
As we know that 
Cycle Time = Work Content / Number of People in the process
Hence,
Number of People = Work Content / Cycle Time
Short-Fat arrangement
Let us now take a look at the Work Content required to process a Single application. As 
shown in Table 5.4 
The total allowed time for all activities = 112
= 112 Minutes.
 Number of People = 112 / 1.64
= 69 People.
Hence if we consider a Short-Fat arrangement, 
We would need 69 people to process 76,250 applications.
Now let’s take a look at the Long and Thin as shown in Figure 5.18
We see that 
Now if we look at the number of people actually employed by Northwest Bank who 
process by region.
 Northern Southern Western Total
Data Stage 12 12
Underwriting 19 22 5 46
Offer 28 28 12 68
Completion 14 15 5 34
Total 61 65 22 160
In addition there are 12 employes working on the Data Input stage. 
Hence the total = 148 + 12 = 160 Employees.
 If we look at the cycle times for the various groups :-
Data Stage :-
Number of People required:- 16/1.64
= 10 People.
Hence we can see that there is under-utilization of people as 12 people were 
employed for this activity.
Underwriting Stage :-
Number of People Needed :- 35/1.64
= 22 People
Actual People allocated :- 46 People
Offer Stage :-
Number of People :- 36/1.64
= 22 People
Actual People allocated :- 68 People
Completion Stage :-
Number of People :- 25/1.64
= 16 People
Actual People allocated :- 34 People
Throughput time = Work in Progress * Cycle Time
= 5000 * 1.64
= 8200 Minutes.
*The above calculation does not take into consideration the geographical 
segregation of teams as it is assumed to be proportional to the geographical demand 
of the applications.
Considering that Andy’s team is much bigger than the number of people to process 
76,250, it is apparent that there is a discrepancy between the work load and number 
of people which can be explained as follows :-
1) Seasonality of Demand :- The workload of 76,250 represents an annual 
number and the seasonality of demand can 
2) The staff has to move about more in the new process and wait times between 
activities which is not reflected in the allowed time.
3) Low utilization of staff which could be attributed to low morale due to the 
changes.
Question 2: [ Should the process be redesigned, and 
if so, which option should be adopted? ]
Andy and his team have three separate options for the design of the process which were being 
considered. Let’s take a look at each of these options to determine if they would provide any 
benefit over the current process.
Option 1:-
The first option is the do nothing option and something which we need to consider as a change 
brings its own set of challenges.
As shown in the above answer by redesigning the process to Option-1, We would have savings 
in the overall staff as highlighted above in Red. We would be able to process the same number 
of application as being done currently with 70 people instead of 160 people.
Option 2:- 
Option 2 creates a Thin and Long arrangement by organizing four Sequential teams around 
the four stages of data input, Underwriting, Offer and Completion.
In this arrangement the overall throughput time average Cycle time is 36 minutes (Offer 
Stage), which creates the balancing loss in the other stages as follows :-
Data Input Stage :-
(36 – 16 ) = 20 Minutes.
Underwriting Stage :-
(36 – 35) = 1 Minutes.
Offer Stage :-
(36 – 36) = 0 Minutes
Completion Stage :-
(36 – 25) = 11 Minutes.
This creates a balancing loss of = (32 / 4 * 36) * 100
Balancing Loss = 22%.
Using Little’s Law
Throughput time = Work in progress X cycle time
= 4 X 1.64
= 6.56 minutes
Option 3:-
In this option, we are organizing the team into four teams in four stages but 
operating the underwriting and offer stages in parallel.
When the underwriting and offer stage are run in Parallel, this essentially creates the effect of 
having a 3 stage process rather than 4 stages .
Hence,
Throughput time = Work in Progress X Cycle Time
= 3 X 1.64
= 4.92 minutes.
This also helps in reducing the throughput time of processing the applications 
when the offer and Underwriting stages are run in parallel.
Thus it is clear that option 3 does offer the benefit of increased throughput times over the 
other 2 options and hence to meet the Northwest banks objective of faster processing of the 
mortgage application the redesign of process. 
Question 3: [How could the ‘recycling’ problem be 
reduced, and what benefits would this bring?]
As mentioned in the case study, Recycled applications accounted for a total of 21,735 
applications. Majority of these were a result of documents or information being missing 
on the application with a small percentage being a result of customer changing their 
minds.
Moreover the Agents accounted for a larger percentage of recycled application than the 
Bank’s own branches. 
Hence we could add an additional screening Process
Adding an initial Screening Process :- Creating an initial Screening process for all 
applications coming to the Bank at the Data Input state. This would add an additional 
20 minutes to the Work Content and would need additional staffing in the Data Input 
Stage. 
This process would also have a mechanism of streaming the Agent supplied 
applications going through additional scrutiny for data validation and data integrity to 
ensure the quality of overall process.
We could also segregate the Data Input stage into two separate processes :-
Agent Received applications and Bank originated applications.
Data Stage Changes :-
Number of People required:- 36/1.64
= 22 people
Impact of the Change :-
Currently we see that 12 people are staffed at the Data Input stage, This will require 
additional staffing of 10 resources to handle the new process change.
Benefit of the Change :- 
This new process will ensure that the applications flowing to the next stage has the 
appropriate information thereby reducing the recycled application from Underwriting 
Stage by 10% and Offer Stage by approximately 17.5%.
This essentially constitutes a saving in the Work Content in both these phases as 
follows :-
Underwriting Stage :-
9% reduction in Assess Credit Case which constitutes a decrease in the work content 
of the Underwriting Stage.
Hence we will be having an Average Processing Time of 18 minutesfor this stage. 
Nbr of People required = 33/1.64
= 21 People
A Saving of 1 resource.
Offer Stage:- 
The offer stage is one of the stages with a high recycling rate, Morever as it is 
later in the process, any recycling from this stage to the Data Input stage 
significantly increases the amount of rework on the applications in all the earlier 
stages which has a compounding effect of rework on the Underwriting stage.
Hence this will further reduce the work content on the Data Input and 
Underwriting stage by 15%.
Hence the Cycle time for new Data Input and Underwriting stage will be cut from 
a cumulative of (36+35) = 71 minutes to 61 minutes.
This will proportionately reduce the staffing required for these two stages from
(22 + 22) = 44 People to
Nbr of People = 61/1.64
= 38 resources.
Overall the process needs an addition of 3 resources but will have a benefit of 
reduced recycling and improved employee morale due to repetition of work 
and greater streamlining of the processes.
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	Assignment Cover Sheet