Reference no: EM132949669

Practice Problem Set

Problem 1

M.M. Sprout, a catalog mail-order retailer, has one customer service representative (CSR) to take orders at an 800 telephone number. If the CSR is busy, the next caller is put on hold. For simplicity, assume that any number of incoming calls can be put on hold and nobody hangs up in frustration over a long wait. Suppose that, on average, one call comes every 5 minutes and that it takes the CSR an average of 4 minutes to take an order. Both interarrival and activity times are exponentially distributed (i.e., they have coefficients of variation equal to 1). The CSR is paid $20 per hour, and the telephone company charges $5 per hour for the 800 line. The company estimates that each minute a customer is kept on hold costs it $2 in customer dissatisfaction and loss of future business.
Estimate the following:
a) The proportion of time that the CSR will be busy
b) The average time that a customer will be on hold
c) The average number of customers using the line (on hold and being served)
d) The total hourly cost of service and waiting

Problem 2
First Local Bank would like to improve customer service at its drive-in facility by reducing waiting and transaction times. On the basis of a pilot study, the bank's process manager estimates the average rate of customer arrivals at 40 per hour. All arriving cars line up in a single queue and are served at one of 4 windows on a first-come/first-served basis. Each teller currently requires an average of 5 minutes to complete a transaction. The bank is considering the possibility of leasing high-speed information-retrieval and communication equipment that would cost $30 per hour. The new equipment would, however, serve the entire facility and reduce each teller's transaction-processing time to an average of 4 minutes per customer. Assume that interarrival and activity times are exponentially distributed.
a) If our manager estimates the cost of a customer's waiting time in queue (in terms of future business lost to the competition) to be $20 per customer per hour, can she justify leasing the new equipment on an economic basis?
b) Although the waiting-cost figure of $20 per customer per hour appears questionable, a casual study of the competition indicates that a customer should be in and out of a drive-in facility within an average of 8 minutes (including waiting). If First Local Bank wants to meet this standard, should it lease the new high-speed equipment?

Problem 3 is based on the Manzana Insurance case.

Problem 3
To improve customer service, Manzana had implemented a policy of passing on requests to a particular underwriting team, based on the territory where requests were generated. Do you think this policy is affecting the current loss rate, and why (explain your reasoning qualitatively)?

Attachment:- Practice Problem Set.rar