Terms of future business lost to the competition

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Reference no: EM13857401

Drive-in Banking: 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 30 cars per hour. All arriving cars line up in a single lane and are served at one of 4 windows on a first-come-first-served basis. Each teller currently requires an average of 6 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 serve the entire facility and reduce each teller’s transaction-processing time to an average of 4 minutes per customer. Assume that both inter arrival and transaction processing times are exponentially distributed (i.e., each CV is 1).

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 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. If First Local wants to meet this standard, should it lease the new high-speed equipment?

Reference no: EM13857401

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