Create a service blueprint of the refinancing process. Why do you think the bank organized its process this way? What problems have ensued ?
DEBRE MARKOS UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS MANAGEMENT DEPARTMENT (MBA PROGRAM) Individual Assignment for the Course Operations Management (MBA622): Section C Weight: 25% Deadline for submission: 10/06/2021 PART I: CASE ANALYSES (10 POINTS) Case 1: Service Design (5 marks) Streamlining the Refinancing Process First National Bank of US had been swamped with refinancing requests in 2011. To handle the increased volume, it divided the process into five distinct stages and created departments for each stage. The process begins with a customer completing a loan application for a loan agent. The loan agent discusses the refinancing options with the customer and performs quick calculations based on customer-reported data to see if the customer qualifies for loan approval. If the numbers work, the customer signs a few papers to allow a credit check and goes home to wait for notification of the loan’s approval. The customer’s file is then passed on to a loan processor, who requests a credit check, verification of loans or mortgages from other financial institutions, an appraisal of the property, and employment verification. If any problems are encountered, the loan processor goes to the loan agent for advice. If items appear on the credit report that are not on the application or if other agencies have requested the credit report, the customer is required to explain the discrepancies in writing. If the explanation is acceptable, the letter is placed in the customer’s file and the file is sent to the loan agent (and sometimes the bank’s board) for final approval. The customer receives a letter of loan approval and is asked to call the closing agent to schedule a closing date and to lock in a loan rate if the customer has not already done so. The closing agent requests the name of the customer’s attorney to forward the loan packet. The attorney is responsible for arranging a termite inspection, a survey, a title search, and insurance and for preparing the closing papers. The attorney and the closing agent correspond back and forth to verify fees, payment schedules, and payoff amounts. The loan-servicing specialist makes sure the previous loan is paid off and the new loan is set up properly. After the closing takes place, the bank’s loan-payment specialist takes care of issuing payment books or setting up the automatic drafting of mortgage fees and calculating the exact monthly payments, including escrow amounts. The loan-payment specialist also monitors late payment of mortgages. It is difficult to evaluate the success or failure of the process, since the volume of refinancing requests is so much greater than it has ever been before. However, customer comments solicited by the loan-servicing specialist have been disturbing to management. Customer Comments: • I refinanced with the same bank that held my original loan, thinking erroneously that I could save time and money. You took two months longer processing my loan than the other bank would have, and the money I saved on closing costs was more than eaten up by the extra month’s higher mortgage payments. • I just got a call from someone at your bank claiming my mortgage payment was overdue. How can it be overdue when you draft it automatically from my checking account? • How come you do everything in writing and through the mail? If you would just call and ask me these questions instead of sending forms for me to fill out, things would go much more quickly. • If I haven’t made any additions to my house or property in the past year, you appraised it last year, and you have access to my tax assessment, why bother with another appraisal? You guys just like to pass around the business. • I never know who to call for what. You have so many people working on my file. I know I’ve repeated the same thing to a dozen different people. • It took so long to get my loan approved that my credit report, appraisal report, and termite inspection ran out. You should pay for the new reports, not me. • I drove down to your office in person today to deliver the attorney’s papers, and I hoped to return them with your signature and whatever else you add to the closing packet. The loan specialist said that the closing agent wouldn’t get to my file until the morning of the scheduled closing and that if she hit a snag, the closing could be postponed! I’m taking off half a day from work to attend the closing and “rescheduling” is not convenient. I know you have lots of business, but I don’t like being treated this way. • I received a letter from one of your loan-payment specialists today, along with a stack of forms to complete specifying how I want to set up my mortgage payments. I signed all these at closing—don’t you read your own work? I’m worried that if I fill them out again you’ll withdraw the payment twice from my account! Case Questions 1. Create a service blueprint of the refinancing process. Why do you think the bank organized its process this way? What problems have ensued? 2. Examine the process carefully. Look at customer/ provider interactions. Which steps create value for the customer? Which steps can be eliminated? Construct a new blueprint showing how the overall process can be improved. Case 3: Operations scheduling (5 marks) Air traffic control: a world-class juggling act Air traffic controllers have one of the most stressful jobs in the world. They are responsible for the lives of thousands of passengers who fly in and out of the world’s airports every day. Over the last 15 years, the number of planes in the sky has doubled, leading to congestion at many airports and putting air traffic controllers under increasing pressure. The controllers battle to maintain ‘separation standards’ that set the distance between planes as they land and take off. Sheer volume pushes the air traffic controllers’ skills to the limit. Jim Courtney, an air traffic controller at LaGuardia Airport in New York, says: ‘There are half a dozen moments of sheer terror in each year when you wish you did something else for a living.’ New York – the world’s busiest airspace The busiest airspace in the world is above New York. Around 7500 planes arrive and depart each day at New York’s three airports, John F. Kennedy, LaGuardia and Newark. The three airports form a triangle around New York and are just 15 miles from each other. This requires careful coordination of traffic patterns, approach and takeoff routes, using predetermined invisible corridors in the sky to keep the planes away from each other. If the wind changes, all three airports work together to change the flight paths. Sophisticated technology fitted to most of the bigger planes creates a safety zone around the aircraft so that when two aircraft get near to each other their computers negotiate which is going to take action to avoid the other and then alerts the pilot who changes course. Smaller aircraft, without radar, rely upon vision and the notion of ‘little plane, big sky’. During its passage into or out of an airport, each plane will pass through the hands of about eight different controllers. The airspace is divided into sectors controlled by different teams of air traffic controllers. Tower controllers at each airport control planes landing and taking off together with ground controllers who manage the movement of the planes on the ground around the airport. The TRACON (Terminal Radar Approach Control) controllers oversee the surrounding airspace. Each New York air traffic controller handles about 100 landings and take offs an hour, about one every 45 seconds. TRACON controllers The 60 TRACON controllers manage different sectors of airspace, with planes being handed over from one controller to the next. Each controller handles about 15 planes at a time, yet they never see them. All they see is a blip on a two-dimensional radar screen, which shows their aircraft type, altitude, speed and destination. The aircraft, however, are in three-dimensional airspace, flying at different altitudes and in various directions. The job of the approach controllers is to funnel planes from different directions into an orderly queue before handing each one over to the tower controllers for landing. Tower controllers The tower controllers are responsible for coordinating landing and taking off. Newark is New York’s busiest airport. During the early morning rush periods, there can be 40 planes an hour coming into land, with about 60 wanting to take off. As a result there can be queues of up to 25 planes waiting to depart. At LaGuardia, there are two runways that cross each other, one used for take-off and the other for landing. At peak times, air traffic controllers have to ‘shoot the gap’ –to get planes to take off in between the stream of landing aircraft, sometimes less than 60 seconds apart. Allowing planes to start their take off as other planes are landing, using ‘anticipated separation’, keeps traffic moving and helps deal with increasing volumes of traffic. At peak times, controllers have to shoot the gap 80 times an hour. Most airports handle a mixture of large and small planes, and tower controllers need to be able to calculate safe take-off intervals in an instant. They have to take into account aircraft type and capabilities in order to ensure that appropriate separations can be kept. The faster planes need to be given more space in front of them than the slower planes. Wake turbulence – mini-hurricanes which trail downstream of a plane’s wing tips – is another major factor in determining how closely planes can follow each other. The larger the plane and the slower the plane, the greater the turbulence. Besides the usual ‘large’ planes, controllers have to manage the small aircraft, business helicopters, trafficspotter planes and the many sightseeing planes flying over Manhattan or up the Hudson towards the Statue of Liberty. The tower controllers have to control the movement of over 2000 helicopters and light aircraft that fly through New York’s airspace every day, being sure to keep them out of the airspace around each airport. Ground controllers As an aircraft lands, it is handed over to the ground controllers who are responsible for navigating it through the maze of interconnecting taxiways found at most international airports