Ogden Bank has been in the consumer-lending business for more than 100 years. Competitors recently Banking Processes have taken a considerable portion of its market share. In addition, its remaining customers have com- (LO 4)

plained that the bank’s loan-approval process is too slow and that finding out the status of aloan applica- _ tion is difficult. The traditional procedure for consumer loan approval is summarized here:

® A loan applicant picks up a standard loan application at the bank, completes it, and mails it to the bank. A mail clerk delivers applications along with regular mail.

® The loan application is delivered to a loan-processing clerk, who logs it in, attaches a routing/

status form to the front page, and files it in a folder of outstanding loan applications. At the end of the day or when the folder is full, the clerk delivers the contents to a credit analyst.

™ Thecredit analyst enters data from the application into a computer program, records the results on the status form, and sends the application through interoffice mail to a consumer-lending specialist.

™ The consumer-lending specialist approves or rejects the loan application and customizes the loan if necessary according to the particular applicant’s needs. From here, all applications go to a pricing specialist via interoffice mail.

™ The pricing specialist determines the appropriate interest rate to charge approved applicants by using a computer program written for this purpose. The rate is recorded on the status form of approved applications, which are forwarded to another clerical group.

§ These clerks prepare letters informing applicants of the bank’s decisions along with a note stating the loan terms of approved applications.

@ After the legal department reviews all of this material, clerks mail the bank’s decision to the applicants along with a promissory note to be signed and returned to those who are approved.

This process takes four weeks on average, during which time applicants could find alternative financing but could almost never determine the status of their application with Ogden Bank. The bank has engaged you to analyze its loan approval process and make recommendations for improvement.

Required

a. Prepare a brief memo explaining how Ogden Bank could benefit from using ABM and what steps and resources would be necessary to successfully implement it.

b. Suggest and explain at least three ways that Ogden Bank could reduce the cycle time of its loanapplication process.

c. Suggest and explain at least three ways that Ogden Bank could improve its communication, internally and externally, about its processes and possible process changes.