Bank USA Cash Movement Del, every wire transfer request is processed first-come-first-served. Some of these wires are for millions of dollars, while others are under $100, said Betty Kelly, a 28-year-old manager of Cash Movement (CM). She continued, Im also concerned that all wires regardless of dollar amount go through the same quality checkpoints and whether we are staffed correctly. Betty left her boss Del Carrs office with many related issues on her mind. As Betty sat down in her office chair, Steve Breslin, supervisor of outgoing wires, said, Betty, last week we processed a wire for $80,000 incorrectly to Houston Oaks Bank, and now they wont give it back. What should we do? Steve, give me the information, and Ill call the bank now, said Betty. The rest of Bettys day was spent recovering this money and discussing several personnel issues. The Cash Movement (CM) operating unit is respon-sible for transferring money for BankUSA and any of its customers. Over 80 percent of all transaction requests are for individual customers, and the remaining requests are for commercial (business) customers. For example, a cus-tomer will sell stock and request that cash funds be sent to another institution such as a mutual fund, credit union, or another bank. The customer will request his or her local customer investment manager (CIM) to transfer money into or out of the account. The CIM will then request by e-mail or fax that Cash Movement process the transaction. All wires must be settled on the same day. The average demand for outgoing wires is 306 wires per day for a 7.5-hour workday. Therefore, the cycle time for this demand rate using Equation 8.2 is computed as follows: 55 CT = A/R = [(7.5 hours/day)(60minutes/hour)] /(306 wires/day) = (450 minutes/day)/(306 wires/day) = 1.47 minutes/wire Cash Movement employs 21 people, with three managers, 11 associates in outgoing wires, two associates in incoming wires, three associates in checks, and two associates in other areas. The average annual salary per associate is $30,000 with an additional 30 percent for benefits and overhead costs. Overhead costs include the cost of leasing/ renting the building, operation of common areas such as the cafeteria and meeting rooms, utilities, insurance, and photocopy services. Process workflow is documented in Exhibit 8.19, with 47 detailed steps consolidated into 16 logical workgroups/ activities. The processing times in the last column are based on stopwatch time studies. The weighted average time per outgoing wire is 7.05 minutes. A total of 11 people work in this process. The assembly line could be balanced using the original 47 steps if the times per step were given (they are not), but Betty thought she would begin by trying to balance the line using a more aggregate SCM103 Unit 8B Case Study Version 1.0 Page 3 of 7 grouping of work with 16 workgroup activities. The 16 work activities are per-formed in a series or sequentially, but how they are grouped does make a difference. The first stage is external to the internal Cash Movement process and involves the front-room interaction between the customer (client) and the CIM. Here, an electronic transfer request can range SCM103 Unit 8B Case Study Version 1.0 Page 4 of 7 from a few minutes to hours trying to help the customer decide what to do, and may include a visit to the customers home or office. This external work activity is not part of the internal process assembly- line balance. The process begins at work activity 1 and ends at work activity 16. A wire transfer request can fail in several ways, with cost consequences to the bank. For example, if the wire is processed incorrectly or is not completed on time, the customers transaction may fail. The effect of a failed transaction includes the customer being upset, customers leaving the bank forever, customers referring friends and relatives to other banks, and the possible financial loss of processing the transaction the next business day at a new security price. BankUSA may have to compensate the customer for a failed transaction in terms of customer losses due to lost interest earnings on daily price changes plus processing fees. The average processing fee is $50 per wire. Moreover, any failed transaction must be researched and reprocessed, which constitutes internal failure costs. Research and reprocessing costs per wire are estimated at $200. CM processes about 1,500 outgoing wires per week, with about one error every two weeks. Errors happen due to CM mistakes but also are caused by other BankUSA departments, other financial institutions, and customers themselves. The information flow of this electronic funds transfer system is sometimes quite complex, with BankUSA having only partial control of the value chain. Specific types of errors include the same wire being sent out twice; wire not sent out at all; wire sent with inaccurate information on it, including dollar amount; or wire sent to the wrong place. No dollar amount has been assigned to each type of failure. The largest risk to Cash Movement is to send the money twice or to send it to the wrong institution. If CM catches the error the same day the wire is sent, the wire is requested to be returned that day. If a wire is sent in duplication, the receiving institution must receive permission from the customer to return the money to BankUSA. This results in lost interest and the possibility of long delays in returning the money or BankUSA having to take legal action to get the money back. For international transaction requests that are wired with errors, the cost of getting the money back is high. These costs are potentially so high, up to several hundred thousand dollars, that five quality control steps are built into the cash management process, as shown in Exhibit 8.14. All wires, even low dollar amounts, are currently checked and rechecked to ensure completeness and accuracy. As Betty, the manager of Cash Movement, drove home, she wondered when she would ever get the time to analyze these issues. She remembered taking a college course in operations management and studying the topic of assembly-line balancing (she majored in finance), but she wondered if this method would work for services. She decided to begin her analysis by answering the following questions. SCM103 Unit 8B Case Study Version 1.0 Page 5 of 7 Unit 8B Assignment Instructions Assignment instruction 1. The case study may be found on the following handout: Bank USA: Cash Movement 2. Instructor will ask students to read the case study and discuss the case. 3. Students will critically examine the case study and understand the background of the issues 4. Students will answer the integrative case study Case Question provided in chapter 8 of their text book (p. 231). Students answers will be submitted to instructor for evaluation. 5. Students will provide their suggestions and feedback as to how they would have dealt with the issues/situation/challenge if they were the operations manager of the organization discussed in the case. Students answers will be submitted to instructor for evaluation. SCM103 Unit 8B Case Study Version 1.0 Page 6 of 7 Unit 8B Rubric Level 4 Exemplary (40 points) Level 3 Proficient (30 points) Level 2 Basic (20 points) Level 1 Unsatisfactory (10 points) Criteria #1 Case Question What is the best way to group the work represented by the 16 workgroups for an average demand of 306 outgoing wires per day? What is your line balance if peak demand is 450 wires per day? What is assembly-line efficiency for each line-balance solution? All information was accurate and was delivered effectively. Subject knowledge was thorough. Extensive details and relevant examples were used to answer the essential question. Subject knowledge was evident. Information included details and strong examples that provided a clear answer to the essential question. Information was relevant, but details and examples did not address the essential question. Subject knowledge was evident but was not used to support argument. Information was confusing or irrelevant. Had few supporting details or examples. Did not answer the essential question. Subject knowledge was not sufficient to make successful argument. Criteria #2 Case Question How many people are needed for the outgoing wire process using assembly-line-balancing methods versus the current staffing level of 11 full-time-equivalent employees? How many staff members do you need for the out- going wire process if you eliminate all rework? All information was accurate and was delivered effectively. Subject knowledge was thorough. Extensive details and relevant examples were used to answer the essential question. Subject knowledge was evident. Information included details and strong examples that provided a clear answer to the essential question. Information was relevant, but details and examples did not address the essential question. Subject knowledge was evident but was not used to support argument. Information was confusing or irrelevant. Had few supporting details or examples. Did not answer the essential question. Subject knowledge was not sufficient to make successful argument. Criteria #3 Analysis Students will provide their and feedback as to how they would have dealt with the issues/situation/challenge in the case study as if they were the operations manager of the organization discussed in the case. Student response was organized and contained clear and comprehensive information. Student provided a roadmap for resolving the challenge. Student response was organized and contained enough information to resolve the challenge. Student response was organized, but some components were missing. Did not include enough information to resolve the challenge as envisioned. Student response is disorganized and missing key elements. Did not include enough information to resolve the challenge as envisioned