Business\tProcess\tAnalysis\tAssignment MGT\t3121 Revised\tby\tW.P.\tMillhiser,\t25-Aug-2016 Instructions: This\tis\ta\tgroup\tassignment\twhere\tyou\tmay\tcollaborate\twith\tup\tto\t5\tstudents. Submit\ta\tbrief\twrite-up\tto\tthe\tfollowing\tquestions\tanswering\teach\tquestion\tas\tsuccinctly\tas possible,\tbut\tgiving\ta\tbrief\tjustification\tto\teach\tquestion. (Partial\tcredit\tis\tavailable\tfor\twrong answers\tif\tyou\tprovide\tbrief\tjustifications).\tClearly\tlabel\teach\tstudent's\tname\ton\tat\tthe\ttop\tof\tthe submission. Only\tone\tteam\tmember\tis\tto\tsubmit\tthe\tsubmission\telectronically\tvia\tBlackboard;\tdo not\tsubmit\tpaper\tcopies. The\tsolution\twill\tbe\tdebriefed\tin\tclass\tand\tso\tthe\tdeadline\tis\tfirm.\tYou will\tfind\tit\thelpful\tto\tread\tCachon\tand\tTerwiesch\tchapters\t2-5\tbefore\tdoing\tthis\tassignment. CASE\tSTUDY:1\tA\thealth\tmaintenance\torganization\t(HMO)\tis\ta\ttype\tof\tmedical\tinsurance\tprovider that\tgives\tits\tcustomers\tall-inclusive\tmedical\tservice\tfor\ta\tfixed\tmonthly\tfee. For\texample,\tmany Baruch\tCollege\tprofessors\tare\tinsured\tby\tEmblem\tHealth's\tHIP\tPrime\tHMO. To\tsecure\tservices, HMOs\tcontract\twith\tphysicians\tand\thospitals\tthat\tprovide\ttheir\tservices\ton\ta\tfee-per-service basis. When\tmembers\tof\tan\tHMO\treceive\tmedical\tservice,\tthe\tproviding\tphysician\tor\thospital submits\ta\tclaim\tto\tthe\tHMO\tfor\treimbursement.\tAcme\tFinance\tis\ta\tservice\tprovider\tto\tHMOs, who,\tfor\ta\tsmall\tfee,\toutsource\tthe\tentire\tclaims\tprocessing\toperation\tto\tAcme. The\tmost\tcommon\tmedical\tclaim\tthat\tAcme\tprocesses\tis\ta\tso-called\t\"physician\tclaim.\" Processing\ta\tphysician\tclaim\tconsists\tof\tthe\tfollowing\toperations. 1. Claims\tbilled\tby\tphysicians\tarrive\tby\tmail\tand\tare\topened\tby\tthe\tmailroom\tclerk\tand\tare date-stamped.\tThey\tare\tthen\tplaced\tinto\ta\tdata-entry\tbin. 2. Data-entry\tclerks\tenter\tdate-stamped\tapplicationsfirst\tin,\tfirst\toutinto\tAcme's claims\tprocessing\tsystem.\tData-entry\tclerks\tmust\tcheck\tclaims\tfor\tproper\tformatting\tand completeness\tof\tdata\tfields\tbefore\tthey\tinput\tclaims\tinto\tthe\tsystem.\tIf\ta\tclaim\tis\tnot legible,\tfully\tcompleted,\tor\tproperly\tformatted,\tit\tmust\tbe\tsent\tback\tto\tthe\tphysician\tfor resubmission.\tOnce\tentered,\tclaims\tare\tstored\tin\ta\tprocessing\tinventory\tcalled \"suspended\tclaims.\" 3. Claims\tare\tassigned\tto\ta\tclaim\tprocessor\tfor\tan\tinitial\tprocessing. 4. Processed\tclaims\tare\ttransferred\tby\tthe\tsystem\tto\ta\tclaim\tsupervisor\tfor\tinspection\tand possible\talterations. 5. Claims\tare\treturned\tto\ttheir\toriginal\tclaim\tprocessors\twho\tcomplete\tthe\ttransaction\tand issue\tinstructions\tto\taccounts\tpayable\tfor\tsettlement. The\tresources\trequired\tfor\teach\toperation\tand\tthe\tcorresponding\twork\tcontents\tare\tlisted\tin\tthe following\ttable. Activity Mailroom Data\tentry Initial\tProcessing Inspection Final\tprocessing 1 Resource Mailroom\tclerk Data-entry\tclerk Claims\tprocessor Claims\tsupervisor Claims\tprocessor Work\tContent (minutes\tper\tclaim) 0.6 4.2 4.8 2.2 1.8 nd This\tcase\toriginally\tappeared\tin\tManaging\tBusiness\tProcess\tFlows:\tPrinciples\tof\tOperations\tManagement,\t2 ed.,\tby Anupindi\tet\tal.,\tPearson,\t2006,\tpp.\t103-111. It\twas\tmodified\tby\tW.P.\tMillhiser,\tBaruch\tCollege\tfor\tthe\tpurposes\tof\tthis assignment. The\tstaffing\tis\t1\tmailroom\tclerk,\t8\tdata-entry\tclerks,\t12\tclaims\tprocessors,\tand\t5\tclaims supervisors. Please\tnote\tthat\tthe\tfollowing\tquestions\tare\tintended\tto\tbe\tanswered\tusing\tonly\tthe\tinformation that\tprecedes\tthem\t(you\tshould\tnot\tuse\tinformation\tthat\tappears\tlater\tin\tthe\tcase). Question\t1:\tDraw\ta\tprocess\tflow\tdiagram\tand\tcalculate\tthe\tnumerical\ttheoretical\tcapacity\tof each\tresource\tpool\tin\tthis\tprocess. Report\tyour\tanswer\tusing\tthe\tunits\t\"claims\tper\thour\"\tand show\tappropriate\tcalculations. What\tis\ta\tprocess\tflow\tdiagram? See\tSection\t3.1. Question\t2:\tWhat\tis\tthe\tconstraint?\tThat\tis,\tin\ta\tgiven\thour\tof\tthe\tday\twhich\tresource\tpool\tis the\ttheoretical\tprocess\tbottleneck? How\tdo\tyou\tknow? Explain. How\tdo\tyou\tfind\ta\tprocess's bottleneck? See\tSection\t3.4. Question\t3:\tCompute\tthe\tnumerical\ttheoretical\toverall\tprocess\tcapacity\t(aka,\tflow\trate)\tin claims\tper\thour. Show\tyour\tcalculation. What\tis\tthe\tflow\trate\tin\ta\tmulti-step\tprocess? See Sections\t3.3\tand\t3.4. Question\t4:\tSuppose\ta\tphysician\tclaim\thas\tjust\tarrived\tto\tan\tempty\tsystem\twith\tidle\tresources. What\tis\tthe\ttheoretical\tbest-case\tflow\ttime\tto\tprocess\tthe\tclaim\tfrom\tstart\tto\tfinish? That\tis, what\tis\tthe\tbest-case\tprocess\tlead\ttime? What\tis\tflow\ttime\tof\ta\tprocess? See\tSection\t2.2. Question\t5:\tOn\taverage,\thow\tmany\tphysician\tclaims\twill\tbe\tin\tthe\tsystem\tat\tvarious\tstages\tof processing? Hints:\tSee\t\"Little's\tLaw,\"\tSection\t2.3. Assume\tthat\tphysician\tclaims\tarrive\tat\tthe same\trate\tas\tthe\tbottleneck\tresource\tpool's\tcapacity. Let's\tnow\tconsider\tthe\teffects\tof\tscheduled\tavailability.\tMailroom\tand\tdata-entry\tclerks\treport to\twork\tfor\t9\thours\ta\tday.\tThey\ttake\tone-hour\tlunch\tbreaks\tand\ttwo\t15-minute\tbreaks\tand\tso any\tclerk\tis\tavailable\tto\tprocess\tclaims\tfor\ta\ttotal\tof\t7.5\thours\t(450\tminutes)\tper\tday.\tSimilarly, assume\tthat\tthe\tclaims\tprocessors\tare\tavailable\t6\thours\t(360\tminutes)\tper\tday,\twith\tthe\trest\tof the\ttime\tused\tfor\tother\tactivities.\tClaims\tsupervisors\tare\tavailable\tfor\tprocessing\tclaims\tonly\t4 hours\t(240\tminutes)\tper\tday\ton\taverage.\tThey\tspend\tthe\tremaining\ttime\ton\tother\tadministrative duties. Hint,\tto\tanswer\tQ6\tto\tQ10,\tyou\twill\twant\tto\temploy\tthinking\tsimilar\tto\tthat\tpresented\tin\tSection 5.2. Question\t6:\tWhat\tis\tthe\ttheoretical\tcapacity\tof\teach\tresource\tpool\t(in\tclaims\tper\tday)\tafter accounting\tfor\tscheduled\tavailability? Question\t7:\tWhat\tresource\tpool\tis\tthe\tprocess\tbottleneck? If\tthis\tis\tnot\tthe\tsame\tanswer\tas question\t2,\tbriefly\texplain\twhy. The\tdemand\tfor\tAcme's\tservice\taverages\tabout\t480\tclaims\tper\tday. Answer\tquestions\t8-10\ton the\tbasis\tof\tthis\tinformation. Question\t8:\tCompute\tthe\ttheoretical\tcapacity\tutilization\tof\teach\tresource\tpool. Question\t9:\tCompute\tthe\ttheoretical\tcapacity\tutilization\tof\tthe\tentire\tprocess. Question\t10:\tWhat\tis\tthe\t\"constraint\"\tin\tthis\tprocessing\tsystem? Now\tsuppose\tthat\tin\taddition\tto\tprocessing\tphysician\tclaims,\tAcme\talso\thandles\tclaims submitted\tby\thospitals.\tThe\tprocess\tused\tto\thandle\thospital\tclaims\tis\tthe\tsame\tprocess\tused\tfor physician\tclaims.\tHowever,\tthe\tunit\tloads\trequired\tfor\tvarious\toperations\tare\tdifferent,\tas summarized\tin\tthe\tfollowing\ttable. Resource\tPool Mailroom\tclerk Data-entry\tclerks Claims\tprocessors Claims\tsupervisors Scheduled Availability (minutes\tper\tday) 450 450 360 240 Unit\tLoad: Physician\tClaim (minutes\tper\tclaim) 0.6 4.2 6.6 2.2 Unit\tLoad: Hospital\tClaim (minutes\tper\tclaim) 1.0 5.2 7.5 3.2 Number\tof People in\tPool 1 8 12 5 Accounting\tfor\tscheduled\tavailability,\tone\tcan\tcompute\tthat\tif\tAcme's\tworkforce\tonly\tprocessed hospital\tclaims,\tthe\tclaims\tsupervisors\twould\tremain\tthe\tprocess\tbottleneck,\twith\tprocess capacity\t375\tclaims\tper\tday\tas\tshown\tin\tthe\tfollowing\ttable. Resource\tPool Mailroom clerk Data-entry clerks Claims processors Claims supervisors Scheduled Availability (minutes/day) 450 Unit\tLoad: Hospital\tClaim (minutes/claim) 1.0 Theoretical\tCapacity of\tOne\tPerson (claims\tper\tday) 450/1.0=450.0 Number\tof People in\tPool 1 Theoretical\tCapacity of\tResource\tPool (claims\tper\tday) 450x1=450 450 5.2 450/5.2 =86.5 8 86.5x8=692 360 7.5 360/7.5 =48.0 12 48x12=576 240 3.2 240/3.2 =75.0 5 75x\t5\t=375 In\taddition\tto\tthe\tdemand\tof\t480\tphysician\tclaims\tper\tday,\tAcme\treceives\t345\trequests\tper\tday for\thospital\tclaims\tprocessing. Hospital\tclaims\tare\tmore\ttime\tintensive\t(and\thospitals\thave deeper\tpockets),\tso\tAcme\tcharges\ta\thigher\tfixed\tprice\tto\tprocess\ta\thospital\tclaim. There\tare also\tvariable\tcosts\tper\tclaim\t(e.g.,\tpaper,\tsupplies,\tetc.)\twhich\tyields\ta\thigher\toverall\tprofit\t-\tor \"contribution\tmargin\"\t-\tfor\ta\thospital\tclaim. This\tinformation\tis\tsummarized\tbelow. Claim Average\tDemand Type (claims\tper\tday) Physician 480 Hospital 345 Acme's\tPrice Variable\tCosts Contribution\tMargin ($\tper\tclaim) ($\tper\tclaim) ($\tper\tclaim) $3 $0.25 $3.00-$0.25=$2.75 $4 $0.85 $4.00-$0.85=$3.15 Assume\tthat\tall\tworkers\tare\tpaid\tan\tannual\tsalary\tregardless\tof\thow\tthose\tworkers\tare\tassigned to\thospital\tor\tphysician\tclaims. Thus\tsalaries\tare\ta\tfixed\texpense\tthat\tcan\tbe\tignored\tfor\tnow. Question\t11:\tGiven\tAcme's\tlimited\tpersonnel\t(see\tthe\tscheduled\tavailability\tdescribed\tabove) for\thandling\tphysician\tand\thospital\tclaims,\thow\tmany\tof\teach\tclaim\ttype\tshould\tAcme\taccept on\ta\tdaily\tbasis? (This\tdecision\tis\tknown\tas\ta\t\"product\tmix\tdecision\"\tof\t2\t\"products\"\tin\ta\tservice industry;\tsee\tSection\t5.1\tand\t5.2\tfor\thints.) Question\t12:\tHow\tmuch\tshould\tAcme\tbe\twilling\tto\tpay\tto\thire\tone\tmore\tworker\t--\ta\t6th\tclaims supervisor\t--\ton\tthe\tbasis\tof\tthe\tincremental\tdaily\tcontribution\tmargin? Assume\tthe\tsame demand\tas\tabove\t(480\tand\t345\tper\tday). Report\tyour\tanswer\tin\tthe\tmaximum\thourly\twage for\tthe\t4\thours\tthat\ta\tsupervisor\tserves\tthis\tprocess.\tJustify\tyour\t