Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 15 per hour. All arriving cars line up in a single file and are served at a window on a first-come, first-served basis. Each transaction requires on average 3 minutes to complete. The bank is considering the possibility of leasing high-speed information-retrieval and communication equipment that would cost $20 an hour. The new equipment would reduce the average transaction time by one minute. Assume that the arrival process of cars (or customers) at the service window follows a Poisson process, and that the transaction times are exponentially distributed. The customer relations manager estimates that the cost (loss of goodwill and future business, etc.) due to a customer’s waiting in queue has a fixed-plus-linear form, i.e., if a customer has to wait in line, then the bank incurs a cost equal to (2 + 10 ´ x) dollars, where x is the time, in hours, the customer spends in queue. On the other hand, if a customer does not have to wait at all, the bank incurs zero cost. a.) In terms of total cost, should the bank lease the communications equipment? Please show the cost difference between the two scenarios (without the communication equipment and with the communication equipment) to justify your answer. b.)Another way to improve customer service is to open a second window and not lease the communications equipment. It costs $20 an hour to staff this

Step by Step Solution

3.54 Rating (147 Votes )

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managing Business Process Flows Principles of Operations Management

Authors: Ravi Anupindi, Sunil Chopra, Sudhakar Deshmukh, Jan Van Mieg

3rd edition

136036376, 978-0136036371

Students also viewed these General Management questions