The Refinancing Process in Colonial Savings Bank in Queensland - Assignment Example

Name: xxxxxxxxxxx Institution: xxxxxxxxxxx Title: Operations Management Tutor: xxxxxxxxxxx Course : xxxxxxxxxxx Date: xxxxxxxxxxx Introduction The concepts of Service blue printing and service chain profit can be employed in describing how organizations conduct their services. The process of refinancing in retail banking can be critically analyzed by service blue printing concept. The process of refinancing need to be conducted well or else it can result into several problems. In this paper the service blue printing concept is used to analyze the refinancing process in colonial savings bank in Queensland. Service blue printing concept together with service chain is then used to redesign the refinancing process in colonial savings bank (Frauendorf, 2006). Analysis of current refinancing process in retail banking In colonial savings bank of Queensland the process of refinancing is divided into five distinct stages. The bank created departments for these stages. The distinct stages include loan application, loan closing, new account establishment and loan payment setup. The process of refinancing can be analyzed well by use of service blue print concept. Service blueprint provides a systematic method to visualize, to structure and design service transaction processes (Mahadevan, 2010). The process of refinancing therefore can be illustrated in a flow-chart mode. Refinancing processes in colonial saving are divided by five lines, which are line of interaction, line of visibility, line of interaction, line of order penetration and line of implementation. These lines separate six different activities which are customer activities, on stage activities, back stage activities, support activities, preparation activities and facility activities. The line of interaction divides activities of the customer from the onstage activities of colonial savings bank. Customer activities include the steps, options, actions and interactions that a customer experiences when applying for a loan (Hoffman, & Bateson, 2010). The application of loan in colonial bank by customers is considered as customer activity. The onstage activities are done by contact employee and are visible to customers. The contact employee in colonial saving bank is a loan agent. A loan agent discusses the option for refinancing with customers. He or she performs quick calculations basing on customer-reported data to find out if the customer qualifiers for loan approval. At this level the loan agent assist customers to know if they qualify for a loan and also to give them guidance on how to service their loans (Hollins & Shinkins, 2006). According to Hollins and Shinkins (2006), the line of visibility separate activities contact employee, that is, the client interface, into onstage and backstage activities. At this level, the differentiation is based on who is undertaking the activity in question instead of variation according to value creation’s level. Backstage activities are the steps and activities that are undertaken by contact worker and occur beyond the customer’s perception. This implies that they are not visible to customers. In colonial bank, loan processing services are not visible to customers. Therefore, activities such as credit checking, loans or mortgages verification from other financial institutions, property appraisal and employment verification are considered as backstage activities. These activities are not usually visible to customers. In case a loan processor wants more clarification concerning customer’s details, he or she cannot contact the client directly. A loan processor can go to a loan agent for advice if there are any problems being encountered. In case the items appearing on the credit report does not appear on customer’s application, or if other agencies have demanded credit reported, then the customer will be expected to respond to these discrepancies through writing. The activities therefore that take place at this level are invisible to customers even though it concerns him or her. The line of interaction divides the backstage from support activities. At this stage most activities include office task or prearranged activities. These activities in most cases are not usually performed by customer contact personnel. Within this activity, zone-internal subdivisions interpret client information data into customized results. In colonial bank, support activities are carried out at loan closing stage. At the stage customers are given letter for loan approval and requested to call the closing agent to plan a closing date and to lock in a loan rate in case a customer has not done that already. The closing agent in colonial savings bank asks the name of client’s lawyer to forward the loan packet. Lawyers are accountable for organizing termite inspection, survey, title search and insurance plus organizing the closing papers. The closing agent and the lawyer communicate back and forth to confirm fees, payment schedules and payoff amounts (Zeithaml, 2009). Up to this point, the bank’s activities are stimulated by a strong customer activity that is customer order. The customer induced activities are separated from customer-independent activities by line of order penetration. The customer independent activities on two bottom activity levels involve management indicators and thus refer to potential of service provider. They can be viewed as separated from the service process operations. The two bottom stages are referred as preparation and facility activities. Preparation activities are separated from support activities by a line of order penetration. The line of implementation separates preparation activities from facility activities. These two bottom levels incorporate pre-standardization of service offer and deal with capacity’s questions. In colonial savings bank, preparation activities usually occur at the stage of establishing new account. A loan-serving specialist in colonial bank usually ensures that the loan previously taken is paid off and the new loan is correctly set up. Facility activities are always experienced at last stage of refinancing process, which is loan payment set up. The loan-payment specialist of colonial savings bank usually takes care of giving out payment books or setting up of the automatic withdrawal of mortgage fees and determining the actual monthly payments. The loan specialist monitors the late payment of mortgages. Onstage activities, backstage activities and support activities relates to processing of client’s resources, while preparation and facility activities are undertaken based on resources of service providers, thus meaning managerial and planning actions. Colonial savings bank designed its refinancing process this way so as to integrate various process elements and workers into overall process. The bank also originally designed refinancing process so as to shed light on vital activities and workers and show how the whole process is connected. Some activities were meant to occur at backstage so as to support crucial customer interaction points. Colonial bank separated its actions into five distinct stages so as to increase efficiency and effectiveness of services transaction. Higher efficiency is always beneficial to service provider whereas enhancing effectiveness mostly aims at better offer and benefits for customers. The refinancing process was designed this way so as to eliminate redundant process steps or design that is too complicated. The process was designed this way so as to optimize between standardization and customization so as to limit costs and realize customer orientation (Heskett & Wheeler, 2008). Problems caused by refinancing process The refinancing process that colonial bank originally applied has very many limitations. From operations management perspective, various problems caused by the process can be identified. The process resulted into time wastage. The bank spent a lot of time processing the loan. Different from other banks, colonial savings bank spent at least two months to process a loan. This made it costly both on the side of the client and the organization. The process becomes costly since there are wastage of money and time. The process was prepared in a way that it caters for only new applicants. Those who have refinanced with the same bank still find themselves following similar steps as to that followed by new applicant. This therefore, wastes time and money. The procedure for obtaining a loan takes a lot of time thus increasing charges and thus increases the monthly repayment amount. The refinancing process used by colonial savings bank has a weakness in a way that it cannot automatically withdraw from the customers’ account. In colonial bank if the mortgage payment of a customer is overdue, he or she has to be called and informed so as to make an attempt of paying it personal. Customers are not usually happy with this kind of a move employed by colonial savings bank. This therefore implies that the support system used by the bank is not effective. It needs to be revised so that it can cater for this kind of situation. The support system need to be designed so that in case a customer’s mortgage payment is overdue, the bank can automatically withdraw the payment from cheque account of a customer instead of calling them to inform them about their mortgage payment status. The support system need to be programmed in such a way that it automatically executes some tasks that are being done manual by the bank so as to improve the efficiency and effectiveness of refinancing process. The system need to be developed in such a way that it reduces involvement of customers in the process of refinancing. The appraisal is usually done in a way that it frustrates customers. Customers prefer the refinancing process that does not involves them directly when evaluating their suitability to obtain a loan (Epps, 2006). Everything in colonial savings bank is usually done in writing and through mail. The colonial bank usually sends a lot of forms to customers so that they can fill them. This makes the process to move slowly. Customers thus are not usually pleased by the paper works that the bank employs. They prefer to be called and asked the questions that the bank expects them to fill in the forms. This can make the process to move very fast. The refinancing process is limited in a way that it allows the repetition of activities, even if the repetition is not important to them or to the customers. For instance, in case a customer has not made any additions to his or her house or property in the previous year, and the bank appraised it in the same year, the bank can still appraisal the property even if they are able to access customer’s tax assessment. Activities at the backstage that causes process of loan application and confirmation to take a lot of time are very many. Loan application and confirmation in colonial savings bank are usually conducted by loan agent and loan specialist. The ways the loan specialist, the loan agent and lawyers interact are always too tiresome. This usually drags the refinancing process and thus making the loan confirmation process to move very slowly. The process of obtaining loan is positively related with the repayment charges, that is, when the process of getting loan is long, higher repayment charges are usually experienced. The cost of getting loan increases as the process drags on. Colonial bank customers are not happy with the way the bank drags its operation. They do not know who to contact in the bank in case they have problem. The bank has many people working on individual customer’s file. Customers are usually served by different individuals on one particular issue. They have therefore raised question why the bank cannot program its process in such a way that a person is assigned to a particular customer throughout the process so that in case of any problem an individual can explain it out. This therefore can make identification of mistakes in the process easy (Christopher & Payne, 2002). The procedure for approving the loan takes a lot of time to an extent that credit appraisal, report appraisal and termite inspection gets expired. The costs for new reports are usually shifted to customers. Since it is not always the responsibility of customers to make sure that the reports are not expired, customers are not suppose to pay for new reports, it is the bank instead that need to cater for such coats. The process of refinancing loan in colonial bank is inefficient in that it always forces customers to drive in person to bank’s office so as to deliver papers of the lawyer. The bank also expects the customers to return the papers with their signature and anything else that they may add to the closing packet. Employees in colonial bank are not usually available to attend to their clients. They are not usually ready to attend on customer’s file and in case of anything they can postpone the scheduled date. This is not fair since customers usually take a day off from only to be disappointed due to lack of services. The colonial bank does not always pay attention to the details the customers usually signs. Even after filling detailed information when applying for the mortgage, the bank does not pay attention to their work. They keep on sending the letter and stacks of forms for customers to specify how they want their mortgage payments to be set up. This is usually costly on customer’s side, since if he or she fills the forms again the bank will withdraw the payment twice from customer’s account (Berry & Parasuraman, 2008). Using service profit chain Customers are always satisfied with the process that is done faster and accurate. A customer therefore will get satisfied if he or she gets loan faster so as to plan for mortgage financing without incurring any additional costs. The colonial savings bank needs to redesign its process in a way that its activities make a customer to move close to his or her target. The bank should conduct its process in a way that makes customers to view the process as non-bias and being customer centered. The process should be designed in a way that the interaction among activities adds value to the entire process without taking the customer in a reverse direction. As long there is efficiency in the service, the interaction among various layers of activities need to be shortened in a way that it incorporate activities bring value to the entire process alone. Service profit chain concept therefore is about making the entire process look shorter. It does not support overlap of activities that are not assisting in the development and profitability of an organization. Activities that overlap each other and are not important in bank’s profitability should either be merged or removed from the process. Using blue printing concept Berry and Parasuraman (2008) argue that the current process employed by colonial savings bank needs a lot of customer involvement. Loan specialist, loan agent and a lawyer interact a lot with customers. The interactions normally affect negatively the morale of customers. The current blue printing services utilizes shorter time. For instance, after a client has applied for a loan, loan processing is done before property evaluation and credit check. The customer thus is capable of know within a short time if his or her loan application was successful or not. Quick disclosing about the status of customer’s loan application is very essential since customers are not placed in darkness as the process slowly moves own. New service blue printing The whole process can be improved in the new service blue printing by doing some activities at once so as to enable customer to get feedback very soon. The verification of customer’s details need to be done very fast so that in case of any adjustment can be worked on very fast. It is important to include the lawyer’s part of termite inspection in the new service blue printing so as to reduce many procedure that are dragging behind the whole process. In the new service blue printing, the eligibility of customer receiving the loan can be determined after doing credit check and completing property appraisal (Friedman & Harris, 2006). The new service blue printing need to be designed in such a way that the stage, concerning with loan processing, gives customer quick results if their application has passed through or has failed. The feedback stage therefore should be as soon as possible. In new blue printing, Stages that are not important are merged so as to reduce the number of customer interaction. The verification of lawyer need to come after loan processing so as to finalize the remaining details before the customer receives a lone. The lawyer needs to have a talk with loan specialist concerning loan repayment. Customers need to be reminded every time about loan application’s development. This can be done either through loan agent or automated system. These assist customers to easily access their loan progress without any problem (Tyson & Brown, 2009). Conclusion Service blue printing and service profit chain concepts have been greatly applied by organizations in improving their services. In the discussion, it is very clear that colonial savings bank used service blue printing that was not efficient enough, and thus needed redesigning. The refinancing process, employed by colonial bank is tedious and time consuming. The support system used by the bank is not effective. The process of obtaining loan is positively related with the repayment charges, that is, when the process of getting loan is long, higher repayment charges are usually experienced. Using of both service profit and service blue printing concept reinforces value-adding steps and minimizes cost-adding steps. New service blue printing improves the efficiency of bank’s process. Bibliography Frauendorf J., 2006, Customer processes in business-to-business service transactions, New York: DUV. Mahadevan B., 2010, Operations Management: Theory and Practice. New York: Pearson Education India. Hoffman D., K., & Bateson G., 2010, Services Marketing: Concepts, Strategies, & Cases. New York: Cengage Learning. Hollins B., & Shinkins S., 2006, Managing service operations: design and implementation, SAGE: New York. Zeithaml A.V., 2009, Delivering Quality Service, Simon and Schuster: New York. Heskett J., & Wheeler J., 2008, The ownership quotient: putting the service profit chain to work for unbeatable competitive advantage, Harvard Business Press: New York. Epps T., Y., 2006, The service-profit chain: understanding the relationship between service and profit in Montessori school environments, Butterworth-Heinemann: London. Christopher M., & Payne A., 2002, Relationship marketing: creating shareholder value, Butterworth-Heinemann: London. Berry L. L, & Parasuraman A., 2008, Marketing services: competing through quality, Cengage Learning, New Jersey. Friedman P.,J., & Harris C.,J., 2006, Keys to Mortgage Financing & Refinancing, Barron's Educational Series: New York. Tyson E., & Brown R., 2009, Home Buying for Dummies, For Dummies: New York. Read More