Production and Operations Management: Blueprinting the Service-Profit Chain - Case Study Example

BLUEPRINTING THE SERVICE PROFIT CHAIN Introduction Blueprinting is a concept that involves the organization putting itself in the position of the customer in order to find out what the customer needs and thus help the company to make the necessary changes. Although it looks like a simple concept it is a very important tool in the measuring success in service delivery. Most companies have used blue printing to bring about innovation and to improve on customer satisfaction. This aim of this paper is to analyze the procedure for the application of loans at the Colonial Savings Bank. It looks at the weaknesses in the system and redesigns the process of loan application, approval and refinancing. This was one of the areas where the bank was doing well but this has since changed. The aim of the restructuring of the process is to create a process that will be more efficient and friendly to the customer and at the same time ensure that the banks assets are more secure. The paper starts with a detailed case study of the system at the Colonial Savings Bank before coming up new service blueprint aimed at providing better services and in turn customer satisfaction. A Case Study of the Loan Application Process at The Colonial Savings Bank The Colonial Savings Bank has a loan approval system which has five stages. The first step involves loans application. Here the customer completes the loan application form for the loan agent who informs him of the refinancing options. The customer also signs papers to allow a credit check then awaits approval. Having made the application the customer moves to the second stage which is that of loan processing. Here the loan processor requests a credit check, verification of loans or mortgages from other financial institutions, an appraisal of property and employment verification. At this stage if there are any discrepancies the customer is expected to explain the same in writing. If the explanation is acceptable the letter is placed in the customers file and sent to the loan agent for approval. The next step is the closing stage. If the loan is approved a letter is sent to the customer requiring him to call the closing agent a schedule a closing date. It is at this stage that the closing agent requests the customer’s lawyer’s name. The lawyer is responsible for arranging a termite inspection, a title search, and insurance as well as preparing the closing papers. The next step after closing involves the opening of new accounts for the loan or mortgage and the refinancing of previous loans. The Bank’s Justification of the Process Despite complaints from the clients the bank must have had a justification for their current process. During the second stage the bank does a check on the loans, employment verification and an appraisal of the property. The justification of this is to check the creditworthiness of the customer and to establish if the customer will be able to repay the loan once the same is approved. Whenever there is any anomaly the customer is required to explain in writing. Some customers complained that this was a waste of time but the justification of the bank is that any correspondence should be in writing for purposes of record. This can easily be relied on by the bank incase of default by the customer. The closing stage also requires an appraisal and a termite inspection of the property and a search to be done by a lawyer. The justification of the process is that the bank has to establish the true ownership of the property. In so doing the bank is able to safeguard its property. Customers Complaints The customers of the bank raised a number of issues that ought to be addressed. One such complaint was that of a customer who complained that it took two months to refinance his loan. In addition to that he complained that the money he had saved on closing costs was eaten up by the extra month’s higher mortgage payments. The customer in fact stated that it would have taken a shorter time to apply for a new loan in another bank. This is a serious problem that the bank needs to address. Since the case involved refinancing of a loan it should be faster since the bank already has details of the customer and in most time access to the security. Another customer complained that there were so many people handling his file that he did not know who to call. This means that there is no proper correspondence between the bank and its customer. This is an integral part of customer satisfaction that the bank needs to address. It can do so by establishing a customer care office which has access to all the files of the customers. Another customer took issue with having to do everything in writing instead of using phone calls. The customer was of the opinion that by calling the process would be made shorter. Inasmuch as the process should be made faster, the bank needs a record of all the correspondence between the customer and itself. Telephone conversations are not easy to record and therefore the bank has to use written correspondence. Among the complaints by the customers was that an appraisal was done on their property again yet they had not added any additions to the property. In this case the bank must have done the appraisal again to know if there have been any additions or subtractions to the property. This is important for the bank to protect its assets. Another complaint was with regard with the time it took for loan to be approved. One complained that it took so long for his loan to be approved that the appraisal report and termite inspection report expired. This meant the customer had to get another report at an extra expense. Inasmuch as the bank needs to scrutinize the application and all the requisite documentation, the process should not take so long to occasion an expiration of the appraisal and termite inspection report. Another complaint was that of a customer who drove to the bank to deliver the lawyers papers but the customers file could not be found until the next day. This raises a lot of questions about the system of filing used by the bank. The filing system should be one that enables the bank to serve the customer using the shortest time possible. The customer further complained that the closing agent told him that if she hit a snag closing could be postponed. This clearly shows that the customer is left in uncertainty. This customer in particular had in fact taken an off day from work to attend the closing. This is a problem that the bank could have been avoided by the bank by preparing everything prior to the day of closing. Another customer complained that he was called by the bank to be informed that his mortgage repayment was overdue yet the same should have been withdrawn automatically from his cheque account. Upon closing the bank should set up an automatic withdrawal of mortgage fees to avoid such situations There was also an issue raised by a customer was that he received documents from the loan repayment specialist requiring him to specify how he wanted to repay his mortgage. The customer had already filled out all this details at closing and felt this as a bother. This shows that there is no proper co-ordination among the bank’s departments. Blueprinting the Service Profit Chain The service-profit chain is a framework for linking service operations, employee assessments, and customer assessments to a firm's profitability. It shows how the quality of services in turn affects the profit of an organization. It gives an integrative framework for understanding how a firm's operational investments into service operations are related to customer perceptions and behaviors, and how these translate into profits (Evanschitzky et al., 2011). The service-profit chain brings about the interrelationship between productivity and profit to customer loyalty. The links in that chain which are supposed to be regarded as suggestions are as follows: Profit and development are stimulated principally by client loyalty. Loyalty is a straight result of buyer satisfaction. Satisfaction is mainly influenced by the worth of services offered to customers. Value is shaped by satisfied, faithful, and creative employees. Employee pleasure, in turn, answers primarily from high-quality prop up services and strategies that enable employees to convey results to customers. The service profit chain lays emphasis on the quality of services provided to the service-profit chain is also defined by a special kind of leadership. Managers of exemplary service companies emphasize the importance of each employee and customer. For these managers, the focus on customers and employees is no empty slogan tailored to an annual management meeting (Jong and Vermeulen, 2003). In our case study from there is need to improve on the services in order to earn loyalty from the customers. Service Blueprinting The service blueprinting concept was originally conceived over twenty years ago by a bank executive, Lynn Shostack, who published a paper on the rudiments of the approach in the Harvard Business Review. In the superseding years the system has evolved considerably. Service blueprints possibly will be described as tune-up roadmaps, tangible, visual articles that place out wherever and however customers and the relevant companies interrelate. More purposely, blueprints are information-loaded documents made of five components with the intention of, when drawn up jointly, can help create customer-company association and the client experience very clearly (Way et al., 2010). Customer actions: - This includes all of the treads that customers get involved in the delivery of processes (Persson and Ryals, 2010). “Onstage/visible contact employee actions” these are actions of the employees at the frontline of the company that are in contact with the clients on a day to day basis “Backstage/visible contact employee actions” these are actions by the employees who are not directly visible to the customer. This group of employees gets into contact with the customer through phone calls, and other mode of services that are intended to support the customer. Support processes: - are all actions that are carried out by some individuals in a corporation who are not basically contact workers. These workers are liable for functions that prop up the other support services. Physical evidence: - this is the tangible property that the employees get exposed to in the time that they are in contact with the particular company or when serving the purpose of that company (Garnefeld et al., 2011). In scheming the blueprints it is pertinent to begin with the actions of the customers since that is the groundwork of all involved other elements. The foundation of the plan is the criticisms from the clients which have previously been analyzed. One of the mainly idiosyncratic characteristics of services is their process nature (Gronroos, 2000). Unlike physical goods, services are dynamic, unfolding over a period of time through a sequence or constellation of events and steps. The service process can be viewed as a chain or constellation of activities that allow the service to function effectively (Johne and Storey, 1998) In this case for instance the service is represented by events occurring between the banks employees and the customers. To function effectively for the client, the entire sequence of loan application should be coordinated and managed as a whole, over time, with emphasis on including the resources and steps that produce value for the customer. An analysis of the client’s interactions with the bank, and the underlying support systems is essential to managing this chain of service activities. Reconstructing the new model In designing a new model, emphasis is made on making the process more time saving. This will ensure that the appraisal reports and termite inspection report do not expire before the loan has been approved. The new model maintains the same stages albeit with improvements. Loan Application The customer meets the agent and discusses with the loan agent about the kind of loan that he wants. The agent performs quick calculations according to the customer’s data to see if the customer qualifies. If the customer qualifies, the agent asks for the original documentation and certifies them to be true copies of the original. The customer then fills and signs an application form after which he goes home to wait for approval (Dotson and Allenby, 2010). Approval Stage Here the documentation is verified by the loan processor. The loan processor verifies the loans or mortgages from other financial institution and the employment verification. In case of a problem the customer is required to explain in writing Closing stage Here if the loan is approved the customer is called to schedule a closing date. When the customer comes for closing the customer is given the loan approval letter. This will help to save the time of sending the letter to the customer and requiring the customer to call. The bank authorizes its lawyers to carry out the title search, a termite inspection, a survey and also to prepare the closing papers. This is a slightly different approach from the current one in that the bank does not use the customer’s lawyer but its own. The aim of this is to ensure that the customer’s lawyer does not collude with the client to give false or fraudulent documents . Establishment of the new account The loan servicing specialist makes sure that the previous loan is paid off and the new loan set up properly. Loan Payment Setup The loan service specialist calculates the exact amount of payments and sets up automatic withdrawal of mortgage fees. This will avoid the situation where the customer is called to be informed that the mortgage is due. CONCLUSION In conclusion there is need to save on time in the loan process system. From the case study it is clear that the main complaint from the customers is time. Blueprinting the services at the bank will help improve on customer satisfaction which in turn will translate to high profitability. REFERENCES Dotson, J. and G. M. Allenby, (2010) “Investigating the Strategic Influence of Customer and Employee Satisfaction on Firm Financial Performance” Marketing Science, September 1, 2010 Evanschitzky, H., C. Groening, V. Mittal, and M. Wunderlich, (2011) “How Employer and Employee Satisfaction Affect Customer Satisfaction: An Application to Franchise Services” Journal of Service Research: 14(2): 89-101. Garnefeld, I., S. Helm, and A. Eggert , (2011) ”Walk Your Talk: An Experimental Investigation of the Relationship Between Word of Mouth and Communicators' Loyalty” Journal of Service Research: 14 (1): 123-48. Gronroos, C. (2000) Service Marketing and Management: A Customer Relationship Management Approach. West Sussex: John Wiley & Sons, Ltd. Johne and C. Storey, (1998) “New Service Development: A Review of the Literature and Annotated Bibliography,” European Journal of Marketing, 32:3-4. Jong, P. and Vermeulen, P. (2003) “Organizing Successful New Service Development,” Management Decision, 41 (9): 9-35. Persson, A. and Ryals, L. (2010) “Customer assets and customer equity: Management and measurement issues” Marketing Theory, 6: 47-54. Way, S., Sturman, C. and Raab, C. (2010) “What Matters More?: Contrasting the Effects of Job Satisfaction and Service Climate on Hotel Food and Beverage” Managers' Job Performance Cornell Hospitality Quarterly, 2(1): 16-24. Read More