Operations Management for Business Excellence - Case Study Example

ANALYTICAL REPORT Name Grade Course Tutor’s Name Date Executive summary The banking sector has boosted many investors who are gearing up to acquire homes. The community bank of Perth is one of the growing banks which have surely attracted most of customers in the Western Australia. Having these increased numbers of loan applications and mortgages, the bank has taken steps and procedures to ensure that their customers experience best service and products. The loan application procedures have been revived to that effect (Cachon & Terwiesch 2006, p. 31). This report seeks to find out how customers have embraced the changes. The report goes ahead to identify some of the grievances brought up by customers who have used the five stage loan application process. With the help of fish bone approach, the report has drawn down the overall effect of the procedure. The report concludes by recommending new adjustments in the process. Through the reviewed profit service chain, the report hopes the management will map in new technology and consideration of external controlling factors to initiate high quality service (Finch, 2008, p. 16). Fully adherence to the report will bring benefit to the business as well as customers. Introduction The strong growth of the business sector in Australia has prompted many banks in Australia to start financing loans. The area that has grown tremendously is the housing sector. Banks have taken the opportunity to finance home loans (Samson & Singh 2008, p. 18). The bank customers in the market right now are seeking economical loans that will sustain their projects. Banks on the other have prepared themselves to handle the increased pressure from customer. They have developed new procedures on the loan application as well as processing. On e of the most successful banks that have embraced these new procedures include Community Bank of Perth. This report will analyse the loan application procedures as well as the processing of these applications at the Community Bank of Perth. The report will revolve around blueprinting the Service-Profit chain (Davis 2006, p. 168). The loan application procedure has five crucial stages. This procedure seems to be meeting the business need of the bank (Schroeder 2008, p. 21). However, the customer views and comments differ with the success of the new loan application process and procedure. The five stages in the loan application are catered for by different departments in the bank. This approach is quite cumbersome to a customer who needs a quick loan for investment. Going through all the five departments eats up a lot of time (Cachon & Terwiesch 2006, p. 55). The operations have received several feedbacks from the customer on the change of the new loan approval process. This prompts a substantial redesigning the entire operation and management of the loan process. The measure and quality performance of the bank are declining (Davis 2006, p. 170). This report will offer a solution to the problem facing the loan application and processing procedure. Analysing the problem Most customers anticipate getting home loans though a fast and easy process and approval by the bank (Russell, & Taylor 2009, p. 22). With the long hierarchy and distributed functions over different bank staff, the bank is working efficiently. The first stage on the hierarchy is loan application. The customer is engaged in filling in the application form via the loan agent. The customer is at a mandate to discuss with the agent on the available refinancing options. This department works well in marketing the bank as the best bank for granting loans. The agent takes up two roles; that of a marketer and a financial advisor (Gardiner 2006, p. 176). Failure to stipulate these roles to the agent well the bank may end up loosing crucial potential customers. The loan agents are supposed to be competent and well conversant with calculations as well as, interest rates offered by the bank. However, the responsibilities given to these agents are quite minimal since after convincing the customer and signature appended on the form their work is done. This is quite dangerous to the bank since when there are few loan applications then the agents will remain idle (Schroeder 2008, p. 62). The second stage is where the loan processing begins. This stage holds critical procedures hence it should be well staffed. However, allowing the staff at this department to consult with the loan agent is not advisable. It is like having a manager in the higher hierarchy who takes orders from the subordinates (Schroeder 2008, p. 71). In addition, the responsibilities are too much for the staff at this department. It is advisable that some of these responsibilities be lowered down to the first stage. All these activities; processing credit card requests, appraisal of property, verification of employment and scrutinising the application forms are quite a tall order. The staffs have to be keen and point out mistakes where possible (Meredith & Shafer 2002, p. 65). The bank has to tighten lose ends in this verification process. If the customer’s property appears on the credit card, then the customer ought not to continue with the application. This will assist the bank to curb issues of unpaid debts by customers (Gardiner 2006, p. 24). However, the customer should be given an opportunity to explain the discrepancies on the credit card. The customer should also provide an assertion as to how to deal with the recurring debts on his account before continuing with the processing. All the records presented by the consumers have to be filed well. After scrutinising the application, the next process is loan closing. This entails communicating to the customer about the approval of his or her loan (Schroeder 2008, p. 141). This stage is quite crucial since the customer lawyer is involved to verify loan package as well as payment schedule and payoffs that the customer can manage. This is a brilliant move by the management of the bank involving third party as witnesses and security of customer (Samson & Singh 2008, p. 26). However, it could have been more effective if they were involved from the initial stage. The responsibilities of the customer’s lawyer are exceptionally considerate in ensuring honesty and insurance to the bank (Russell, & Taylor 2009, p. 44). The closing agent should only be communicated to schedule a closing date to lock the loan once the customer has provided a satisfactory survey inspection of assets (Jacobs & Chase 2008, p. 127). In stage four, the loan specialist confirms if the customer had previous loans and if they were cleared in a reasonable time. The next loan is set up properly if the customers account is clean from previous loan debts. The loan specialist seems to have minimal responsibilities at this stage. On the contrary, in stage five much of financial bank records concerning the loan are undertaken. The loan specialist here calculates monthly payments, sets up automatic mortgage fees monitors’ late payment and takes care of payment records and books. This is quite a tall order hence the department has to be facilitated with adequate staff (Russell, & Taylor 2009, p. 63). Customer complaints and feedback The in-depth understanding of the relevant operation management concept shows that the bank is able to work efficiently but at the same time straining the staff (Gardiner 2006, p. 129). The practice also inconveniences the customer. Even though, the bank makes lamp some profit at the expense of the customers the staff on the other hand, has to be considered. From the complaints, it is prudent that the bank has not fulfilled the most crucial factor in business (Cachon & Terwiesch 2006, p. 92). The bank lacks relationship marketing. This factor is mainly significant in measuring customer satisfaction. The complaints show that the expectations and perceptions by the customers are way below average. Once the bank management understands the complaining behaviour of the customer it will be able to minimise loss of potential customers (Meredith & Shafer 2002, p. 59). This will assist the bank to review its services and improve where possible. The main problems that come out clearly from the analysed complaints include; - Long duration of approving the loan applications as compared to other banks. - Despite the automatic withdrawal of payments there are still errors of overdue payments. - So many agents working on one file. It confuses the customer. - The closing charges are too high, yet the service is to slow yet in other banks they charge less and have commendable services. - Most customer prefer being communicated to via phone since it is quicker that the email and postal mail. - The bank is accused of inconveniencing customers who have left their normal work schedules to finalise loan applications. These problems are normal problems that every bank faces (Russell, & Taylor 2009, p. 94). The problem of delays occurs in almost all the departments. The errors in calculations may have affected the values to be keyed in the automatic withdrawal. It is extremely essential for the Community Bank of Perth to have monitoring tools to review the performance of its staff (Jacobs & Chase 2008, p. 135). This will give the bank a competitive edge in the market. There are quite a number of ways to gauge performance of staff. The most effective one is the fishbone approach where the management uses the feedback from customers to narrow down to the cause of the problem. After noting the problem, the management should come up with credible solution. However, much the bank has tightened the loan procedure the process still provides loose ends. For instance, it has not stipulated how to determine the credibility of the assets and guarantor provided by the customers (Jacobs & Chase 2008, p. 135). Some stages such as stage four and five should be merged to one department. The initial stage and the second stage should also be merged since they are operated by the same loan agent. The bank is accused of having different loan agents dealing on one customer’s file causes a lot of confusion to the customer (Meredith & Shafer 2002, p. 81). This move is highly not advisable since it may lead to loss of crucial documents on the loan application file. The bank should assign one loan agent per customer (Samson & Singh 2008, p. 38). This should cut down on the negative reputation brought about by the complaining customers. The customers raised concerns on the many staff working on a single customer’s file as well as the delays in approving loans and closing dates. In addition to understanding consumer needs, the management ought to carryout extensive organisational historical database and relate to technology economical and social environmental factors (Meredith & Shafer 2002, p. 89). These factors will assist to judge between real demand from consumers and exaggerated demand. The variables usually influence the decisions made by customers towards services and products offered in the bank (Samson & Singh 2008, p. 38). Assessing these variables and the behaviours attributed by customers, the bank management need to have short and long-term goals, which will steer the bank into success. Solutions In order for guaranteed quality banking, the management should monitor and audit the entire process (Russell, & Taylor 2009, p. 44). The solutions highlighted by the report will strive to improve customer satisfaction, increase profitability and increase market share. The best way to tackle the problems experienced by customer is by outlining and optimising the loan process to meet potential needs of the business. The process should be well organised process containing fast and customer friendly approach. The management should eliminate the defects mentioned in the customer feedback (Cachon & Terwiesch 2006, p. 42). Furthermore, the blueprinting service chain should study how organisations, which carry out heavy investment, operate. The bank should aim in improving customers’ perceptions and staff behaviour (Davis & Heineke 2005, p. 45). The major success of the business lies upon the employees and resources of the business. Having an effective profit chain service, bank is able to make initiatives through transition as well as, specialising interactions between employees and customers. The bank should tailor their services according to customer’s emotional experience. The bank should focus in profit making by considering employees and resources. Apart from that the managerial sequence should crown the final gains and benefits. Service profit chain This framework links the business operations to employees’ and customers assessment (Kamakura, Mittal , Rosa & Mazzon 2002, p. 299). It also evaluates the assessment to the profitability of the business. Initiating this approach to the bank's operation will provide an integrative understanding of the business investment. The approach will enable the management to know customers perception and behaviour contributes to the profit of the business (Russell, & Taylor 2009, p. 44). However, this framework works best if it is combined with data such as measures of operational input and business financial outcomes (Kamakura, Mittal , Rosa & Mazzon 2002, p. 310). The bank will be able to identify and quantify the benefits of this service strategy. As for this bank the operational analysis shows that the bank has the potential of achieving a superior customer satisfaction and profitability if the efficiency of the staff is improved (Davis 2006, p. 168). The service-profit chain links relationships within the daily bank transaction to come up with a flow chat as shown below. (Source: Kamakura, Mittal , Rosa & Mazzon 2002, p. 320) Figure 1: flow chat indicating the linkages between variables that contribute to business profits growth All the key variables are interdependence. The flow chart visualises the service process to be a positive interaction between bank employee’s and the customers (Kamakura, Mittal , Rosa & Mazzon 2002, p. 320). The proposed new application process/stages In the improved stages of loan application, the report suggests that the first stage is to make the application process to be online (Schroeder 2008, p. 221). This initiative automatically transfers the customers’ credentials to the main banks’ database, and within 24 hours the customer should be communicated to verify the application from the bank. In the second stage once the customer has presented him or herself personally at the bank the applicant presents formal identifications and selects the preferred mode of communication from the bank through out the application process. The customer also verifies property appraisal and employment through the credit clerk (Cachon & Terwiesch 2006, p. 42). Within seven days, the customer is communicated to on closing documentation. The customer has the obligation to select the date of closing the documents. The customer sets a date that is suitable with his or her schedule. At the third stage, the applicants’ lawyer inspects and surveys the loan packet as well as initiating insurance to the bank. Afterwards, the lawyer verifies fees, payoffs and payment schedules the document is closed. In the last stage, loan specialist checks previous loan payoffs and immediately set up the new loan. The loan specialist communicates to the loan agent who was processing the application to inform the customer that the application has been approved. Once the customer has been communicated to the withdrawal of mortgages are set up automatically (Schroeder 2008, p. 95). The whole of loan application process should take a maximum of two weeks. Recommendations Quite often do staff rescheduling in order to relieve them the workload. While on it stipulate the job descriptions as well as the responsibilities (Jacobs & Chase 2008, p. 67). Let every employee and manager understand their mandated responsibility in the bank operation. Group the staff in teams and assign each team to handle different tasks for instance one team can handle customer file and another to monitor application process. In each team, there should a team leader to delegate duties. In addition, increase member of staff to hasten the clients’ appraisal (Russell, & Taylor 2009, p. 127). It is advisable for the bank to have several loan agents such that each customer can be assigned a specific agent to see through the entire process (Davis & Heineke 2005, p. 108). Matters concerning the files and application process are channelled through the assigned agent who in turn communicates to the customer. Some stages in the Blueprinting the Service-Profit chain should be merged so as to make the process shorter and easier for the applicants (Jacobs & Chase 2008, p. 35). The crucial stages which require much attention should be facilitated with extra staff for efficient and effective service rendering. Such stages are stage two and five. Eliminating some departments in the Blueprinting the Service-Profit chain will help to deter cross intervention. The loan system should be tested on regular bases so that errors on overdue payments will not be raised. As for the human errors in calculations, the bank management should formulate policies to control inappropriate staff behaviour. Promote a pre-booking service that will minimise multi travelling of customers. This should be supplemented by call up service where the customer care service records customer ID time of conversation query discussed in the conversation and the possible action taken (Finch, 2008, p. 60). This will enable the management to keep track on the loan application process of each customer in the bank. This will also reduce repeated appraisal. The bank should improve the technology in order to improve their services. The most crucial sector is the IT sector. It should be improved so as to get more feedback from clients. Conclusion The paper demonstrates a solid analysis of identified problems and complaints from the five stage loan application and processing. It also gives a recommendation on customers’ desires and measures to tighten up the loose ends and points of profit loss (Davis & Heineke 2005, p. 82). The fish bone approach discussed in this report is the best tool to function in the hierarchy service framework of the bank. The improvement of service will largely depend on the review of service profit chain carried by the bank management (Finch, 2008, p. 77). The management should not overlook modern technology known as blueprinting. The bank should base their service framework on customer centric. The staff on the other hand, should add value and loyalty to the services rendered by the bank. This will automatically form a base on potential clients and profits. The management should analyse the previous bank activities and planning and formulate an effective and efficient work order for increased productivity. The dispatched work order highlights tasks for each staff member. The bank will get work done on time and raise the capacity to demand revenue from the market (Cachon & Terwiesch 2006, p. 79). References Cachon, G & Terwiesch, C 2006, Matching Supply with Demand: An Introduction to Operations Management, McGraw-Hill Irwin, New York. Davis, M M & Heineke, J 2005, Operations Management: Integrating Manufacturing and Services, McGraw-Hill Irwin, New York. Davis, PJ 2006, ‘In Search of Common Wealth: a Service Profit Chain for the Public Sector’, International Journal of Productivity and Performance Management, vol. 55 no. 1/2, pp, 163-172. Finch, B J 2008, Operatons Now: Supply Chain Profitability and Performance, 3rd edn, McGraw-Hill Irwin, New York. Gardiner, D 2006, Operations Management for Business Excellence, Pearson Education, North Shore NZ. Jacobs, F R & Chase, R B 2008, Operations and Supply Management: The Core, McGraw-Hill Irwin, New York. Kamakura, W A, Mittal V, Rosa, F & Mazzon, J A, 2002, Assessing the service-profit chain, Marketing science, vol. 21, no. 3, pp. 294-327. Meredith, J R & Shafer, S M 2002, Operations Management for MBAs, 2nd edn, John Wiley & Sons, New York. Russell, R S & Taylor, B W 2009, Operations Management: Creating Value Along the Supply Chain, 6th edn, John Wiley & Sons, Hoboken NJ. Samson, D & Singh, P J (eds) 2008, Operations Management: An Integrated Approach, Cambridge University Press, Port Melbourne. Schroeder, R G 2008, Operations Management: Contemporary Concepts and Cases, McGraw-Hill Irwin, New York. Read More