Submitted By: Bhaskar Jain (105), Abhimanyu Maheshwari (109),
Prannoy Pillai (114), Pranjal Saiwal (115)
Question and Answers
(1) What are the problems that the Friutvale Branch is facing? What are the causes of these problems?
Answer: Problems faced and the causes for these problems:
Improper scheduling of work resulting in tighter schedules or idle time.
Decline in profits – the Fruitvale branch reported a loss of $ 174,000 & $
121,000 during the first quarters of 1991.
High interest rates and competition by Golden gate casualty.
High Turn Around Time (TAT) – TAT announced by Golden Gate was less (2 days) compared to Fruitvale (5 days).
Renewal Loss Rate of Fruitvale went up to 33% as compared to 15% of
Rising level of settlements on liabilities were unprofitable.
Brand profit declined and backlog of policies.
Causes for these problems:
Improper utilization of resources:
The uneven pattern of work given to the underwriters, overstaffed in rating and policy writing. Sometimes one team is stretched to work and the other team is idle. According to the status given, there is vast difference between the average working hours and the capacity available (Capacity available being higher than the average working hours). Method prioritization:
Although the company policy was to use FIFO, but in practise it was found that RUNs and RAPs were given priority over the RAINs and
RERUNs. This resulted in backlog of RERUNs as the emphasis was laid on new requests and hence the notice was sent to agents on the last day. Flaw in TAT:
Mean time for processing a request should be taken in TAT instead of
Standard Completion Time.
As the RUN and RAP method were being emphasized, there was loss of renewals according to the data provided. As the notice was sent on the last day to the agents, agents preferred to recommend to their clients other insurance firms.
(2) Analyze current processes used to handle various types of service requests.
What is your assessment of the rules used to assign priorities in Fruitvale operations? Can you identify the problems in the way Manzana is calculating turnaround time in Exhibit 3 of the case?
The Manzana case discusses the inefficiencies of operations at Fruitvale branch of Manzana Insurance Company. There are various major concerns like
Declining Profits, Policies Backlog, and Improper balancing of load among employees and also the High and increasing Turn-Around Time (TAT) which is the Total time required to completely process the insurance request compared to its competitor, Golden Gate. Golden Gate has recently announced TAT of one day, which can add serious competition-resulting in increasing renewal loss rate (47%) and late renewals (44%).
According to the Manzana case discussed, TAT is calculated and found to be
And there are various flaws in the method which is used to calculate TAT of the process:
1. The mean time for processing should be considered for the calculations instead of the 95% SCT (Standard Completion Time). Mean process time provided already accounts for time required for non-productive work.
2. Once the process reach a steady state, the TAT will not be addition of through put time of all 4 processes as the processes will run parallel, reducing the overall TAT. Moreover, it will also depend on the individual loads of UT teams 1, 2 & 3.
Hence, considering above flaw, the revised TAT is 4.7 days which is still higher than Golden Gate. Exhibit 3 shows the new calculated TAT considering the mean time for each process.
3. While utilization for the distribution clerk is already quite high, the clerks also have others tasks: “Distribution was also responsible for analyzing and disseminating data published each month by the state insurance commissioner, researching and verifying insurance rates quoted by local competitors, and overseeing the rating operations.” The extent of this extra