Pamantasan ng Lungsod ng Pasig
One Call Away
Team E
Fundal, Jovelyn D.
Gabriel, Rosemarie C.
Gumban, Rheane Jade C.
Java, John Dave N.
Lazo, Mark Lester L.
Management Science Prof. Abelito T. Quiwa
BSA – 2A
I. Case Study Title
One Call Away
II. Story
Bob and Carol Packer operate a successful outdoor-wear store in
Vermont called Northwoods Backpackers. They stock mostly cold weather
outdoor items such as hiking and backpacking clothes, gear, and accessories.
They established an excellent reputation throughout New England for quality
products and service. Eventually, Bob and Carol noticed that more and more of
their sales were to customers who did not live in the immediate vicinity but were
calling in orders on the telephone. As a result, the Packers decided to distribute a
catalog and establish a phone-order service. The order department consisted of
five operators working 8 hours per day from 10:00 A.M. to 6:00 P.M., Monday
through Friday. For a few years the mail-order service was only moderately
successful; the Packers just about broke even on their investment. However,
during the holiday season of the third year of the catalog-order service, they were
overwhelmed with phone orders. Although they made a substantial profit, they
were concerned about the large number of lost sales they estimated they had
incurred. Based on information provided by the telephone company regarding
call volume and complaints from customers, the Packers estimated that they lost
sales of approximately $100,000. Also, they felt they had lost a substantial
number of old and potentially new customers because of the poor service of the
catalog order department.
Prior to the next holiday season, the Packers explored several alternatives
for improving the catalog-order service. The current system includes the five
original operators with computer terminals who work 8-hour days, 5 days per
week. The Packers hired a consultant to study this system, and she reported that
the time for an operator to take a customer order is exponentially distributed, with
a mean of 3.6 minutes. Calls are expected to arrive at the telephone center
during the 6-week holiday season, according to a Poisson distribution, with a
mean rate of 175 calls per hour. When all operators are busy, callers are put on
hold, listening to music until an operator can answer. Waiting calls are answered
on a FIFO basis. Based on her experience with other catalog telephone-order
operations and data from Northwoods Backpackers, the consultant has
determined that if Northwoods Backpackers can reduce customer call-waiting
time to approximately 0.5 minute or less, the company will save $135,000 in lost
sales during the coming holiday season.
Therefore, the Packers have adopted this level of call service as their
goal. However, in addition to simply avoiding lost sales, the Packers believe it is
important to reduce waiting time in order to maintain their reputation for good
customer service. Thus, they would like for about 70% of their callers to receive
immediate service.
The Packers can maintain the same number of workstations and computer
terminals they currently have and increase their service to 16 hours per day with
two operator shifts running from 8:00 A.M. to midnight. The Packers believe
when customers become aware of their extended hours, the calls will spread out
uniformly, resulting in a new call average arrival rate of 87.5 calls per hour (still
Poisson distributed). This schedule change would cost Northwoods Backpackers
approximately $11,500 for the 6-week holiday season.
Another alternative for reducing customer waiting times is to offer
weekend service. However, the Packers believe that if they offer weekend
service, it must coincide with whatever service they offer during the week. In
other words, if they have phone-order service 8 hours per day during the week,
they must have the same service during the weekend; the same is true with 16-
hours-per-day service. They feel that if weekend hours differ from week-day
hours, it will confuse customers. If 8-hour service is offered 7 days per week, the
new call arrival rate will be reduced to 125 calls per hour, at a cost of $3,600. If
they offer 16-hour service, the mean call arrival rate will be reduced to 62.5 calls
per hour, at a cost of $7,200.
Still another possibility is to add more operator stations. Each station
includes a desk, an operator, a phone, and a computer terminal. An additional
station that is in operation 5 days per week, 8 hours per day, will cost $2,900 for
the holiday season. For a 16-hour day the cost per new station is $4,700. For 7-
day service the cost of an additional station for 8-hours-per-day service is
$3,800; for 16-hours-per-day service, the cost is $6,300.
The facility Northwoods Backpackers uses to house its operators can
accommodate a maximum of 10 stations. Additional operators in excess of 10
would require the Packers to lease, remodel, and wire a new facility, which is a
capital expenditure they do not want to undertake this holiday season.
III. Problem
Determine what order service configuration the Packers should use to
achieve their goals and explain your recommendation.
IV. Solution/Answer to the Problem
A. O
e Operators
ervice Configuration 1 (Current System)
According to the case, the current system of Northwood Backpackers which is
Customer’s
Phone Order
working 8 hours, 5 days per week with five operators is not feasible and
effective to serve the customers efficiently.
B. Order Service Configuration 2
The table below shows the average time and number taken in the queue
d
Operators
Customer’s
Phone Order
the system. Besides that, the table demonstrated the total cost that was incurred
Arrival Rate= 125 calls per hour
Service Rate= 16.67 calls per hour
c= 10 Operators
Average Number in the System(L)= 8.42 Calls
Average Number in the Queue (Lq)= 0.918 Calls
Average Time in the System (W)= 4.04 Minutes
Average Time in the Queue (Wq)= 0.44 Minutes
Cost = $3,600 + ($3,800* extra operators) = $22,600
in meeting the calls.
In this service configuration, the manager of the business shows us that
they want to add their operators of 5 in 7 days operation of the business. The
business does not change its operating hours of 8 hours per day. The total cost
incurred in this configuration is $22,600.
C. Order Service Configuration 3
The table shows the average time and number taken in the queue and the
system. Besides that, the table demonstrated the total cost that as incurred in
meeting the calls.
Customer’s
Phone Order
7 days, 16 hours Service:
Arrival Rate= 62.5 calls per hour
Service Rate= 16.67 calls per hour
Operators
5 days, 16 hours Service:
Arrival Rate= 87.5 calls per hour
Service Rate= 16.67 calls per hour
c= 8 Operators
Average Number in the System(L)= 5.64 Calls
Average Number in the Queuei (Lq)= 0.394 Calls
Average Time in the System (W)= 3.87 Minutes
Average Time in the Queue (Wq)= 0.27 Minutes
Cost = $11,500 + ($4,700* extra
operators)= 25,600
Additional operators and service hours are in this configuration. Compare
to the previous configuration, this configuration has a greater value of cost, but it
lessens the average waiting time of the customers of 38.64%. The increase in
cost is 13.27%. So, this configuration must have a proper decision, if the
company make the cost be an investment that will be able to serve the customer
well and that will lead them to more profits in the future.
D. Order Service Configuration 4.
The table shows the average time and number taken in the queue and the
system. Besides that, the table illustrated the total cost that was incurred in
meeting the calls.
Customer’s
Phone Order
c= 6 Operators
Average Number in the System(L)= 4.13 Calls
Average Number in the Queue (Lq)= 0.379 Calls
Average Time in the System (W)= 3.96 Minutes
Average Time in the Queue (Wq)= 0.36 Minutes
Cost = $11500 + $7,200 + ($6,300* extra
operators) = $25,000
The service hours, days and even the operators have been changed or
increased in this configuration. It is hard to say that it is the best configuration
because even all the factors have been increased, the cost and the service to
the customer needs to take account. Even there is an increased in all factors
it doesn’t give more advantages to the previous configurations.
The company preferred to adopt the “customer order configuration
number 2” which is additional working days and operators but stay in 8 hours
operation. It will reduce the waiting time of the customers and it has the
lowest cost compare to the other alternative configurations.
V. Recommendation
There are recommendations we need to say for the company to developed and
improved their system. So, the first thing we recommend is for solving the queueing
problems like the outputs we need to be able for us to decide after we put the input
requirements. We recommend using “ExcelQM and QM for Windows” instead of
manually applying complex formulas in excel spreadsheets. In this case study they use
excel spreadsheets and manually input the formulas one by one. To be able for the
company to sustain its transaction we need to decide quickly and accurately to the
problem arise from a situation. This application can solve most management science
problems like linear programming, queueing problems, forecasting etc. It uses also by
many major businesses around the world like American Bank and L.L Bean.
As we can see in the picture, this application has a various function and only
limited to management science problems. It is easy and convenient to use, just click the
appropriate module of our problem and place the requirements needed, wait for a
second and we will give a solution to our problem and additional data that we need.
To show us how it will work, we will answer the fourth customer order
configuration using this application. This configuration gave us the input data that we
need. It is the arrival rate, service rate and operators of 62.5, 16.67 and 6 respectively.
The first step is to determine what module is appropriate
to our problem. We use the Waiting Line Analysis or Queueing
Analysis.
The second step is to put the inputs
required by the application. We use Multi -
Server Waiting Line because we have more
than one operator.
The third step is to click enter or solve in the panel. After that we can see the
solution to our problem. We can also see some converted measurements that we need.
We agreed that Queueing Analysis Method is used in solving their problem
because in fact, some companies use this method to better serve its customer like L.L
Bean and Lands’ End which is also use catalog phone order system. One of the key
factors in maintaining a successful catalog phone order system is to provide prompt
service; if customers have to wait too long before talking to a customer service
representative, they may hang up and not call back. Catalog companies such as
[Link] and Lands’ End often use queuing analysis to make a number of decisions
related to order processing, including the number of telephone trunk lines and customer
service representatives they need during various hours of the day and days of the year,
the amount of computing capacity they need to handle call volume, the number of
workstations and the amount of equipment needed, and the number of full-time and
part-time customer service representatives to hire and train.
Our next recommendation is using internet as a medium of transaction. Other
than providing a hotline number for call orders, the Northwood backpackers can also
operate through e-mails. Wherein the customers can send the orders they choose on
the catalog to the company’s email which eliminate (or if not minimize) the waiting time
in the call line of the operator. There should be assigned personnel to check the emails
for the orders and reply to the customer when will be the product delivered, an
immediate response will be appreciated, and a satisfied customer will surely become a
regular customer.
To make use of the technological innovations at this generation and to maximize
the profit of the Northwood Backpackers, they can also introduce an automated system.
This automated system will be in the form of website and application which is very easy
to access by anyone that may be a potential customer, the website can be searched in
the search engine of browser provided by devices used and the applications can be
easily found in google play store and is free to install in any devices. In this website or
application the customer can see the variety of products that is offered by the business,
it will be viewed with pictures, description as to what materials are used in the
production of that certain product, the prices and of course the comments and ratings of
the other satisfied customers. Another edge of this automated system is that it can also
offer orders and deliveries for the customers. The procedure can be: first, the
customers can search or download the applications to their smartphones, second is to
browse into the products offered and if they see something into their liking they can add
it to their cart and last is to order the product chosen, for that they have to give their
address for the successful delivery of the product. In this way, the customer can buy a
product easily without a hassle like going to the store and waiting in line to pay, or order
in a call where an operator may be busy so there’s also a waiting time. These reasons
are the one responsible for the walking out or backing out of old and potential
customers in ordering a merchandise that results to a loss on sale in the business.
Based on the results given in this case study, we are also agreed to the choice of
the company which is to adopt the second configuration because it gives a lower cost
compared to other configurations. Their business is very active only if there is a holiday
season, so the company based on our perspective, don’t need or required a system that
incurred more cost even it decreased the waiting time of the customer effectively. As
what we said earlier, the company may also think that additional cost as an investment
in improving the relationship between the business to the customer. We need to
consider the future situation of the company before deciding or changing the system of
the company. One mistake can destroy the business so we must be intelligent and
clever in terms of decision making. In addition, having five additional administrators
would raise a group environment that could help confidence. Having a group
environment makes the potential for representatives to cooperate towards an objective
of giving a superior client benefit contribution. With a group of ten, working eight hours
for every day, seven days expands assurance and contributes to profitability. Having
exhausted representatives can be adverse the advance that the Northwood
Backpackers Company has made. In addition, having a second move will make the
company acquire some of additional costs. Using the least cost option will give the
company the most obvious opportunity for progress during the upcoming holiday
season.
