Operations management report ON: Operations management concepts

Executive Summary:

Intend of this business report is to make use of production ad operations management concepts and utilizing all those to identify the operations related problems. Therefore, a case study of community bank of Perth has been analyzed in order o review the process they have adopted for refinancing. In this context, service blueprinting concept has also been taken into consideration to analyze the process on why bank decided to make it this way. Next, customer’s comments being taken as a part of the problem identification, issues caused by this process have been described from the perspective of operations management. Afterward, service-profit chain and blueprinting concepts have been put across to revamp the process approached with respect to the problem solution after specification. The redesigning process will include the steps that are adding value to the customers and reducing the costs to the bank. A well-structured service blueprinting has been recommended showing the steps for improvement of the entire process. At the end an all inclusive conclusion has been drawn summarizing the report.

 Introduction:

As a part of the introduction, it is needed to define the concepts used in the report to identify the process, related problems and redesigning of process. These concepts include operations management theory, service blueprinting and service-profit chain concepts. Firstly, operations management refers to a process wherein the resources of an enterprise are pooled as a whole with the support of a controlled and organized manner. This process brings all the resources together to work in order to add value according to the policies and practices established by the organization’s management. Operations management is related to converting inputs into output by effectively using the capabilities, core competencies and relevant knowledge in the entire production process. This operations management theory will be used to identify the problems occurred due to process designed by community bank of Perth.

Next, it is also important to give a brief outline of the case of bank so that process can be examined and related problems caused by it could be making easier to understand. The case is all about the refinancing process designed by bank of Perth when it is at its booming level in Australia. The steps they included were not well-structured and subject to the objective of the process. Therefore, customers started viewed the process as long time taking in approval of loan, dealing with customer regarding payments and closing of process, etc. This case throws light on two concepts service blueprinting and service-profit chain. Service blueprinting is considered with the technique used for designing or innovation of service. It is basically a medium for refining and redesigning a well-defined framework for service including key value adding steps (Bitner, Ostrom & Morgan, 2007). On the other hand service-profit chain concept is used by the enterprises in order to establish the relationships between loyalty from customer’s end and employee satisfaction. In this context, it is understood that loyalty directly takes birth from customer satisfaction.

Following this, next segments discuss about the explanation of the process and problems identification with regards to the customers satisfaction.

 Service blueprinting:

Service blueprinting depicts the real image of a business’ service framework of delivery process. Supportively, it also demonstrates the role of employees and customers in that overall process, major noticeable constituents of the service being offered. Service blueprinting plays a significant role in breaking down a service into its sound and logical modules and hence continue it in the tasks and paces that are easily definable.

(Source:  Beige, S, Lay, G & Buschak, D, 2012)

It generally consists of actions of customers toward a process or service describing the line of peripheral interface. Through this, employee actions and dealing with customers can also be viewed and observed onstage and backstage that present the line of visibility and a line of interaction which is done on internal basis. On an average, it can be articulated that it is mostly used at the stages of designing and redesigning of a process or framework of a service development. By understanding this process, refinancing process of community bank of Perth can be analyzed and explained (Bitner, Ostrom & Morgan, 2007).

Analysis of refinancing process of the bank:

To analyze the refinancing process designed by Perth bank, the stages involved in service blueprinting can be taken into account. Service blueprint maps out the entire journey of a business. First it analyzes the process which constitutes the service, then segregates the potential negative points and finally sets a time outline for the journey. Hence, taking the concept of service blueprinting into account, the refinancing process of Perth’s bank can be analyzed. According to the process, they have involved five main stages concerning the customer first and to win their loyalty for the business. For that, first a loan application is prepared by the agent after cross-checking the customer’s background. At this stage, customer is provided with the full information regarding refinancing options and if customer’s data is qualified after the calculation, he/she sign the paper otherwise application ends (Zehrer, 2009).

Furthermore, according to service blueprinting concept, onstage actions are also taken into care. Therefore, the second stage of bank’s loan process states that after approving the application, processor makes a request for credit check from the customer. In this context, the loan processor examines and verifies the property’s appraisal and level of employment. Here, the onstage contact between employee and the customer come into view. If any kind of problem is found out with reference to customer’s verification, he/she goes to the agent for advice. Afterward, customer describes the inconsistencies on his/her credit report and provides a writing application to the processor. On the other hand, if the application and credit check request is accepted then it is sent further to the loan agent or board of the bank for its final approval (Michael & Romana, 2010).

Afterward, the backstage activities of the employee’s contact with the customer is monitored which is generally invisible in nature. At this stage of closing, customer is offered the letter of final approval and customer makes a call to the agent for scheduling a date of closing to lock the loan. Here, lawyer comes in the process as a medium to act in response to the activities performed between customer and employee. Next stage of refinancing process relates with the support process concept of service blueprint. This stage talks about the responsibility of the loan-servicing specialist who has to ensure that previous loan has been paid-off and new is being set up appropriately. If previous discrepancies are left, then the customer is supported by the loan-specialist properly. Finally, physical evidence concept of service blueprinting goes along with the last stage of bank’s refinancing process. Payments are made as physical evidence and in addition, loan payment specialist takes the responsibility of payment books into account. Following this, the specialist establishes the automatic withdrawal of mortgage fees and also monthly payments are calculated by the specialist (Pasupathy & Traintis, 2007).

On the basis of overall analysis of the refinancing process, it can be explained that bank has designed it in this way to create the separate department which will assist the volume of customers’ applications in accordance to the system. This process has been curved taking involvement of customer and employee into consideration.

Next, it is also necessary to take the customer’s views into account to understand and refine the process in a suitable manner. In other terms, there is a term ‘relationship marketing’ which is used by the companies to maintain the customer’s satisfaction through a consistent customer service’s improvement. Therefore, problems posed to the customers caused by this process have been defined with the support of operations management.

 Operations management:

Operations management is referred with the area related to management of sourcing, production, engineering, controlling and operations of the production of goods and services. Usually, it is considered that physical resources are used to convert inputs into outputs in order to meet the customer’s requirement and organizational objectives. Management of operations makes a clear distinction from other functions related to human resources, marketing & sales. The key point in operations management is that it includes value –addition activities and on the other hand resources, overall framework in to care. In addition, operations management’s systematic approach talks about the responsibilities of hierarchical management of the organization. In other words, it can be articulated that approach of process’ framework/system to the problems caused needs the identification of the problem first. Afterward, problems are separated from the network of the irrelevant data which cause them. Operations management helps identifying the problems and then breaks them into micro parts that can be managed easily (Kumar & Suresh, 2009). This system approach of operations management consists of following four constituents mainly:

Operations management

(Source: Mbanet book, 2010)

• Measurement of problems or issues by using an precise sensory technique
• Feedback of information related to customer and employee’s actions in a suitable way
• Making a comparison with some standards like especially time and cost standards
• Remedial acts by someone who has the ability to make corrections and can take authority into consideration simultaneously (Bertrand & Fransoo, 2002).

Problem identification:

With the help of operations management, problems caused to customers with bank of Perth can be identified. Customers’ satisfaction is concerned with the expectations they have with the system or service and their perceived performance which automatically comes forward during the experiences they meet with. Alternatively, if customers are not fully satisfied they bring it in light through making complaints about the system and services offered. After taking operations management concept into account, following consumer complaints have been described:

• First, bank takes a longer time to get the application approved for loan than other banks usually and on the other hand charges higher costs of closing the application as well. This demonstrates that input has not been put rightly with the use of appropriate physical resources which gave birth to such problem.
• There was a major problem which customers came through that the agents from the banks call and tell them about their overdue payment which is very hard to believe because bank withdraws that from customer’s cheque account automatically (Tirupati, 2012).
• From the perspective of operations management, most appropriate techniques are used to operate the service better so that it could be made accessible to the customers at right time. Here, in case of Perth’s bank, agents and specialists used the mail to get the information about the client instead of calling them directly. It was found that customers found this technique of mailing very slow and time taking.
• Next, the customers also reported the complaint regarding meaningless reassessment of property’s appraisal for background check. According to the operations management, value-adding activities are involved in the entire process in order to receive the best output. When the customers did not add anything to their property and it has already been examined earlier, this activity of reassessing the property background was completely reduced the value of their process (Gupta & Boyd, 2008).
• When a system is implemented, resources are allotted to the different departments. This avoids the confusion among the customers regarding their suggestions, data, information and queries. Taking operations management into consideration, it can be analyzed that customers faced a challenge in finding the concern person taking care of their loan-file. Therefore it consumed their time in giving the same answer repeatedly to the diverse people. It can be defined that resources are the main assets of an organization. By using the appropriate allocation framework and the proper intellectual competencies of the employees, an organization can increase the value of its human capital and can result in high productivity. But, here in case of the bank’s refinancing process, the resources were not rightly used and multiplied separately in accordance to the process of handling a greater volume of customers at the same time (Schmidt & Raman, 2012).
• Te process took so long to approve the loan file that all the reports such as property appraisal and credit cheque have expired by the time. Here, operations management concept depicts that the objective of getting all the resources together for work under organized and controlled situation is to achieve a higher level of result in comparison to the inputs. The main factor related to this objective is to get the overall effectiveness of resources and process from the customers. The operations management of Perth’s bank was not clear and exact with its objective as to deal with the customers and to meet with their requirements (Stefanou, 2003).
• The next problem can be identified better through the objectives of operations management. The first and foremost objective of operations management states that resources can be utilized in order to satisfy the customer. Further it says that the operating should be in such a manner that the customers should be treated and satisfied in both the terms of cost and time. Therefore, the next problem reveals that refinancing process did not cover the appropriate system of rescheduling for closing date and moreover the customers faced the risk of the date being postponed. It represent that customer were not provided with proper service by the bank’s employees which made them dissatisfied with the system (Meyer & Schwager, 2003).
• Finally, the aspect related to cost and resource utilization of operations management comes in light while identifying the next complaint made by the customer. These aspect states that it is mainly concerned with the optimum utilization of the resources and compliance to meet future needs. Following this, further issue raise by the customers was with reference to mortgage payments’ re-establishment. Moreover the customers had also a risk of double withdrawal of amount being taken away from their accounts once the paper has been signed by them. This shows that bank has not designed the process in the way that it could produce the quantities in order to meet anticipated demands and satisfy the customers completely (Bertrand & Fransoo, 2002).

After outlining the problems, it can be notified that entire concept of operations management talks about its strategic perspective, on the basis of which problems have been identified. It states that once the process related potential problems are defined of an organization, a strategy can be brought forward. This should include some primary requirements and basics for competing with such problems. In simple words, organization can set the priorities among quality of the process, cost effectiveness, reliability including the appropriate timing for approval and closing scheduling, and lastly flexibility. These priorities will help responding quickly with the settlement of loan application’s approval in a great volume (Gardiner, 2008).

Service-profit chain concept:

As far as service-chain concept it considered, it depicts the relationship between customer satisfaction and loyalty. Through this both employees and customers are taken into account during the process. This concept explores that customer loyalty is driven by customer satisfaction only. Then, profitability, high level of productivity and growth takes place due to customer loyalty. According to service-profit chain’s concept, after it, value addition to the customer drives customer satisfaction. That value to the customers is added and driven by the employees’ productivity. Similarly, it put across that employee’s productivity takes place directly due to their loyalty that is derived from employees’ satisfaction. Further, chain moves on and demonstrates that employee satisfaction is driven by the internal quality of the working environment in an organization (Heskett al, 2012).

Service-Profit Chain

(Source: Jupiter management services, 2011)

At the end, it is noticed that it entails the leadership which confirms the customer satisfaction and also take care of the value of external service, employee productivity & satisfaction, employee loyalty and internal service quality.

Recommendations:

First of all, to redesign the process taking service-profit chain and service blueprinting into account, it is necessary to ensure the quality of bank by monitoring and auditing the previous process. Here, customer-driven six sigma fit the most suitable to improve the overall business’ performance so that customers’ expectations can be satisfied accordingly. Six-sigma’s positive impact can be noticed in terms of developed profitability, reduced cost, and reinforced customer satisfaction. It has been analyzed that the Six-Sigma concept of business strategy involves following main five forces into it (Leopoldo, 2009):

• Customer’s voice: It is concerned with the gathering of impartial data from customer’s end. Therefore, bank must consider the voice of customer first which make their business customer-centric.
• Performance metrics: A set of performances should be monitored according to the requirement of customer which helps designing the bank service (Thomke, 2003).
• Lean process design: In this design process, all the errors and bugs should be eliminated from the process and then the system goes in line with the objectives of the process.
• DMAIC process development: At this stage, entire input process is gone through, routines of output process are examined and therefore, the process is developed according to the changes and requirement (Leopoldo, 2009).
• Governance: Leaders are a soul of any company because they lead and organize the whole process. They play a significant role in continuation of the process and look after the application approvals and other requirements of the customers. Following this, the governance should be in a satisfactory way from the leaders’ end toward the customers of their bank.

This six-sigma business strategy helps fulfilling the quality improvement goal of a business. Furthermore, taking all these models and concepts in sight, a new service blueprint refinancing process can be designed. Here service-profit chain will help assessing and improving related services from the operations management’s perspective. Further, it will help understanding how the bank’s operational investments can be turned out into profits and can be linked to customers’ perceptions. On the other hand, service-blueprinting will be taken into care to make the process envisioned among chain of actions. Besides, for evaluating the level of customer satisfaction, it will concentrate on interaction between both the employees and customers (Gronroos, 2000).

Therefore, it can be recommended for the bank to imply six-sigma concept which is customer-driven and on the other hand to take service-blueprinting and service-profit chain concept into account while drawing an implementation plan for refinancing process. 

New implementation plan:

After making recommendations for redesigning process, a new plan can be structured and implemented by the bank of Perth so that they can satisfy customers’ expectations and make higher returns for their organization.

Stage 1– Loan application within 24 hours: At this stage, 10-15 minutes time is provided for filling the form with their preferred mode and once they are thorough with this, system automatically sends it for pre-approval within 24 hours.

Stage 2- Loan processing within 7 days: Afterward, if the application gets approved, the loan processor will make a call to the customer and will discuss about the option of refinancing. Moreover, he/she makes a record of that service including the time issues into the service structure. After it, loan-processor requests customer for a credit check of property appraisal and employment within 7 days. If checks are verified by the processor, he/she asks for a closing date’s preparation based on customer’s preference and within a time limit (Files, 2004).

Stage 3– Loan closing within 1-2 days: Next, customers come into action to call the agent of loan closing for scheduling a date of closing and provide the lawyer name to make a record of the same service. This is also done within the limits of 7 days. Then, the lawyer verifies the payoff amounts; fees payment schedules and records the service as well within 1-2 days.

Stage 4– New account establishments within 1-3 days: At this stage, loan specialist quickly checks the condition of previous statement of loan and then set up the new loan. If there are problems related to previous loan payments, then customer’s problem is made fixed on call.

Stage 5– Loan payment establishments in 1 or 2 days: Finally, the set ups related to withdrawal of mortgage fees are made by the loan specialist. For this, he/she makes a call to the customer and confirms about the automatic withdrawal. This last process takes only 1 or 2 days for the set-up. Hence, entire system is designed by taking service-profit chain and blueprinting into view (De Jong & Vermeulen, 2003).

On the basis of new designed process, it can be noticed that use of customers’ preferred contact methods and less time in approval and inspection has eliminated the additional cost in the process. Apart from this, limited time frame has been set up for each stage of the process. This results in the customer loyalty which further turns into the customer satisfaction. It then specified the internal quality level of the bank and enhanced the employee satisfaction and loyalty as well. Therefore, it can be pointed out that service-profit chain has completely been put into consideration in designing of the new process (Davis, 2006).

Conclusion:

Some decisive points can be drawn out of this entire report. Firstly, it takes service blueprinting concept into view to evaluate the refinancing process of the community bank of Perth. According to service blueprinting concept, process of the bank reveals some stages which are linked with employee and customer’s onstage and backstage actions. Further, it has presented physical evidence and support process into consideration. Afterward, a solid analysis has been made to identify the problems caused by that process from operational management perspective.

The problems are with reference to the complaint reported by the customers to the bank according to 5 stages process. Additionally, eight key problems were defined regarding high charges & time taking process than other banks. Customers also met with the issues related to approval of loan application on time and schedule postponed. These problems have been defined taking operations management objective and strategic concept into account. Later, customer-driven concept of six-sigma has been brought forward to specify the current and future potential customers’ requirement. Therefore, the improvement process begins with the assessment of service-profit chain’s practice and technology for mapping called service-blueprinting. With the understandings of these concepts, a new process framework has been designed according to the customers’ needs. Apart from this, it was taken care that the new process which was designed should be customer-centric, should add the value to both the customers and bank and also reduce the cost. The newly designed process system improves the overall profitability, develops the level of productivity, saves the time and satisfies the customer’s expectations.

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