One Hour Loan offers customized loans. Customers call a toll free number with a specific loan request, and obtain a response within an hour. One Hour Loan’s business process includes five activities which must be conducted in the sequence described below:
Activity 1: Answer customer call and record key information (4 minutes)
Activity 2: Gather and format the information (obtain credit scores, organize customer needs) for analysis (5 minutes)
Activity 3: Analyze the information, check the credit worthiness, and decide the loan amount and APR to offer (7 minutes)
Activity 4: Perform final checks on the loan offer (2 minutes)
Activity 5: Call customer back with the new loan offer and close (4 minutes) Three workers in a worker-paced line conduct the whole process. The assignment of tasks to workers is the following: Worker 1 does Activity 1 Worker 2 does Activities 2 and 3 Worker 3 does Activities 4 and 5
a. What is the bottleneck of the process?
b. How much time will it take to process 100 loans, assuming the process starts with an empty production line?
c. What is the average labor utilization of the workers?
d. What are the direct labor costs for one loan application? Assume a wage rate of $20 per hour.
e. To increase the production rate, One Hour Loan is considering two alternatives: Alternative I: Hire a new worker to help any one (and only one) of the workers without changing the tasks performed by each worker. Alternative II: Redesign the assignment of tasks to workers, specifically re-assign Activity 2 from Worker 2 to Worker 1.
Suppose Alternative I is chosen. Which worker should the new employee assist?
f. What would be the costs of direct labor of one loan application for Alternative I?
g. What would be the direct labor costs for Alternative II?