An insurance company's map of its process for policies is as follows
All policies have to complete these three steps in series. The first step takes a setup of 10 minutes and a processing time of 1 minute on average per policy in a batch. The second step takes a setup of 22 minutes and a processing time of 3 minutes on average per policy in a batch. The third step takes 12 minutes of setup and a processing of 2 minutes on average per policy in a batch. The arrival rate of policies at the company is 11batches per hour, with 10 similar policies in a batch .
(a) Provide the estimated lead time to process a policy through the entire system. Also provide the actual processing time for a policy. Explain the reason for the difference.
(b) A consultant suggests that the policies really are of two types with different characteristics. She suggests splitting the capacity into two separate cells each covering 50 % of the load. Under the new configuration, the setup cost would drop by 50% for each step. The number of employees at each step would be half the original in (11a). Provide the lead time under this new system.
(c) The same consultant suggests decreasing the batch size might decrease lead time. Explore whether decreasing batch size down from 10 will decrease system lead time - provide quantitative estimates of the impact.