(Solved Homework): Your Task: There are six case studies in this course. The BankUSA Cash Movement Case Study…

1.What is the best way to group the work represented by the 16 work groups for an average demand of 306 outgoing wires per day? What is your line balance if peak demand is 450 wires per day? What is assembly-line efficiency for each line balance solution?

How to group work tasks most efficiently is best done with assembly line balancing methods. Please note that this process is best described as having dominant line flows (i.e., a flow shop) with considerable customization per transaction (widget). The high volumes and fair degree of customization per financial transaction resembles the idea of mass customization. Case Exhibit gives us enough information to do assembly line balancing.   Students should work line balancing problems before they are assigned this case. Please note that the line balancing solutions are for the outgoing wire process only. At the line balancing level of analysis we should examine the job design of every task in the process. Line balancing is a very effective and powerful method to reduce unit costs as long as the volume is high and stable, and the transaction is somewhat standardized.

The cycle time at 306 wires/day is 1.47 min/wire as shown in the case. At about 150% of average demand, the cycle time in Equation 8.2 is C = A/R or C = 1/[(306 wires/day*1.5)(1/7.5 hours/day)(1 hr./60 minutes)] = 1/1.02 = 0.98 min/wire ≈ 1 min./wire. This assumes demand is 150% of average demand or 457 wires/workday or about 450. We use the 450 as peak demand in the case. The line balance below assumes an output rate of 457 wires/day or a cycle time of about 1.0 minutes/wire. (You may want to work out these cycle time computations and assumptions in class prior to them doing the case analysis.)

You may also want to explain to students that if demand is greater than 457 wires/day, you have to redefine the work and break the 16 steps and times into more steps and smaller task times; then do line balancing. The resulting line balance with C = 1.0 min/wire for a peak demand of 457 wires/day is as follows:

Work Station          Tasks               Total Time                   Idle Time

1                        1                                  0.8                   0.20

2                        2                                  0.3                   0.70

3                        3, 4                              0.9                   0.10

4                        5                                  1.0                   0.00

5                        6, 7, 8                          0.9                   0.10

6                        9                                  1.0                   0.00

7                        10, 11, 12, 13              1.0                   0.00

8                        14, 15                          0.4                   0.60

9                        16                                .75                   0.25

Total                           7.05 min.         1.95 min.

Total Time Available = (Number work stations)(Cycle Time) = N*CT = 9(1) = 9.0 min

Total Idle Time = N*CT – S t = 9(1) – 7.05 = 1.95 min.

Assembly Line Efficiency = S t/ (N*CT) = 7.05/(9*1) = 78.33%

Balance Delay = 1 – Assembly Line Efficiency = 1.0 – .7833 = .2167 or 21.67%

Therefore, by grouping work using assembly line balancing you need 9 people, not 11 as currently assigned. The annual labor savings is (2 employee)($30,000)(1.30) = $78,000.

The resulting line balance with C = 1.47 min/wire (306 wires/day) is as follows:

Work Station    Tasks               Total Time                   Idle Time

1                  1, 2                              1.1                   0.37

2                  3, 4                              0.9                   0.57

3                  5, 6, 7                          1.4                   0.07

4                  8                                  0.5                   0.97

5                  9, 10, 11, 12                1.25                 0.22

6                  13, 14, 15                    1.15                 0.32

7                  16                                0.75                 0.72

Total                           7.05 min.         3.24 min.

Total Time Available = (# work stations)(Cycle Time) = N*CT = 7(1.47) = 10.29 min

Total Idle Time = N*CT – S t = 7(1.47) – 7.05 = 3.24 min.

Assembly Line Efficiency = S t/ (N*CT) = 7.05/(7*1.47) = 68.85%

Balance Delay = 1 – Assembly Line Efficiency = 1.0 – .6885 = .3115 or 31.15%

2.How many people are needed for outgoing wires using assembly line balancing methods versus the current staffing level of 11 full-time equivalent employees?

Therefore, by grouping work using assembly line balancing, you need 7 people, not 11 as currently assigned if you plan for average demand of 306 wires/day. Here, the annual labor savings is (4 employee)($30,000)(1.30) = $156,000. The question is whether the risk of going to 7 employees is worth it; given the necessity for control and the high cost of failure—going to 9 employees seems more reasonable.

Many other “what if” scenarios are possible and left to the discretion of the instructor. For example, you could ask what if we worked 20% faster or 20% slower and change standard task times accordingly?   The 20% faster standard times could be due to continuous improvement initiatives while the 20% slower stand times could be due to everyone ignoring the standards (which happen often).

Eliminating the 3 rework tasks is working smarter and taking non-value added tasks out of the process. Eliminating rework saves two or three full-time employees (FTE) depending on how much safety capacity you want in the process. Several “what if” line balancing solutions for outgoing wires are summarized below.

Process                        Cycle   No.           No.

Standard     Output     Time    Work-      Direct         Idle

Seven Scenarios                  Time/Wire   Rate*       (min)    Stations    People        Time

(1) Peak Demand              7.05 min          450      1.00     9                     9          1.95    

(2) +20% Inc. Std Times    8.46 min          450      1.00     12                    14        3.14

(3) -20% Dec. Std Times    5.67 min          450      1.00     7                      7          1.33

(4) Drop 3 Rework Steps 6.15 min          450      1.00     8                      8          1.85

(5) Average Demand                    7.05 min          306      1.47     7                      7          3.24

(6) Demand Inc. 50%                     7.05 min          457      0.98     10                    12        2.71

*An output rate of 450 wires per day assumes 7.5 hours/day times 60 minutes/hour. Hence, the cycle time is 1.0 minute/wire (Cycle Time = 1/Output Rate).

In the spirit of continuous improvement, a 20 percent decrease in standard times (that is total time = 5.67 min/wire) results in higher process efficiencies, better grouping of tasks, and requires only 7 people, not the current 11.

3.How many staff members do you need for the outgoing wire process if you eliminate all rework?

The next line balancing “what if” scenario assumes you eliminate the three rework areas. If this can be done, you need only 8 people instead of the original 9 people in the base case. These first four scenarios assume an output rate of 450 wires per day and a cycle time of one minute per wire.

A few of the conclusions from these analyses are as follows:

a)Either a 20 percent decrease in standard times or staffing to meet the average demand of 306 wires/day would require 7 associates for the outgoing wire process, not 11. This is a labor savings of $156,000 ($30,000*4*1.3).

b)A 20 percent increase in standard times has severe consequences, requiring 12 workstations and 14 associates, given that all other variables remain the same. In this scenario, cost per wire would increase dramatically. One lesson here is that standard times must be carefully managed and not allowed to drift upward.

c)Eliminating rework at three steps in the process would allow the reduction of one associate compared to the base case and a savings of $39,000. So rework does costs money and reduces efficiency!

4.What are your final recommendations?

The issue in the case is “how to handle high dollar wire customers?”   The case provides no data to help make this decision but does define the problem. At the time of the case, no real data existed to help make this decision. Preliminary initiatives to help analyze this issue include:

a)Do an ABC analysis on dollars per wire versus customer category. Who are the high-dollar wire A customers? These data will also help set a high dollar wire cut-off dollar value.

b)Do a well-designed Pareto cause and effect analysis on who causes what types of problems (other banks, the Bank USA departments, customers, Federal Reserve system, etc.).

c)Another related idea is to evaluate the advantages and disadvantages of sending high dollar wire customers a “confirmation” that once the wire is successfully completed, to enhance customer service and relieve customer anxiety.   For example, by sending the confirmation for wires over say $100,000, Cash Movement sets customers expectations. What if the high dollar wire customer now asks for this premium service on all wires they initiate?

High dollar wire volumes may be large enough to justify a separate dedicated high wire process.