Operations Management of Colonial Saving Bank - Case Study Example

Name: Institution: Title: Operations Management Tutor: Course : Date: Table of Contents Title: Operations Management 1 Table of Contents 2 Introduction 4 The current refinancing process of the Colonial Savings Bank 4 Problems caused by the refinancing process 6 Use of service profit chain to redesign the refinanacing process 10 Use of service blueprinting to redesign the refinancing process 11 Conclusion 13 Bibliography 14 Executive summary With continued growth of miming sector in Central Queensland, Colonial Savings Bank of Queensland had experienced strong growth in every area of its business. Refinancing of home loans was one are that appeared to be booming because current and prospective customers were looking for more refinancing loans, with refinancing applications being received in high numbers. In order to be able to handle the increased number of customers, Colonial Savings bank created a new loans approval process, with the process divided into five distinct stages and departments being created for each stage. The new process had several problems because the numbers of refinancing requests were so many and the operations management did not effectively manage the process which resulted to customer dissatisfaction. Since customer satisfaction is a priority in a service organization, the report looks at how operations management of the Colonial savings bank can redesign current refinancing process by use of service profit chain and service blueprinting to ensure quality service delivery. Introduction Operations management is a kind of management that is concerned with overseeing, redesigning and designing business operations in the production of services or goods. It is the function of managing the operating core of a company, which are the activities associated with production, creation, delivery and distribution of the company’s services and goods. Operations management focuses on the efficient management the resources and activities that deliver or produce the services and goods of any business. Operations management professionals manage the materials, people, information and equipment resources that an organization requires to produce and deliver its service. The current refinancing process of the Colonial Savings Bank A blueprint displays the service process and has details of a service from the organization’s and customer perspective. The blueprint of the Colonial Savings Bank of Queensland refinancing process consists of procedures that are taken by the customers and the organization in the loans approval process. The Colonial Savings bank Blueprint has broken down the loan refinancing process into five stages which include loan application, loan processing, loan closing, new account establishment and loan payment set up and the tasks involved in each step and the people responsible for their execution. The activities that bring together service delivery and customer satisfaction and experience in a service blueprint are divided into customer actions, backstage or invisible contact employee actions, onstage or visible contact employee actions, physical evidence and support systems. Customer actions entail all steps that a customer undertakes as part of service delivery process. Visible contact employee actions are actions of frontline contact workers that take place as part of a face to face encounter with the customers. In this case, onstage activities entail the discussion held between the loan agent and the customer on the refinancing option. Support processes are all actions undertaken by individuals in an organization who aren’t contact staff but whose actions are vital to carrying out of the service processes. Invisible contact employee actions are non-visible interfaces with clients, like telephone calls and other actions that employees undertake so as to prepare to serve clients or that are a portion of their roles and responsibilities. In this case study, backstage activities entail loan processing, property appraisal, loan agent advice and the telephones made by the bank as well as the customer. Physical evidence represents all tangibles that clients are exposed to or collect during their contact with an organization. In the colonial savings bank case, physical evidence entails the loan forms that are handled by or represented to different individuals such as the loan agents, the loan specialists, the customer or the customer’s lawyer (Shostack, 2002). The colonial Savings Bank of Queensland designed the current refinancing process service in this manner because there was increased growth of mining sector and the bank had experienced an increased growth in every area of its business. There was booming business in refinancing of home loans and there was high demand for more loans as current and prospective customers were looking for more economical loans and there were larger number of people applying for refinancing of home loans. In order to be able to be able to tackle the increased demand , the bank created the new loans approval procedure with the procedure divided into five distinct steps and departments being created for every stage to ensure customers were quickly served and give the bank a greater market share and increased profits. Problems caused by the refinancing process There were several problems with the process because it was not easy to evaluate the failure or success of the process, because there were large numbers of refinancing requests from customers than before. The process did not effectively identify the needs and experience of the customers until the management received comments that revealed customer experience with the bank’s refinancing process. Operations management in a service organization such as the Colonial Savings bank of Queensland is very vital the operations manager is supposed to control all levels of the service delivery process to ensure all people involved in the service development and delivery effectively performs their tasks and deliver timely service to their customers (Haksever, 2000). In order to attain improvements, every employee in the organization needs to be included. One of basic principles of operation management is the aspect of continuous improvement. James (2008) states that through making sequence of incremental advances, the business is likely to experience main increases to quality and reductions in cost. The refinancing process of the Colonial Savings bank did not have any advancement in improving its services and the customer refinanced with it because it had previously held the original loan with the aim of saving money and time. This happened because the current service blue print did not consider its previous customers and their needs which made them to prolong the refinancing process and skip some steps in the loan refinancing process and adding additional costs on the customer. The customer did not save any time and costs because it took the bank two months longer to process the loan than the other bank would have taken and the money the customer had saved on the closing costs was highly consumed by the higher mortgage payments of the extra month. The customer claims that he got a call from someone from the bank claiming that the mortgage payment of the customer was overdue and wondered how it could be overdue when the bank automatically drew it form the customer’s cheque account. The bank was supposed to call the customer but was required to make deduction for payment of mortgage from the customer’s account. The customer had to personally go to the bank to tale lawyer’s papers to be signed. On arrival to the bank, the customer is informed that the closing agent wound not get his file until the morning of the scheduled closing date and there was a possibility of the closing date being postponed. The customer had also to take a half day off from his work to attend to the closing date and rescheduling was not convenient for him. The loan agent should have directly dealt with the lawyer to prevent inclusion of the customer in the whole process when the customer had other businesses to attend to. In addition, the person who had the responsibility of signing lawyer’s paper was supposed to be present and attend to his duties to avoid rescheduling of the closing date which was inconvenient to the customer. If the operations manager had identified major services that emerge in course of the day and organize the concerned individuals in all departments, the customer would have been attended with and rescheduling avoided (Shostack, 2003). The operations manager of the Colonial Savings Bank did not ensure timely approval of the loan, making the appraisal report, credit report and termite inspection report to expire. The customer did not know who to call, since there were a lot on people working on his file. The manager did not also interact with the concerned departments and customer was not able to know which department to call for enquiries. According to Shostack, (2004), the operations manager is charged with the role of managing daily operations and make sure that organization is capable of running its day by day operations with no any barriers. This is essential because there are a lot of issues emerging in every workflow daily. The refinancing process of the Colonial Savings Bank was not successful because the operations manager did not monitor daily operations with the organization. The customer personally drove to the office to deliver lawyer’s paper with the hope of returning with the bank’s signature and things added to closing packet. However, the loan specialist informed the customer that the closing agent could not sign the papers until the day scheduled for closing. The customer received a loan specialist, along with a stack of forms for the customer to fill indicating how he want to set up the mortgage payments but the customer had signed them at closing and wondered if the loan specialists does not read their work. The customer was also worried that if he completed the forms for the second time, the bank was going to withdraw the payment from his account twice. According to Slack, & Johnston, (2001), there are several issues that an operations manager is needed to take into considerations to ensure successful delivery of a service. Thus, the bank manager was required to make sure that delivery of services on time and meets time commitment and also interact will the concerned departments to make sure that services meet quality criteria as agreed with the client. It is also the role of operations manager to attain feedback from the customer about the services delivered and communicate the feedback to the specific departments. Use of service profit chain to redesign the refinanacing process The top management of the Colonial savings Bank which is a service organization must spend little time focusing on market share and setting profits goals and rather understand that in the novel economies of service, frontline employees and customers require to be at the of management concern. Satisfied customers drive profitability on service organizations and in order to maintain profitability of the business, the manager is supposed to manage the service profit chain, which is all the links in the operation that influence customer satisfaction (Murdick, 2005). The service-profit chain functions by facilitating internal service quality through equipping workers with power and skills to serve customers, which in turn increases employee satisfaction and fuels employee productivity and loyalty. Therefore the bank should ensure that every step undertaken in the loan refinancing process should consider customer’s need and move toward organizational goal of handling the huge figures of people applying for the home loans. Jones, & Sasser, (2008) argue that all procedures in the loan process should be intended to add value to the service being offered to customer and minimize additional costs for the bank as well as for the customer. Employee productivity and loyalty enhances external service value which raises customer loyalty and satisfaction. The refinancing process can be improved if the organization nurtures, guides and empowers its employees who play a crucial role in enhancing customer satisfaction and gains that ensue from it. By understanding what motivates employees, the bank operations manager will be able to deal with them to attain extraordinary results (Jones, & Earl, 20006). According to James & Leonard (2000), creation of a work atmosphere that encourages quick response to the needs of customers and making a follow up on customer experience and satisfaction is the way to leverage the benefit of service profit chain. In the service process of the Colonial Savings Bank, the customer should be centered, so that customer satisfaction is enhanced. The operations management must view the whole organization and the whole service process and try to minimize actions that results to delays in the loan process and consequently result to customer dissatisfaction. Merging of overlapping activities is essential as this will save time, costs and lead to customer satisfaction and increased organizational profitability. Employees must be empowered to make decisions, and motivate to resolve problems in the loan approval process. Customer satisfaction data should be collected and information relayed to the people responsible for value creation, and a system that rewards individuals for creating and maintaining customer relationships (Johnston, 2008). Use of service blueprinting to redesign the refinancing process The Colonial Savings Bank can use service blueprinting to redesign the loan approval process to improve customer satisfaction. In the current blue print, there are several interactions between the concerned individuals which takes a lot of time and result to customer dissatisfaction. In the new blueprint these interaction should be reduced and when a customer applies for loan, credit check property appraisal then loan processing must follow since these are the most vital steps in the process. This will enable the customer to be notified if the loan application was approved or not as soon as possible (Morgan, & Bither, 2008). When redesigning the refinancing service process, the Colonial Savings bank is supposed to undertake an operations analysis. An operation analysis refers to a structured study that identifies every task to be undertaken and the flow of materials and people via the system and evaluates the flows and tasks to determine ways through which the process may be improved and simplified to meet the needs of the customers (Meyer, & Schwager, 2007). A time frame should be established and standards set against which execution of the numerous steps may be measured. Analysis of profitability of the service delivered, in terms of number of consumers served during duration of time is essential. In the new blue print the process of completion of loan form by the customer, loan approval and disbursement of the loan should be done quickly to enhance quick feedback for the customer. In the new blue print, the low and high contact parts of service delivery processes should be maintained detached, but stay connected by communications. According to Shostack, (2002) this will enable the different departments involved in the refinancing process to communicate with each other and establish how the process is progressing. It will also offer managers the chance to recognize latent points of failure and design foolproof processes to prevent their occurrences, therefore ensuring delivery of quality service. The loan processing should include the portion of layer termite inspection so as to cut down on time consumption and to offer the customer the ruling of failure or success of loan application. After lawyer’s verification, the lawyer is supposed to hold discussions with loan agent on how the loan will be deposited in customer’s account and also with the loan specialist on how the mortgage repayments will be made. Conclusion Operations management is an important aspect that Colonial saving bank must endorse to ensure quality service process, service delivery and customer satisfaction. Since the current refinancing service process is not effective and customer satisfaction is not achieved, the bank should create a new service blue print that will enable it to analyze the service process and design a quality service that will ensure employee commitment and customer satisfaction. Since a service blueprint that will enable the organization to identify innovative opportunities, activities that are resulting to dissatisfaction of customers and new opportunities for promoting the quality of the refinancing service. The top management should also focus more on the frontline employees and customers and manage all operations involved in the service process, to ensure customer satisfaction and the overall growth and profitability of the organization. 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