Pamantasan ng Lungsod ng Pasig

One Call Away

Team E

Fundal, Jovelyn D.

Gabriel, Rosemarie C.

Gumban, Rheane Jade C.

Java, John Dave N.

Lazo, Mark Lester L.

Management Science Prof. Abelito T. Quiwa

BSA – 2A
I. Case Study Title

One Call Away

II. Story

Bob and Carol Packer operate a successful outdoor-wear store in

Vermont called Northwoods Backpackers. They stock mostly cold weather

outdoor items such as hiking and backpacking clothes, gear, and accessories.

They established an excellent reputation throughout New England for quality

products and service. Eventually, Bob and Carol noticed that more and more of

their sales were to customers who did not live in the immediate vicinity but were

calling in orders on the telephone. As a result, the Packers decided to distribute a

catalog and establish a phone-order service. The order department consisted of

five operators working 8 hours per day from 10:00 A.M. to 6:00 P.M., Monday

through Friday. For a few years the mail-order service was only moderately

successful; the Packers just about broke even on their investment. However,

during the holiday season of the third year of the catalog-order service, they were

overwhelmed with phone orders. Although they made a substantial profit, they

were concerned about the large number of lost sales they estimated they had

incurred. Based on information provided by the telephone company regarding

call volume and complaints from customers, the Packers estimated that they lost

sales of approximately $100,000. Also, they felt they had lost a substantial

number of old and potentially new customers because of the poor service of the

catalog order department.

 Prior to the next holiday season, the Packers explored several alternatives

for improving the catalog-order service. The current system includes the five

original operators with computer terminals who work 8-hour days, 5 days per

week. The Packers hired a consultant to study this system, and she reported that

the time for an operator to take a customer order is exponentially distributed, with

a mean of 3.6 minutes. Calls are expected to arrive at the telephone center

during the 6-week holiday season, according to a Poisson distribution, with a

mean rate of 175 calls per hour. When all operators are busy, callers are put on

hold, listening to music until an operator can answer. Waiting calls are answered

on a FIFO basis. Based on her experience with other catalog telephone-order

operations and data from Northwoods Backpackers, the consultant has

determined that if Northwoods Backpackers can reduce customer call-waiting

time to approximately 0.5 minute or less, the company will save $135,000 in lost

sales during the coming holiday season.

Therefore, the Packers have adopted this level of call service as their

goal. However, in addition to simply avoiding lost sales, the Packers believe it is

important to reduce waiting time in order to maintain their reputation for good

customer service. Thus, they would like for about 70% of their callers to receive

immediate service.

The Packers can maintain the same number of workstations and computer

terminals they currently have and increase their service to 16 hours per day with

two operator shifts running from 8:00 A.M. to midnight. The Packers believe

when customers become aware of their extended hours, the calls will spread out
uniformly, resulting in a new call average arrival rate of 87.5 calls per hour (still

Poisson distributed). This schedule change would cost Northwoods Backpackers

approximately $11,500 for the 6-week holiday season.

Another alternative for reducing customer waiting times is to offer

weekend service. However, the Packers believe that if they offer weekend

service, it must coincide with whatever service they offer during the week. In

other words, if they have phone-order service 8 hours per day during the week,

they must have the same service during the weekend; the same is true with 16-

hours-per-day service. They feel that if weekend hours differ from week-day

hours, it will confuse customers. If 8-hour service is offered 7 days per week, the

new call arrival rate will be reduced to 125 calls per hour, at a cost of $3,600. If

they offer 16-hour service, the mean call arrival rate will be reduced to 62.5 calls

per hour, at a cost of $7,200.

Still another possibility is to add more operator stations. Each station

includes a desk, an operator, a phone, and a computer terminal. An additional

station that is in operation 5 days per week, 8 hours per day, will cost $2,900 for

the holiday season. For a 16-hour day the cost per new station is $4,700. For 7-

day service the cost of an additional station for 8-hours-per-day service is

$3,800; for 16-hours-per-day service, the cost is $6,300.

The facility Northwoods Backpackers uses to house its operators can

accommodate a maximum of 10 stations. Additional operators in excess of 10

would require the Packers to lease, remodel, and wire a new facility, which is a

capital expenditure they do not want to undertake this holiday season.

III. Problem

Determine what order service configuration the Packers should use to

achieve their goals and explain your recommendation.

IV. Solution/Answer to the Problem

A. O

e Operators

ervice Configuration 1 (Current System)

According to the case, the current system of Northwood Backpackers which is

Customer’s
Phone Order
working 8 hours, 5 days per week with five operators is not feasible and

effective to serve the customers efficiently.

B. Order Service Configuration 2

The table below shows the average time and number taken in the queue

d
Operators

Customer’s
Phone Order
 the system. Besides that, the table demonstrated the total cost that was incurred

Arrival Rate= 125 calls per hour

Service Rate= 16.67 calls per hour
c= 10 Operators

Average Number in the System(L)= 8.42 Calls

Average Number in the Queue (Lq)= 0.918 Calls
Average Time in the System (W)= 4.04 Minutes
Average Time in the Queue (Wq)= 0.44 Minutes

Cost = $3,600 + ($3,800* extra operators) = $22,600

in meeting the calls.

In this service configuration, the manager of the business shows us that

they want to add their operators of 5 in 7 days operation of the business. The

business does not change its operating hours of 8 hours per day. The total cost

incurred in this configuration is $22,600.

C. Order Service Configuration 3

The table shows the average time and number taken in the queue and the

system. Besides that, the table demonstrated the total cost that as incurred in

meeting the calls.

Customer’s
Phone Order
 7 days, 16 hours Service:
Arrival Rate= 62.5 calls per hour
Service Rate= 16.67 calls per hour

Operators

5 days, 16 hours Service:

Arrival Rate= 87.5 calls per hour
Service Rate= 16.67 calls per hour
c= 8 Operators

Average Number in the System(L)= 5.64 Calls

Average Number in the Queuei (Lq)= 0.394 Calls
Average Time in the System (W)= 3.87 Minutes
Average Time in the Queue (Wq)= 0.27 Minutes

Cost = $11,500 + ($4,700* extra

operators)= 25,600

Additional operators and service hours are in this configuration. Compare

to the previous configuration, this configuration has a greater value of cost, but it

lessens the average waiting time of the customers of 38.64%. The increase in

cost is 13.27%. So, this configuration must have a proper decision, if the

company make the cost be an investment that will be able to serve the customer

well and that will lead them to more profits in the future.

D. Order Service Configuration 4.

The table shows the average time and number taken in the queue and the

system. Besides that, the table illustrated the total cost that was incurred in

meeting the calls.

Customer’s
Phone Order
 c= 6 Operators

Average Number in the System(L)= 4.13 Calls

Average Number in the Queue (Lq)= 0.379 Calls
Average Time in the System (W)= 3.96 Minutes
Average Time in the Queue (Wq)= 0.36 Minutes

Cost = $11500 + $7,200 + ($6,300* extra

operators) = $25,000

The service hours, days and even the operators have been changed or

increased in this configuration. It is hard to say that it is the best configuration

because even all the factors have been increased, the cost and the service to

the customer needs to take account. Even there is an increased in all factors

it doesn’t give more advantages to the previous configurations.

The company preferred to adopt the “customer order configuration

number 2” which is additional working days and operators but stay in 8 hours

operation. It will reduce the waiting time of the customers and it has the

lowest cost compare to the other alternative configurations.

V. Recommendation

There are recommendations we need to say for the company to developed and

improved their system. So, the first thing we recommend is for solving the queueing

problems like the outputs we need to be able for us to decide after we put the input

requirements. We recommend using “ExcelQM and QM for Windows” instead of

manually applying complex formulas in excel spreadsheets. In this case study they use

excel spreadsheets and manually input the formulas one by one. To be able for the
company to sustain its transaction we need to decide quickly and accurately to the

problem arise from a situation. This application can solve most management science

problems like linear programming, queueing problems, forecasting etc. It uses also by

many major businesses around the world like American Bank and L.L Bean.

As we can see in the picture, this application has a various function and only

limited to management science problems. It is easy and convenient to use, just click the

appropriate module of our problem and place the requirements needed, wait for a

second and we will give a solution to our problem and additional data that we need.

To show us how it will work, we will answer the fourth customer order

configuration using this application. This configuration gave us the input data that we

need. It is the arrival rate, service rate and operators of 62.5, 16.67 and 6 respectively.
 The first step is to determine what module is appropriate

to our problem. We use the Waiting Line Analysis or Queueing

Analysis.

The second step is to put the inputs

required by the application. We use Multi -

Server Waiting Line because we have more

than one operator.

The third step is to click enter or solve in the panel. After that we can see the

solution to our problem. We can also see some converted measurements that we need.

We agreed that Queueing Analysis Method is used in solving their problem

because in fact, some companies use this method to better serve its customer like L.L
Bean and Lands’ End which is also use catalog phone order system. One of the key

factors in maintaining a successful catalog phone order system is to provide prompt

service; if customers have to wait too long before talking to a customer service

representative, they may hang up and not call back. Catalog companies such as

L.L.Bean and Lands’ End often use queuing analysis to make a number of decisions

related to order processing, including the number of telephone trunk lines and customer

service representatives they need during various hours of the day and days of the year,

the amount of computing capacity they need to handle call volume, the number of

workstations and the amount of equipment needed, and the number of full-time and

part-time customer service representatives to hire and train.

Our next recommendation is using internet as a medium of transaction. Other

than providing a hotline number for call orders, the Northwood backpackers can also

operate through e-mails. Wherein the customers can send the orders they choose on

the catalog to the company’s email which eliminate (or if not minimize) the waiting time

in the call line of the operator. There should be assigned personnel to check the emails

for the orders and reply to the customer when will be the product delivered, an

immediate response will be appreciated, and a satisfied customer will surely become a

regular customer.

To make use of the technological innovations at this generation and to maximize

the profit of the Northwood Backpackers, they can also introduce an automated system.

This automated system will be in the form of website and application which is very easy

to access by anyone that may be a potential customer, the website can be searched in

the search engine of browser provided by devices used and the applications can be
easily found in google play store and is free to install in any devices. In this website or

application the customer can see the variety of products that is offered by the business,

it will be viewed with pictures, description as to what materials are used in the

production of that certain product, the prices and of course the comments and ratings of

the other satisfied customers. Another edge of this automated system is that it can also

offer orders and deliveries for the customers. The procedure can be: first, the

customers can search or download the applications to their smartphones, second is to

browse into the products offered and if they see something into their liking they can add

it to their cart and last is to order the product chosen, for that they have to give their

address for the successful delivery of the product. In this way, the customer can buy a

product easily without a hassle like going to the store and waiting in line to pay, or order

in a call where an operator may be busy so there’s also a waiting time. These reasons

are the one responsible for the walking out or backing out of old and potential

customers in ordering a merchandise that results to a loss on sale in the business.

Based on the results given in this case study, we are also agreed to the choice of

the company which is to adopt the second configuration because it gives a lower cost

compared to other configurations. Their business is very active only if there is a holiday

season, so the company based on our perspective, don’t need or required a system that

incurred more cost even it decreased the waiting time of the customer effectively. As

what we said earlier, the company may also think that additional cost as an investment

in improving the relationship between the business to the customer. We need to

consider the future situation of the company before deciding or changing the system of

the company. One mistake can destroy the business so we must be intelligent and
clever in terms of decision making. In addition, having five additional administrators

would raise a group environment that could help confidence. Having a group

environment makes the potential for representatives to cooperate towards an objective

of giving a superior client benefit contribution. With a group of ten, working eight hours

for every day, seven days expands assurance and contributes to profitability. Having

exhausted representatives can be adverse the advance that the Northwood

Backpackers Company has made. In addition, having a second move will make the

company acquire some of additional costs. Using the least cost option will give the

company the most obvious opportunity for progress during the upcoming holiday

season.