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. Order Service Configuration 1 (Current System)

Customer’s
Operators
Phone Order

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

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

and the system. Besides that, the table demonstrated the total cost that was

incurred in meeting the calls.

Operators

Customer’s
Phone Order
 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 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

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

Operators
 7 days, 16 hours Service:
Arrival Rate= 62.5 calls per hour
Service Rate= 16.67 calls per hour
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.