Operations Management-II

Case – Megacard Corporation

Section E Group 8

Darshita Doshi (2012PGP106)

Naveen S (2012PGP219)
Partha Pratim Panda (2012PGP248) 
Srihari K V (2012PGP371)
Swati Bhargava (2012PGP394)
Yasarapu Vamsikrishna (2012PGP447)
 The Company – Megacard Corporation

• Business Travel Centers was one of their depts

• Had 20 BTCs spread throughout the US
• Offered airline, hotel and car reservations
• Received 10% commission from airlines
• Provided management information reports
and cost-control monitoring
• Front end operation consisted of six functions-
TC, Hotel Agents, Rate Agents, Ticketeers,
Messengers, Prepaid agents.
 Issues faced by Bill O’Brien
• Megacard is currently overstaffed for its operations. O’Brien feels it is
better to overstaff than to under serve.
• O’Brien is thinking about having a centralized system which essentially
means a single queue for the entire company. Currently they have
different queues for all the BTCs.
• If forecast was too high and level of staff larger than necessary, profits
would fall
• Forecast of incoming calls was very difficult to forecast
• If the forecast was too low and staff smaller than necessary, service
quality, and ultimately profits would slip
• Long waits on the line motivated callers who used more than one travel
agent to try elsewhere
• Quality and customer’s perception of quality were contrasting
• Quality of service as perceived by corporations included reduced travel
costs, monthly statements an reports
 Computations
• Taking 1 min. as hold-time and 5 min. As
average service time, we get 6 mins as average
time a customer spends in the system
• Assumptions : Total #working hours in a day
are 10, with a one-hour break
• Avg. Sales per call = $ 22,957
• TC Salary costs = 68% Total employment
expenses = 68% of 60% of BTC’s total expenses
 Comparison of Costs for two systems
Decentralized system
• Number of TCs required at a
BTC = (#Daily Calls*Avg time
per call)/Daily working hours
• Therefore, for Indianapolis BTC,
#TCs reqd. = (749*6)/(60*9) =
8.32 = 9
• Similarly for Kansas City, #TCs
reqd. = 5
• For Dallas, #TCs reqd. = 4
• Similar calculations can be
done for the rest 17 BTCs
assuming avg calls per sales
volume in dollars
Centralized system
• We can compute the number
of TCs required for the total
number of expected calls and
therefore the total costs, given
we have one queue for the
system.
• The number of TCs would be
less compared to the
decentralized system
BTC 1992 Expected Sales (000s) #Calls #TCs reqd Annual TC Salaries Total BTC Expenses
New York 31437 1370 16 $ 4,80,000.00 $ 9,34,943.51
Washington, D.C. 26048 1135 13 $ 3,90,000.00 $ 7,59,641.60
Atlanta 9880 431 5 $ 1,50,000.00 $ 2,92,169.85
Boston 5838 255 3 $ 90,000.00 $ 1,75,301.91
Kansas City 10779 470 6 $ 1,80,000.00 $ 3,50,603.82
Indianapolis 14552 634 8 $ 2,40,000.00 $ 4,67,471.76
Denver 2246 98 2 $ 60,000.00 $ 1,16,867.94
Boulder, CO 2426 106 2 $ 60,000.00 $ 1,16,867.94
Phoenix 4554 199 3 $ 90,000.00 $ 1,75,301.91
Dallas 8084 353 4 $ 1,20,000.00 $ 2,33,735.88
Philadelphia 19761 861 10 $ 3,00,000.00 $ 5,84,339.70
Baltimore 9880 431 5 $ 1,50,000.00 $ 2,92,169.85
Stamford, CT 0 0 0 $ - $ -
Newark 3862 169 2 $ 60,000.00 $ 1,16,867.94
Charlotte, CT 13203 576 7 $ 2,10,000.00 $ 4,09,037.79
Albany, NY 12484 544 7 $ 2,10,000.00 $ 4,09,037.79
San Francisco 35928 1565 18 $ 5,40,000.00 $ 10,51,811.45
Palo Alto, CA 3234 141 2 $ 60,000.00 $ 1,16,867.94
Oakland, CA 4491 196 3 $ 90,000.00 $ 1,75,301.91
Los Angeles 23354 1018 12 $ 3,60,000.00 $ 7,01,207.64

Decentralized system 242041 10552 128 $ 38,40,000.00 $ 74,79,548.11 Difference

Centralized System 242041 10552 118 $ 35,40,000.00 $ 68,95,208.41 $5,84,339.70
 Conclusion
• As we see from the computations, the company will
be able to do away with 10 TCs, saving approx. $0.5
mn with a centralized system. The operating
expenses have been considered as for a normal BTC
in this computation as well.
• Now, these savings are more than the annual
expenses and one-time setup costs required for the
centralized BTC which is $0.16 mn
• They will still be saving approx. $ 0.4 mn for the first
year and $0.5 mn per annum next year onwards.
• Hence, O’Brien should go for a centralized system.