1) How is Fruitvale branch doing and what are the causes of its problems?

The Fruitvale branch is doing bad on all parameters of performance right now.
The reported average turnaround time (TAT) of the Fruitvale branch of Manzana
for the latest quarter is 6 days which is way too longer than the average TAT of 2
days of its rival Golden Gate. This is an important factor in Fruitvales loss of
business since this is one differentiating factor in an otherwise closely
competitive insurance market with companies providing similar products and
services. If TAT is too long you lose your business since the agents prefer
switching to insurance companies with lesser TAT.
The profits of Manzana Fruitvale branch have started dwindling since the
takeover in 1989 (and its subsequent cost cutting measures) and of late the
Fruitvale branch has been making losses. From the exhibit 5 of the case it can be
seen that that the profit in the 4th quarter of 1989 was $1238 and the branch was
making a loss of $121 in the 2nd quarter of 1991, a sign of a huge drop in its
profitability.
Late renewals have been increasing since the first quarter of 1990 (225 in 1 st
quarter of 1990 to 468 in the 2nd quarter of 1991) and incidentally the number of
renewals lost have also increased in the same period (219 in the 1 st quarter of
1990 to 497 in the 2nd quarter of 1991). The reason is the companys policy of
not releasing the computer generated RERUNs to the DCs until the last date
before the due date. The increase in late renewals has led to a loss of business
since the agents usually expect the policy to be renewed before its expiry and
this has also been confounded by the stagnation in the number of new policies
being insured with Manzana.
There is a huge backlog of policies in the rating department due to inconsistent
policies being followed in the different departments especially the use of FIFO
with priorities on RUNs and RAPs.
There seems to be no uniform procedural code to be followed throughout the
branch since each department is doing the tasks according to its own
convenience.
From exhibit 7, UT1, UT2 and UT3 handled 23, 26 and 27 agents respectively. The
total number of policy requests handled by UT1, UT2 and UT3 are 1755, 1578,
1347 respectively. From this data it is evident that the workload is not even
between the underwriting teams with the number of agents handled and the
number of policy requests processed being different for different teams.
This also shows that the companys reorganisation of its operations on a
geographic basis has not led to improvement in its responsiveness to agents as it
was expected to be. Because of this the branch is facing operational
inefficiencies in different stages of its processes. Because of the above stated
reasons Manzana Fruitvale branch is losing its competitiveness in its territory to
Golden Gate.
2) Identify the problems in the way Manzana is calculating TAT in exhibit 3?
In the exhibit 3, TAT calculations are done by multiplying the 95% of standard
completion time (SCT) for each request with the average number of requests at
each desk. But this SCT usage in the calculations exaggerates the actual
expected TAT since this is a worst case scenario which indicates the maximum
turnaround time and not the average turnaround time which needs to be arrived
at. If we use the mean processing times from exhibit 4 in the TAT calculations, we
would be able to arrive at a TAT value which would be much lower than the
current reported TAT value. From our calculations we find the average TAT to be
4.7 days as against the 8.2 days as reported in exhibit 3 of the case.