Question

Urbo Underwriting offers customized loans. Customers call a toll-free number with a specific loan request, and typically obtain a response the same day. Turbo Underwriting’s business process includes six activities which must be conducted in the sequence described below. (The time required for each activity is shown in parenthesis).

Activity 1: Answer customer call and record key information. (4 minutes/loan application),

Activity 2: Gather and format the information (obtain credit scores, organize customer specific needs) for analysis (5 minutes / loan application),

Activity 3: Analyze the information: Check the credit worthiness and decide loan amount and APR to offer. (7 minutes/loan application),

Activity 4: Collect social media information about the customer and feed this information into a proprietary machine learning system (4 minutes / loan application)

Activity 5: Perform final checks on loan offer (2 minutes / loan application),

Activity 6: Call customer back with the new loan offer and close or inform about the rejection decision. (5 minutes / loan application).

All six activities need to be carried out, independent of the customer’s loan application being accepted or not. The whole process is conducted by four associates.

Associate 1 performs activity 1 and 2

Associate 2 performs activity 3

Associate 3 performs activity 4 and 5

Associate 4 performs activity 6

Each associate is paid $50 per hour. You can assume that there exists unlimited demand and that loans are only entering the process at the rate of the bottleneck.

What is the process capacity in loans per minute?
What is the bottleneck resource (please enter the associate number)?

What is the Direct Labor Content (in minutes) of a loan? (Number only)
What is the average labor utilization?
How much time (in minutes) does it take to handle 20 loan requests starting from an empty system?

Answer 1

The bottleneck in Turbo Underwriting's loan process is Associate 2, who performs Activity 3, resulting in a process capacity of 0.143 loans per minute. The Direct Labor Content for one loan is 27 minutes, and it would take 140 minutes to handle 20 loan requests from an empty system.

Step-by-step explanation:

The process capacity can be determined by identifying the bottleneck, which is the step in the process that has the longest duration and therefore limits the rate at which the process can output completed loan applications. By examining the time taken for each associate to complete their respective activities, we can calculate the process capacity and identify the bottleneck resource. In this scenario, the activities with the longest time are Activity 2 and Activity 3. Since an associate only performs one of these activities, we must determine which has the higher workload for the process capacity calculation.

Associate 2, who performs Activity 3 alone, is the rate-determining step because this activity takes the longest at 7 minutes per loan application. Thus, the bottleneck resource is Associate 2. The process capacity is therefore the inverse of the bottleneck activity time, which is 1 loan every 7 minutes, or approximately 0.143 loans per minute.

The Direct Labor Content is the sum of the time required for all activities to process one loan, which is 4+5+7+4+2+5 = 27 minutes per loan. To determine the average labor utilization, we would need more information regarding the number of loans handled over a specific period.

Since the process operates at the rate of the bottleneck, and there are 20 loan requests, it would take Associate 2 a total of 7 minutes × 20, equal to 140 minutes to handle 20 loan requests starting from an empty system.