2012 - SecB Group3 Assignment2

Managing Service Operations

Central Bank of India, Gulbai Tekra Branch

Instructor: Prof. Chetan Soman

Academic Associate: Mr. Sathish L M

Operations Management I (2012)

Group Assignment 2

December 13, 2012

Section - B, Group - 3

Aditi Sholapurkar

Aditya Kumar M.

Ankit Bhageria

Inshul Sahni

Vignesh Mani

Yatin Kamat

INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD

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Introduction

This report aims to analyse the service model of Central Bank of India, a retail bank and

provides an insight into the daily operations at a representative branch (Gulbai Tekra),

primarily from operations management perspective.

The report is based on primary data, observations of group members availing loan facilities

at the branch and from online resources available about Central Bank of India. Though the

branch offered multiple services, we have restricted the report to primary operations

Teller services, Loans and Locker operations.

A bank is a fitting example of service sector operations and represents most of the salient

features of a service delivery model. All the typical characteristics of a service firm -

customer management, waiting models and process optimization can be well observed at a

bank. This served as the motivation for the group to analyze Central Bank of India, which is

not only one of the largest and oldest commercial banks in India but also provided easy

access due to prior relations of group members as account holders.

We are thankful to Mr. Prakash Chandra Jain, manager of the Gulbai Tekra Branch and Mr.

Sanjay, loan officer for providing us valuable information for this project.

Service Classification

Service Process Matrix1

Degree of interaction & customization

Low High

De

gre

e o

f la

bo

r

inte

nsi

ty Lo

w

Teller services

Hig

h

Locker services

Cash

withdrawal/deposit

Loans

1 CS-Intro-to-Service Operations Management, Prof. Chetan Soman, IIM Ahmedabad

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Strategic Service Classification (Nature of Demand and Capacity)

Demand Fluctuation

Low High

Fre

qu

en

cy o

f d

em

an

d

ex

cee

din

g c

ap

aci

ty

Ra

rely

Loans

Teller services

Cash

transactions

Locker services

Re

gu

larl

y

Strategic Service Classification (Customization and judgment)

Degree of customization

High Low

Ex

ten

t to

wh

ich

pe

rso

nn

el

ex

erc

ise

ju

dg

me

nt

in s

erv

icin

g

cust

om

er H

igh

Loans Locker services

Teller services

Low

Cash

withdrawal /

deposit

Strategic Service Classification (Relationship with customers)

Type of relationship with

customer

Member Informal

Na

ture

of

serv

ice

de

liv

ery

Co

nti

nu

ou

s

Locker services

Teller services

Cash

transactions

Dis

cre

te

Loans

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System Description

The Gulbai Tekra branch of Central Bank of India is located in a commercial building housing

various other corporate offices. The presence of the bank right at the entrance of the tower

and prominent signage allow easy recognition of the location. However, the branch does

not have an ATM facility, which is one of the important aspects of banking services in

modern times.2

Fig. 1 Front entrance of Central Bank of India, Gulbai Tekra

2 All pictures have been taken and reproduced with the permission of the Branch manager

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Fig. 2 Branch Layout

As seen above, the waiting area seems inadequate and its presence in front of teller counter

leads to crowding of the space immediately following the entrance. Also, the area housing

forms is obstructed by waiting area and hence, causes issues.

Recent Developments

Changing Customer Profile With the increase in number and effectiveness of

Internet Banking services offered by Central Bank of India, the number of customers

visiting the branch has reduced over the past few years. Also, more youth and young

professionals have been attracted to the branch due to the locational ease coupled

WA

ITIN

G A

RE

A

SECURITY GUARD

TE

LLE

R

LOAN OFFICER

BRANCH

MANAGERS

OFFICE

ACCOUNTS OFFICER

TO LOCKER

FACILITY

CASH COUNTERS

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with facilities like electronic transfer. Regular physical visitors are elderly and people

seeking loan from Central Bank of India

Electronic Banking services The bank has been increasing its presence in the ITES

space by providing electronic funds transfer facilities and online bill payment. This

has reduced the operational load and cut down on queuing up of customers during

peak periods by cutting down on the number of requests for DDs and cheque

deposits.

Service Package

The Gulbai Tekra branch of Central Bank of India services approximately 6000 customers per

month and is a pretty well-known branch in the locality. The branch manager is assisted by 1

loan officer, 1 accounts officer, 1 teller, 1 cashier and support staff (peons / clerks). The

branch manager indicated that the branch will soon shift to a new location which also

houses an ATM facility. The branch offers various services including teller services, loan

facility, cash transactions, locker services etc. Customer profile varies from individuals

opening savings account to small corporates with current accounts.

The number of employees in the branch is low due to the moderate size of customer base.

Customers are centrally employed and trained and put into speciality roles (Teller, loan

officer, accounts officer etc.) in various branches. There is no provision of scaling up the

employee base during peak seasons like festivals or when educational institutes invite

admissions (leading to increased demand for loans).

Characteristics of service package:

Supporting facility As seen in figure 2, the bank branch houses all important

functions within one facility. Though there is crowding during peak hours, balking

usually doesnt happen. Waiting area has been provided for customers; however it is

not very comfortable. The branch is electronically connected to the central network

and employs latest IT systems.

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Explicit services The bank provides various readily observable services like locker

service. In a retail bank, the service package has an integrated characteristic and

customers usually do not change loyalty because the service package lacks in one or

more services as long as the bank offers the commonly demanded services. This also

means that bank can gain on some services while lose on others.

Implicit services A retail bank needs to have friendly staff and offer adequate

security owing to the nature of service. It was observed that employees at CBIs

Gulbai Tekra branch are very cooperative and supportive in helping customers with

their banking needs.

Information There is huge amount of information with a bank in terms of

employee demographics, financial records and this needs to be processed at fast

pace both in real-time as well as in background to ensure smooth operation. CBI

offers a lot of information on its website to enable customers to quicken the process.

Organizational Vision

Corporate vision3

To emerge as a strong, vibrant and pro-active Bank/Financial Super Market and to

positively contribute to the emerging needs of the economy through consistent

harmonization of human, financial and technological resources and effective risk control

systems.

Salient Features of Corporate Mission

To transform the customer banking experience into a fruitful and enjoyable one.

To leverage technology for efficient and effective delivery of all banking services.

To have bouquet of product and services tailor-made to meet customers aspirations.

3 https://www.centralbankofindia.co.in/site/MainSite.aspx?status=2&menu_id=148

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From the banks corporate vision and mission statement, it can be inferred that the bank

realizes the importance of customers and utilizes social models and technology to tailor

services to customer needs and to provide an enjoyable experience.

Skills and Attitude of Service Personnel

Friendly nature A bank officer / teller needs to be attentive, responsive and

friendly in his demeanour. Often, the customer might come across as unfriendly and

rude, but the service personnel need to be patient, show appreciation to the issue

and effectively assist the customer to his banking needs. As a famous quote goes, It

never fails to amazes me how the most simple gestures, such as a smile, hand-shake

or a kind word, can change or brighten up someone elses world.4

Communication Skills In a state like Gujarat, where there is diversity in terms of

Gujarati, Hindi and English speaking people, the bank personnel need to be

multilingual so as to effectively communicate with customers, colleagues and other

stakeholders. In addition, a bank officers appearance, articulation (to explain

banking procedures in simple terms) and the ability to prevent inundation of

technical banking jargon to customer can improve the communication

effectiveness.5

Relationship building By engaging a customer through friendly talk, a bank

manager or officer can develop a long term relationship with the customer. This

establishes trust and builds customer confidence in services and solutions offered by

the bank. This helps in customer retention and increasing customer base through

word of mouth publicity.6

Solution Oriented The service personnel should be thorough with the products

and services of the bank so that he can effectively assist the customers with their

4http://www.searchquotes.com/quotation/It_never_fails_to_amazes_me_how_the_most_simple_gestures%2

C_such_as_a_smile%2C_hand-shake_or_a_kind_word/413240/ 5 http://www.ehow.com/way_5766818_customer-service-skills-bank-employees.html

6 http://work.chron.com/customer-service-skills-bank-employees-6700.html

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needs. Regular training programs and working with managers to keep oneself up to

date can arm a service personnel with an arsenal of information.

Customer Demand and Alteration

The bank typically operates from 10:30 AM to 3:30 PM and employees observe a half hour

lunch break between 1:30 PM and 2:00 PM. On an average, 60-70 customers visit the

branch every day with customer aggregation happening between 10:30 AM to 1:30 PM.

Demand surges significantly near lunch hours as customers are free from work and business

customers typically visit the branch at this time. The following diagram shows the average

customer build-up.

Fig. 3 Customer buildup (Inventory) diagram

As specified above, the profile of customers physically visiting the branch is changing due to

arrival of internet banking services. However, elderly are skeptical in utilizing these services

and they require greater attention and engagement from service personnel leading to

increased service times.

Even with considerable utilization of technology and ITES, influencing demand remains a

challenge for the bank. To reduce operational workload at the branch, the bank can provide

0

2

4

6

8

10

12

10.00 11.00 12.00 13.00 14.00 15.00 16.00

Cu

sto

me

r B

uil

du

p

Time (In 24 hour duration)

Customer Buildup Diagram

Customer arrival at 10/hr

Service at 20/hrCustomer arrival at 20/hr

Service at 15/hr

LunchCustomer arrival at 10/hr

Service at 15/hr

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lower service rates to online customers. For e.g. a customer requesting for funds transfer at

the branch will be charged much more than a NEFT transaction. This will lead to self-service.

Also, by scheduling appointments for services like loans and locker services, the bank can

reduce waiting times.

Delivery System Analysis

Teller Transactions

The bank has one teller for cash requests, preparing financial instruments like DD,

Bank draft and pass book update. The average number of customers availing teller

services per day is 60.

The average processing time is 4 minutes leading to 15 customers being served per

hour. From customer buildup diagram, it can be inferred that there is a waiting

capacity of 10 customers (balking doesnt happen till then).

Queuing Model = M / M / 1 / 10 / / FCFS

Appendix A provides average queue length and waiting time for cash transactions.

Fig. 4 Process flow diagram for cash transactions

Customer fills

deposit or

withdrawal form

Queue Teller verifies details

Cash counter queue Customer receives /

deposits cash

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Fig. 5 Process flow diagram for cheque processing

Locker Transactions

A customer is accompanied to locker area by bank employee and there is one server

On an average, the bank sees 4 customers per hour for locker transactions and they

spend 20 minutes in the locker area leading to a service rate of 3 customers per hour

Locker customers have to wait in same queue as other customers

Queuing Model = M / M / 1 / 10 / / FCFS

Fig. 6 Process flow diagram for locker transactions

Customer fills

cheque deposit

form

Queue Teller verifies cheque details

Local / Outstation clearing

Cheque returned

Money credited to beneficiary

Verification Locker queue

Customer uses Locker

Customer leaves

Officer accompanies

customer

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Loan transactions

Loan is a high-engagement service and is handled by a loans officer and branch

manager. There is significant due diligence involved in verifying the customer details

leading to an average service time of 3 to 15 days depending on nature of the loan.

On an average the bank sees 15 loan customers per month which amounts to an

arrival rate of 0.5 customers / day

Queuing Model = M / M / 1 / / / FCFS (No queue for loan customers)

Fig. 7 Process flow diagram for loan transactions

Promotion of self-service / technology

The following measures can be adopted to encourage use of technology and self-service:

Lower fees on online service as compared to similar services being offered physically

within the branch. E.g. Customers of Deutsche Bank can apply for a demand draft

free of cost through Internet Banking which is delivered to their mailing address. By

charging the in-branch customers for the same, customers can be encouraged to use

Internet banking services

Customer completes

loan application Background check

Loan processing

queue

Loan sanction Money credited

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Cheque drop box facility is not available in all branches of the bank. Thus, elder

citizens and business customers utilize teller time to deposit cheques, which comes

at a premium (waiting). By installing drop-boxes within the branch / ATM locations,

bank can promote self-service.

The bank can provide simplified video tutorials on its website to promote the use of

technology so that all kinds of customers can equally utilize Internet / Phone banking

services.

There is still a significant number of customers requesting for withdrawals through

the cash counters instead of utilizing the ATMs. This either happens due to

unavailability of ATMs, cash run-out in ATM or security concerns. By addressing

these issues, the bank can reduce workload on one service.

Evaluation Parameters

Average service time for teller services Provides insight into the competence of

personnel and optimality of personnel numbers

Average loan processing time Provides insight into the service provided to high-

engagement customers

Customer buildup Shows the ability of the bank to handle peak demands and

prevention of balking

Percentage of customers opting for Internet Banking services Provides insight into

the confidence of customers on reliability and safety of technology

Employee retention Provides information about employee satisfaction, employee

workload which translates into better customer service

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Recommendations

Absence of ATM ATM is one of the prime ways of reducing human workload by

allowing self-service for basic banking operations. The absence of ATM facility at

Gulbai Tekra branch prevents such reduction. A new ATM should be installed either

within the bank premises or in a nearby area.

Promotion of online services As indicated above, by providing lower service

charges on online transaction, the bank can promote self-service and utilize

technology to reduce wait times at the bank.

Space utilization - The space between teller window and seating area is limited (As

seen in figure 2). By using chairs instead of couches or by removing the seating area

altogether, crowding of the teller area due to queue formation can be prevented.

However, there is a trade-off on the comfort of waiting customers. The manager has

indicated that the new facility will have better waiting area and space utilization.

Loan transactions The average processing time of loan transactions is very high.

This is primarily because of the due diligence process. By outsourcing this process or

utilizing shared credit history, loan processing time can be cut down.

Locker services Usually banks do not make a lot of money or lose money on locker

services. The high wait times lead to customer dissatisfaction. By employing

scheduled appointments (through internet / phone), waiting times can be nullified

leading to better utilization

Cheque drop box facility This model has been successfully used by private banks

like ICICI and HDFC. By providing drop box services at convenient locations, cheque

transactions at the bank can be processed faster as customers do not have to wait in

line for teller to get free.

Visibility of forms Commonly used forms like deposit, withdrawal, demand draft

requisition etc. should be readily stacked and should be kept in a corner along with a

writing space in the form of a mounted table.

Customer service training The bank should regularly organize customer service

and technology trainings for the bank employees in order to keep them up to date as

well as build soft skills in better servicing bank customers.

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Quick Scan Audit

Service concept

1. What are the various services offered by the branch?

2. What is the average time to provide each of these services?

3. What are the various stages in provision of each of these services?

4. Are there any facilities offered by the competing banks / branches that are not

available at your branch?

5. Are there any services which bring significantly higher revenues/profits than others?

6. What is the number of bank employees providing each of these services?

7. Are there any new services in the offing or plans to automate operations?

8. Are there any services which do not require physical presence of customers or

intervention of bank personnel and lead to self-service?

Customer profile and requirements

9. What is the typical distribution of customers across various services on an average

day?

10. What are the average waiting time / number of customers waiting to avail each kind

of service?

11. What is the demographic and economic profile of customers visiting the bank?

12. What kind of amenities, seating facilities are available to customers waiting to be

services?

Operating conditions

13. What are the operating timings of the branch?

14. Are there any peak hours when the customer arrival is extraordinarily high?

15. Does the bank offer services when customers would probably be free weekend /

lunch hours?

Internal Processes

16. What is the feedback mechanism employed by the bank for customers to bring

forward their complaints and suggestions?

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17. Does the bank identify high value customers and provide differentiated services?

18. What is the banks strategy to build up customer base?

Service Personnel

19. How many employees does the branch employ?

20. What is the cost of employing different kind of personnel?

21. What is the organizational structure?

22. What are the various incentive schemes for the employees?

23. Has there been any change in number of employees in the past few years?

24. Does the bank organize training program for the employees to keep them up to date

in customer service and banking skills?

25. Does the bank employ latest technological facilities as per the industry norms?

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APPENDIX A Queuing Model Analysis

Teller transactions

Average number of customers waiting (Nq) = 2.329

Average balking = 0.221 per hour

Average waiting time (Tq) = 0.2

Locker transactions

Average number of customers waiting (Nq) = 7.403

Average balking = 1.03 per hour

Average waiting time (Tq) = 2.495

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APPENDIX B Inside view of the bank

* Even though the picture above shows presence of two computer terminals in the teller

area, the bank manager indicated in an interview that on an average, one teller operates.