report manzana renz

MSc17

Group 23Bertels, Margot

Koppes, Roel

Lierop, van Joris

Nikitina, Nataliya

Sietsma, Renz

MSc 17

Nyenrode Business University

Operations Management Case1:Manzana Insurance

Operations ManagementCase 1: Manzana Insurance

Table of contence

Preface..................................................................................................................................................2

Introduction...........................................................................................................................................3

Questions..............................................................................................................................................3

Answers.................................................................................................................................................4

Abbreviations........................................................................................................................................7

Literature...............................................................................................................................................7

Appendix A: Current Flowchart.............................................................................................................8

Appendix B: Proposed Flowchart...........................................................................................................9

Group 23MSc17

1 Nyenrode Business University


PrefaceThis is the case report of the Manzana Insurance case, which is made by group 23 for the course Operational Management at the Business University Nyenrode.

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IntroductionThe case is about the Manzana insurance firm who is suffering a setback in profit and is given a hard time by its competition. For the business group it is to discuss which actions should be taken in order to make Manzana a more profitable organization by being more efficient.

QuestionsThe questions which shall be answered are:

1. How important is turnaround time in this business? Is the turnaround time the only reason for the lack of competitiveness?

2. What operational problems is Manzana facing? How might they be connected to the deteriorating profits experienced over the past year?

3. Analyze and asses Manzana Operations that process insurance requests as depicted in Appendix A with sub questions:

a. How much time do RUN, RERUN,RAIN and RAP take?b. What is the flow time efficiency of a RUN?c. What is de capacity of the various resources?d. Which resource is the bottleneck?e. What is the capacity of the system?f. What is the utilization of the various resources?g. How can the current system be improved?

4. What plan of actions should be taken and recommended to the General Manager? How would the actions resolve the problems? How hard is it to implement it?

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Answers1. The turnaround time is very important for the insurance business, because all paper are sold

with a certain deadline. If these deadline is not made, the potential customers will not sign the insurance policy and go to the competition. Because of their poor TAT they cannot cope with sufficient volume to support lower prices and higher fees for their sales representative than their competitor Golden Gate. So they sell less policies. Furthermore there are additional higher cost for Manzana because they have to pay their senior employees more in order to keep them from defecting.

In short, their TAT is the result from their inefficient handling of all there work, which results in less policies and less earnings. Which in turn weakens their ability to fight the competition

2. The operational problems that Manzana is facing are in essence the prioritization and way of thinking by the different departments within the company. Each department only thinks about themselves and think the other departments have the same priorities. They also do not cooperate with each other because they do not act for the interest of the company but for the department. The problem here is most evident for the RERUNs:

Distribution clerk(DC): “the computer generated RERUNs were not released to the Distribution clerk until the last day of the due date.Underwriting department(UT): “we process RUNs and RAPs first, as for RERUNs we have plenty of notice.Rating department(RD): “The UT seem to think that RERUNs handle themselves, but they take just as much work as any other policy.Policy writing department(PW): “we usually try to handle the simple jobs before tackling the longer or more difficult requests.”

In short UT thinks they have plenty of time so they do RERUNs when they come to it. After they handled RUNs and RAPs. But in reality they have not more than one day for it. They also seem to think that it does not entail much work for the RD but is just as labour intensive. And at the end PW first do the simple tasks before doing the more difficult ones in order to reduce the volume of the paper on their desks. This reaction is very normal for the PW. Because of the batch way of working they get the largest amount of batches in the least amount of time because the RERUNs are long overdue.As a result the TAT is very poor especially for RERUNs and that is were Manzana loses the largest amount of customers and money.

Analysis of Manzana operations, see also appendix A:3.

a.

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DC UT RD PW TotalRUN 68.5 43.6 75.5 71.0 258.6

RERUN 28.0 18.7 75.5 50.1 172.3RAIN 43.5 22.6 65.5 54.0 185.6RAP 50.0 38.0 64.7 N/A 152.7


Table 1: Throughput time in minutes

b. Flow time efficiency of a RUN is:

c. The capacity per month of the various resources are:

Time WAT # Workers CapacityDC 9000.0 41.0 4.0 878.0UT 9000.0 28.4 3 (teams) 950.7RD 9000.0 70.4 8.0 1022.7PW 9000.0 54.8 5.0 821.2

Table 2: Capacity per month

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d. We can see that the department with the least capacity should be, in a serial process the bottleneck. In the case of Manzana the bottleneck should be Policy Writing. But, because we have not taken into account the total number we have to state this in a table:

RUN RERUN RAIN RAP Total

DC 350.0 2081.0 451.0 1798.0 4680.0UT 350.0 2081.0 451.0 1798.0 4680.0

RD 350.0 2081.0 451.0 1798.0 4680.0

PW 624.0 2081.0 451.0 0.0 3156.0Table 3: Handling of requests of half a year per resource

So what capacity-wise look as a bottleneck is in reality a bottleneck. Policy Writing is handling the least amount of policies in the same time or in other words capacity is lower. According to TOC(as used in The Goal by E.M. Goldratt) this department must set the pace or in other words the time used by the Rating Department is the takt-time (as used by Toyota). If this is not done as in the case of Manzana it must have the largest amount of in-process requests, this is seen in the text: “reduce the sheer physical volume on our desks.”

e. The total capacity of the system over a half a year is the same as the capacity of the bottleneck. So the total capacity of the system is:

f. Utilization of the various resources is the number of request per capacity:

Table 4: Utilization in percentage per resource

4. I would as Bill Pippin, propose to reengineer the complete structure of the company, the best way is to create a “supermarket” at the Distribution Clerks and add a person to this department from one of the other departments. Then there will be 18 people left which I would team up into 6 teams of 3 people with most of the overall specializations. Then the teams will go to the “supermarket” (Learning to see, M. Rother and J. Shook) and pick the first request in line. These teams should be busy for a bit longer time, but because of the parallel of 6. There would be more requests handled. See Appendix B.

To further encourage a higher production rate, Manzana could reward the best team by giving them a bonus for the most requests handled, and in order to keep quality high there should a coupling of team to request handled, so management can track the quality of the requested handled by the different teams.

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# Rqst/M Capacity % UtilizationDC 780 878.0 88.8UT 780 950.7 82.0RD 780 1022.7 76.3PW 526 821.2 64.1


It would be hard to implement because people do not like change by nature. But there are incentives like more profit for the company which can result in bonuses as previously mentioned, more various work, no stacks of work on the desks and less frustration.

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AbbreviationsTAT = Turnaround timeRUN = Request for underwritingRERUN = Renew Request for underwritingRAIN = Request for additional insuranceRAP = Request for priceDC = Distribution clerkUT = Underwriter teamRD = Rating departmentPW = Policy writers

Literature The Goal, E.M. Goldratt Lean Thinking, Womack and Jones Learning to see, M. Rother and J. Shook

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Appendix A: Current Flowchart

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Appendix B: Proposed Flowchart

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