Case 4 Pacific National Bank

8/13/2019 Case 4 Pacific National Bank

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Case 4: Pacific National Bank

Pacific National Bank is a medium-sized bank with 21 branches. Until veryrecently, Pacific did not o erate its own automatic teller machines !"#$s%& instead, itrelied on an outside vendor to o erate these. Ninety ercent of the "#$ customersobtained cash advances with non-Pacific credit cards, so the "#$s did little to directlyim rove Pacific's own bankin( business. ) erations *ice President $aria Perez wantsto chan(e that, by havin( Pacific offer a broader mi+ of bankin( services with its ownmachines tied into its own data- rocessin( network.

#he industry consensus is that the "#$ a eals to customers in much the sameway as the su ermarket e+ ress line it minimizes the amount of waitin(. But for Pacific,the 2 -hour "#$ would also have the broader a eal of rovidin( essential bankin(services at all hours, reachin( a se(ment of the market not currently served. istorically,customers who find standard bankin( hours inconvenient have been lost to Pacific, so the"#$ will increase the bank's market share.

Besides attractin( more customers and servicin( e+istin( customers better, the"#$ o eration should offer substantial cost advanta(es. /ewer human tellers would bere0uired for the same volume of transactions as before. #he er transaction cost of themachine, which does not need human attention for restockin( and maintenance, should besubstantially less. But even if that were not so, its 2 -hour readiness would be e+tremelye+ ensive to du licate with human tellers, who would have to be (iven e+tra rotectionfor dan(erous late-ni(ht work.

$s. Perez selected the reenhills office as the test branch for a ca tive "#$.ustomers from that branch were recruited to si(n u for a Pacific "#$ card. "ll

residents within the nei(hborin( zi codes were offered an incentive to o en freecheckin( accounts at Pacific when they also si(ned u for the card. )nce a critical mass

of "#$ card holders was established 3 but before the bankin( "#$ was installed 3statistics were ke t. #he arrival times in the followin( table were determined for varioustimes of the week

Customer Arrivals at Greenhills Office(Before ATM Installation)

PeriodDaily Average

Number of Arrivals

!1% $onday 3 /riday 14 ".$. 3 12 P.$. 155!2% $onday 3 /riday 12 3 1 P.$. 2 2!6% $onday 3 /riday 1 3 6 P.$. 274

! % /riday 6 3 8 P.$. 55

#he bank o ens at 14 ".$. and closes at 6 P.$., e+ce t on /riday, when it closesat 8 P.$. Past study shows that, over each eriod, customers arrive randomly at a stablemean rate, so the assum tion of a Poisson rocess is valid. #he mean time re0uired tocom lete customer transactions is two minutes, and the individual service times have afre0uency distribution with a ronounced ositive skew, so an e+ onential distribution isa reasonable a ro+imation to reality.



#ellers all work art-time and cost P54 er bank hour. Pacific's e+ erience hasestablished that there will be a si(nificant dro -off in clientele soon after about durin(which customers suffer len(thy delays in (ettin( teller access. #he su lier of the "#$e0ui ment claims that other banks of com arable size have e+ erienced a 649 diversionof re(ular business away from human tellers to the "#$, which roduced a further 29

e+ ansion beyond the revious level of overall client transactions 3 all absorbed by the"#$, half of it outside re(ular bankin( hours. #he su lier also maintains that the "#$traffic is fairly uniform, e+ce t between 11 P.$. and 8 ".$., when it is ne(li(ible. $s.Perez believes that the "#$ busy- eriod arrivals will constitute a sin(le Poisson rocess.

:ndustry e+ erience is that the mean service time at an "#$ is one-half minute,with an e+ onential distribution servin( as an ade0uate a ro+imation to the unknown

ositively skewed unimodal distribution that actually a lies. $s. Perez believes that,once the "#$ is installed, the reenhills human tellers will be left with a (reater

ro ortion of the more involved and len(thy transactions, raisin( their mean service timeto 2.5 minutes.

$s. Perez knows that much of the evaluation of the "#$ o erations will be a0ueuin( e+ercise. er knowled(e of the sub;ect is a bit rusty, so she has retained you toassist her.

Questions:

1% "ssume that Pacific National Bank remains with human tellers only.a% /or each time eriod (iven in the table, determine the minimum number of tellers

needed on station to service the customer stream. b% "ssume that the number of tellers found in art !a% is used. /or each time eriod,

determine the mean customer waitin( time.c% /or each time eriod, determine the mean customer waitin( time when the

number of tellers is one more than that found in art !a%.

2% Past e+ erience shows that the dro -off in clientele due to waitin( translates into ane+ ected new resent value in lost rofits of P4.54 er minute /or each time eriod,determine the avera(e hourly 0ueuin( system cost assumin( that the bank uses thefollowin( service arran(ementa% #he minimum number of human tellers necessary to service the customers

b% )ne teller more than was found in art !a% of <uestion 1

6% =u ose that the "#$ is installed and that customers themselves decide whether touse human tellers or to use the "#$, and that two 0ueues form inde endently foreach. /inally, assume that a 149traffic increase is (enerated by the "#$ within eacho en time eriod and that all of it is for the "#$.a% >etermine for each eriod the mean arrival rate at the human teller windows.

b% >o the same with re(ard to the mean arrival rate at the "#$.c% /ind the minimum number of human tellers re0uired to be on station durin( each

time eriod.



% "ssume that the number of human tellers is one more than that found in art !c% of<uestion 6. >etermine for $s. Perez the mean customer waitin( time durin( eacho en eriod for those customers who seek the followin(a% uman tellers

b% "ccess to the "#$

5% onsider the com lete 2 -hour, ?-day icture. :ncor orate whatever information youneed from <uestions 1 throu(h and your solutions, lus any additional informationin the case and any necessary assum tions, to com are the net cost of o eration withand without the "#$. #hen (ive your overall recommendation to $s. Perez.

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Case 4 Pacific National Bank