Cost Savings per Hour Relative to the Status Quo


Community Bank is planning to improve customer service at its drive-in facility by reducing waiting and transaction times. Observations of the existing single-teller window reveal that customers arrive according to a Poisson process at an average rate of 10 per hour, and that they are given first-come first-served service with an average transaction time of 5 minutes. Transaction times are exponentially distributed. The cost of keeping a customer waiting in queue is represented as a $5-per-hour loss of goodwill.

The bank is considering the following two improvement options.


(A)The bank can lease high-speed information-retrieval and communication equipment that would cost $20 an hour. The new equipment would reduce the average

     transaction time by one minute. Assume that the transaction times are still exponentially distributed with the leased equipment.

(B)The other option is to add another teller and to install four remote stations with pneumatic tubes running from the stations to the tellers, who are located in a glassed-in

     building. The hourly cost of a teller is $10. (The teller is paid regardless whether he/she is idle or not. Ignore the cost for installing the pneumatic tubes, which are

     systems that propel cylindrical containers through a network of tubes by compressed air or by partial vacuum.)

What is the cost savings per hour relative to the status quo?  



This question belongs to Operations management and discusses cost savings per hour relative to the status quo for the given company.


Total word count: 66





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