Introduction

The operations function is central to any organisation because it produces the products that are its reason for existing. “A product is anything that can be offered to customers in order to satisfy their needs and expectations”(Slack,N.,et.al, 1995, p156). However it should be remembered that when customers buy a product they are not simply buying some goods or services, but are buying a set of expected benefits to meet their needs. A service product with its unique characteristics of intangibility, perishability, consistency and simultaneity is looked upon as a ‘Package of Attributes’. One such service is Banking that includes different types of operations. In this assignment I have analysed the ‘Cheque Clearance Operations’ being performed at Bank of Baroda.

Bank of Baroda is one the largest retail banking networks in India with over 2300 branches located throughout the length and breadth of the country. It has been operating in the United Arab Emirates for the past 15 years through it's three branches located at Abu Dhabi, Dubai and Sharjah and serving primarily a clientele of Indian expatriates.

The Five Performance Objectives

In order to achieve its organisational and operational goals the bank tries to achieve an operations-based advantage through the five basic performance objectives. The five performance objectives in descending order of their priority for the Cheque Clearance Operations are as follows:

1.     Speed: Waiting time in the queues should be minimum and response quick.

2.     Quality: Funds should be accounted correctly, the quality and design of the cheques, passbooks, pay-in-slips etc. should be appropriate and the staff be helpful and courteous.

3.     Dependability: Work should be done as and when promised and should be reliable.

4.     Cost: Customers should receive best services at the minimum cost.

5.     Flexibility: Innovative type of accounts meeting specific customer needs and adjustability of staff inspite of changes in demand.

However we can know the extent to which these performance objectives are giving Bank of Baroda an operations-based advantage only by analysing the transformation process at the Cheque Clearance operation.

The Transformation Model

“All operations produce goods or services or a mixture of the two, and they do this by a process of transformation. By transformation we mean that they use their resources to change the state or conditions of something to produce outputs.”(Slack,N.et al.,1995,p11). All operations confirm to a general Input-Transformation-Output Model.

·        The inputs to the Cheque Clearance operations at Bank of Baroda can be classified as:

Transformed Resources which include the materials, information about the customer’s funds, databases, forms, pay-in-slips and even the customers themselves.

Transforming Resources which include the facilities i.e. the buildings, equipment, the process technology as well as the staff who operate, plan and manage the operations who may be at various levels in the organisation.

·        The transformation process at the Cheque Clearance operations involve the physical processing of the materials i.e. the cheques, bank slips received. This is combined with the processing of information about the customer’s funds cashing their cheques and even processing the customers themselves by serving them appropriately and keeping them happy.

·        The output of the transformation process includes the banking services, cash, processed copies of the bank slip, funds transferred. It should be noted here that though Cheque Clearance operations give an output primarily of service, the results of these services can be seen in some physical form and it can also be felt by the customers through its psychological benefits.

A detailed step by step analysis of the operation can be seen in the flowchart People having come to clear a cheque, either a cash cheque or a payee’s account cheque move to the respective counter to get it processed. In case of payee’s account cheques the customer takes back the processed bank slip and leaves, while in case of cash cheques the customer is asked to prove his identity, if necessary and is issued a token with a number. The job of the employee at both the cash cheques and payee’s account cheque counter consist of processing the cheques manually while the cashier displays the number of a token on a LCD screen indicating that the person with the displayed token number can come and collect the cash.

Capacity Planning

“Capacity is a measure of an organisation’s ability to provide customers with the demanded goods or services in the amount requested and in a timely manner.”(Vonderembse and White,1996, p286). Proper planning of capacity is essential for every organisation as it influences the various performance objectives that can be achieved by the operations.

The first step in any capacity planning is to forecast demand fluctuations. It has been noticed that Bank of Baroda experiences hourly demand fluctuation at it's Cheque Clearance operations, which require capacity adjustments. The long-term demand forecasts are also positive with pressing needs for breakthrough capacity improvements.

The next step is that of measuring capacity which has been explained below:

Through observations it has been found out that individual jobs at the Cheque Clearance counter consist of different activities. The various activities and the average action time for the same are as follows:

Cash Cheques:

                   Receiving and Processing                   60 seconds                               Transfer to Cashier                       15 seconds

Payee’s Account Cheques:

                             Processing Time                                 90 seconds

Cashier:

Receiving processed cheque

from Cheque Clearance counter          15 seconds

Entering number on screen                  15 seconds

Delivering cash to customer                15 seconds

Number of Hours / Week:48 hrs. / week

Capacity / Week :

Cash Cheques Counter: 2304 Cash Cheques / week

Payee’s Account Cheques Counter:1920 Payee’s Account Cheques/ week

Cashier: 3840 Deposits or Withdrawals / week

Having understood the demand fluctuations and capacity, the next step is to consider the alternative methods of adjusting to the fluctuations. Bank of Baroda, at present performs the Cheque Clearance operations by providing a server each at the Cash Cheques, Payee’s Account Cheques and the Cashier counter. However it has been observed that the operations is suffering from a “deficiency of mechanisation” i.e. the operation’s bottleneck lies in the processing time which is causing significant delays as almost the whole of the operation is done manually. Introduction of machines like ATMs and other self processing machines can help the system, by reducing the processing time, to respond to its demand and reduce other resource requirements. This can be further utilised as a marketing tool to provide varying service types in the form of Express Counters or Drive thru Cheque Clearance on a self service basis. Such measures can go a long way in reaching customers located in out-of-the-way places, when combined with measures such as UAESWITCH. Although Bank of Baroda makes forecasts of their expected average level of demand, due to the probabilistic arrival and processing time only rarely do the arrival of customers match the ability of operations to cope with them. Inspite of the division of work, long queues build up at some counters while others remain idle. Such a problem can only be solved by effective manpower planning by training the employees at the Cheque Clearance operations in other operations as well, and by strategies such as job enlargement and job enrichment. Through scientific management techniques of time and motion study the job should be designed ergonomically which is both satisfying and motivating to the employees. Instead of having separate cash cheques and payee’s account cheques counter, the bank should have three ‘cashier counters’ with the customers having the liberty to move to any counter for any type of  cheque clearance operation required and get the cash from the same counter as well. This will not only reduce processing time but also reduce the customer’s queue at any given time, thereby helping the bank meet its demand to the fullest extent with ease.

Aggregate Production Planning (APP)

APP is a first rough-cut approximation determining how resources of people and facilities should be used to meet projected demand over a time horizon of about an year. Though Bank of Baroda uses mathematical procedures such as Trend Ratio Analysis method, its strategies at present are mainly reactive strategies aimed at chasing demand resulting in chaos due to long queues at certain peak hours. An aggregate plan can be translated into a formalised production plan encompassing specific capacity requirements by a Master Production Schedule.

Scheduling          

Depending on the scheduling situation, various types of data about the jobs, activities, equipment, employees and facilities is needed. One major problem with the scheduling of banks and other services is that it cannot be inventoried and hence is more concerned with determining what level of capacity should be made available at different times.

Scheduling Strategies

Due to the probabilistic arrival and processing time of customers, for Cheque Clearance at Bank of Baroda, it is not worthwhile to schedule for peak hours and keep a large portion of capacity idle. Moreover forecasting daily demand shifts and chasing it will be quite impractical. Hence the solution lies, as explained earlier, in building adjustable workforce combined with mechanisation of activities. Though this involves additional costs it will on the one hand reduce the waiting lines at the counters and on the other hand result in increased customer goodwill resulting in the achievement of an operations-based through speedy service.

Queuing Model

Evaluating the consequences of capacity decisions, which is the most important step in scheduling can be done appropriately at Bank of Baroda by using the queuing model. Though various assumptions are made largely for mathematical convenience, they are quite appropriate for actual processing rates at Bank of Baroda.

My investigations have revealed that customers at the Cheque Clearance and Cashier counters arrive at an average rate of 90 per hour (  ). The average service rate of cash cheques, payee’s account cheques and the cashier counters is 42.66 per hour (  ). If  the number of servers trained in all activities of the whole Cheque Clearance Operations is 3 (n), the utilisation factor will be :

                              / n     =    90/42.66 * 3     =   90/128   = 0.703125

From the figure (Fitzsimmons and Fitzsimmons, 1994 cited by Slack, N. et.al.,1995, p 456) For a utilisation factor of .70 and n =3

L5      = mean number of customers in the system = 3

Lq     =  mean number of customers in the queue = L5-p, where p =   /

          =  3- [90/42.66] = 0.890 , and,

Wq    =  mean queuing time will be Lq /

          =  0.890/90 = 0.00989 hours

          =  35.66 seconds.

Thus with a capacity of 3 servers at the Cheque Clearance counter performing multiple and varied adjustable jobs, the average time a customer will have to wait in the queue will be drastically reduced and the processing time too can be further reduced by installing self service processing machines.

Quality Management

The operations view of quality is concerned with trying to meet customer’s expectations, however as individual customer’s expectations differ, they may perceive quality in different ways. Though the objective of Bank of Baroda is to keep every customer happy, it has been observed that a large percentage of their customers do not perceive the quality of the Cheque Clearance operations as being at par with their expectations. Instead of trying to merely meet their customer’s expectations Bank of Baroda should focus its efforts on trying to exceed their customer’s expectations and delighting them with improved quality standards adopting the Transcendent approach to quality as given by Prof. David Garwin. Inorder to achieve a high quality standard various dimensions of service quality at the Cheque Clearance should first be analysed.

Dimensions of Service Quality

The five dimensions of customer’s judgement of quality (Ziethaml,V. et.al.,1990 cited by Vonderembse,M.A. and White,G.P., 1996, p79) in relation to the Cheque Clearance operations at Bank of Baroda are as follows:

1.  Reliability:

+       Was the cheque cleared within reasonable time?

+       Have the customer’s funds been accounted properly?

+       Was the ATM working properly?

2.    Responsiveness:

+       Do the staff clear any queries that the customers have about their accounts?

3.    Assurance:

+       Do the staff politely and knowledgeably interact with the customers?

+       Is the staff able to perform quickly at rush hours?

4.  Empathy:

+       Do the staff recognise the regular customers?

+       Is the staff willing to spend time to understand a customer’s particular need ?

5.  Tangibles:

+       Is the bank furniture clean , comfortable and modern?

+       Are adequate number of bank slips and writing instruments available?

+       Are the bank statement, pay-in slip, pass book and other forms easy to understand?

The next step should be to measure each characteristic. Characteristics may be measured in the form of variables like the time taken to clear a cheque, mean waiting time in the queue and in the form of attributes about the comfortability of the furniture or the politeness of the staff. Once measured these characteristics should be compared against some set standards which will depend to a great extent on the operation’s design, degree of mechanisation, availability of funds and the overall mission the organisation. It is very essential that once some standards are set the quality must be controlled against these set standards. This can be ensured at the Cheque Clearance operations by ensuring that all the required materials and equipment are available to the staff, and the processing as well as the output is delivered flawlessly. The bank should however realise that trying to raise the current standards of performance with the same amount of labour may actually increase the per unit cost of operation after the optimum level due to increased overtime costs. The mechanisation of operations may involve investment initially but it can actually mean reduced costs because of savings of reworks, wastage, time, and reduction of customer complaints and claims

Materials Control

Materials are the physical items that are necessary to produce the goods and services we consume. In case of banks and other services a Bill of Activities is prepared which describes the various activities in the operation. The Cheque Clearance operations at Bank of Baroda maintain an inventory in the form of staff, equipment etc., however the actual inventory which is maintained is that of the transformed input resources. All the transformed material input resources, are centrally purchased by Bank of Baroda from local suppliers, having a reorder period ranging from 7 to 10 days are ordered as soon as they reach their respective reorder level. The bank also uses the “VED- vital, essential and desirable” (Jain, S. P. and Narang, K. L.,1995,p 2.44) analysis method and accordingly different level of attention is given to different materials. “The materials inventory is maintained typically for the purposes of transaction and precaution for perfect synchronisation of inflow and outflow of the material and for providing cover for any inability to predict demand of the material.” (Chary, S.N.,1995, P135). The stocks of customers is referred to as queues and its control has been explained earlier under scheduling.

Cost Control

The activities on which the cost of an operation is incurred determine to a great extent the way in which the operations manager can influence the costs. The costs of the Cheque Clearance operations at Bank of Baroda can be broken down into the staff costs, facilities, technology and equipment costs, and the materials costs. Bank of Baroda, unlike most other banks in the area clear both local and outstation cheques free of cost. However in trying to control costs the bank has traded off quality and speed. It has failed to realise that their service also comes with various hidden costs and restraints that negatively impact the customer. The bank can effectively control costs at all levels only through Total Quality Management.

Logistics    

“Logistics is defined as the procurement, movement of materials and information, their storage and inventory management and their distribution through marketing channels.”(Christopher, M.G.,1992, cited by Slack, N., et.al., 1995, p529). Bank of Baroda is not much concerned with the effective distribution of its service which is evident by the long queues that keep forming at the Cheque Clearance operation. But it should not be assumed that since the bank does not deal with any physical goods, logistics does not have any role to play. Increasing capacity will prove to be of no use unless increased capacity can be delivered to the customer effectively. Therefore logistics must be made a part of the bank’s strategic and operational planning process. An effort should also be made to use logistics in conjunction with the planning of manpower to highlight issues which should be enhanced such as basic training, stabilising existing programs and increasing staff’s technical and interpersonal skills. The role of logistics should also be continuously improved upon aiming to actually meet changing customer needs rather than simply being able to meet them.

Conclusion  

Thus we can see that the management of operations plays a very important role in the Cheque Clearance operations at Bank of Baroda. The various defects that lie in the way the service is delivered can be easily identified and rectified too if viewed from an operation manager’s perspective. Today, the role of operations is not merely confined to that of  ‘controlling costs’ , but is viewed as a means to achieve organisational goals. Proper implementation of operations management tools, techniques and strategies can give Bank of Baroda an operations-based advantage arising from reduced costs, high quality, customer service, product performance, variety and a highly motivated staff.

With increasing globalisation a firm can no longer hope to survive on its past laurels. Businesses must realise that substantial interdependencies exist in different functional areas within an organisation and should take an “Integrated Systems Approach” (Coldwell,T.,1997, p16) to achieve breakthrough improvements in performance. Apart from being creative and international in its outlook, the designed operations should recognise the need for a team work and must be ethical at the same time too. To conclude, it would not be wrong to say that only those companies who seriously focus their efforts towards the formulation of the right operations strategy, and its timely interpretation can assure themselves of continued success well into the next millennium.

BIBLIOGRAPHY

1.    Chary, S.N. (1995): Theory and Problems in Production and Operations Management: Tata McGraw Hill Publishing Co. Ltd.

2.    Christopher, M.G. (1992): Logistics and Supply Chain Management: Pitman Publishing.

3.    Cordwell, T. (1997): Operations Management Study Guide 1-8: ULH Publications.

4.    Fitzsimmons, J.A. and Fitzsimmons, M.J. (1994)): Service Management for Competitive Advantage, McGraw Hill.

5.    Gummesson, E. (1993): ‘Service productivity, service quality and profitability’, Proceedings of the 8^th International Conference of the Operations Management Association, Warwick, UK.

6.    Jain, S.P. and Narang, K.L. (1995): Cost Accounting- Principles and Practice, 13^th Revised Edition,: Kalyani Publishers

7.    Slack, N., Chambers, S., Harland, C. Harrison, A. Johnston,R. (1995): Operations Management: Pitman Publishing

8.    Vonderembse, M.A. and White, G.P. (1996): Operations Management-Concepts, Methods and Strategies, 3^rd Edition: West Publishing Company

9.     Zeithaml, Valerie. A., Parasuraman, A. and Berry, Leonard, L. (1990): Delivery Quality Service: The Free Press.

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