Case ProblemPrior to the next holiday season, the Packers exploredseveral alternatives for improving the catalog-order service.The current system includes the five original operators withcomputer terminals who work 8-hour days, 5 days per week.The Packers hired a consultant to study this system, and shereported that the time for an operator to take a customer or-der is exponentially distributed, with a mean of 3.6 minutes.Calls are expected to arrive at the telephone center duringthe 6-week holiday season, according to a Poisson distribu-tion, with a mean rate of 175 calls per hour. When all opera-tors are busy, callers are put on hold, listening to music untilan operator can answer. Waiting calls are answered on aFIFO basis. Based on her experience with other catalogtelephone-order operations and data from NorthwoodsBackpackers, the consultant has determined that if North-woods Backpackers can reduce customer call-waiting timeto approximately 0.5 minute or less, the company will save$135,000 in lost sales during the coming holiday season.Therefore, the Packers have adopted this level of callservice as their goal. However, in addition to simply avoid-substantial profit, they were concerned about the large ing lost sales, the Packers believe it is important to reducewaiting time in order to maintain their reputation for goodcustomer service. Thus, they would like for about 70% ofNORTHWOODS BACKPACKERSBDob and Carol Packer operate a successful outdoor-wearstore in Vermont called Northwoods Backpackers. Theystock mostly cold weather outdoor items such as hiking andbackpacking clothes, gear, and accessories. They estab-lished an excellent reputation throughout New England forquality products and service. Eventually, Bob and Carol no-ticed that more and more of their sales were to customerswho did not live in the immediate vicinity but were callingin orders on the telephone. As a result, the Packers decidedto distribute a catalog and establish a phone-order service.The order department consisted of five operators working8 hours per day from 10:00 A.M. to 6:00 P.M., Mondaythrough Friday. For a few years the mail-order service wasonly moderately successful; the Packers just about brokeeven on their investment. However, during the holiday sea-son of the third year of the catalog-order service, they wereoverwhelmed with phone orders. Although they made anumber of lost sales they estimated they had incurred.Based on information provided by the telephone companyregarding call volume and complaints from customers, thePackers estimated that they lost sales of approximately$100,000. Also, they felt they had lost a substantial numberof old and potentially new customers because of the poorservice of the catalog order department.their callers to receive immediate service.The Packers can maintain the same number of worksta-tions and computer terminals they currently have and increasetheir service to 16 hours per day with two operator shifts run-ning from 8:00 A.M. to midnight. The Packers believe whenCASE PROBLEM635Still another possibility is to add more operator sta-tions. Each station includes a desk, an operator, a phone,and a computer terminal. An additional station that is inoperation 5 days per week, 8 hours per day, will cost$2,900 for the holiday season. For a 16-hour day the costper new station is $4,700. For 7-day service the cost of anadditional station for 8-hours-per-day service is $3,800;for 16-hours-per-day service, the cost is $6,300.The facility Northwoods Backpackers uses to house itsoperators can accommodate a maximum of 10 stations.Additional operators in excess of 10 would require thePackers to lease, remodel, and wire a new facility, which isa capital expenditure they do not want to undertake thisholiday season. Alternatively, the Packers do not want toreduce their current number of operator stations.Determine what order service configuration thePackers should use to achieve their goals and explain yourcustomers become aware of their extended hours, the callswill spread out uniformly, resulting in a new call average ar-rival rate of 87.5 calls per hour (still Poisson distributed). Thisschedule change would cost Northwoods Backpackers ap-proximately $11,500 for the 6-week holiday season.Another alternative for reducing customer waiting timesis to offer weekend service. However, the Packers believethat if they offer weekend service, it must coincide withwhatever service they offer during the week. In other words,if they have phone-order service 8 hours per day during theweek, they must have the same service during the weekend;the same is true with 16-hours-per-day service. They feelthat if weekend hours differ from week-day hours, it willconfuse customers. If 8-hour service is offered 7 days perweek, the new call arrival rate will be reduced to 125 callsper hour, at a cost of $3,600. If they offer 16-hour service,the mean call arrival rate will be reduced to 62.5 calls perhour, at a cost of $7,200.recommendation.

Name: Case ProblemPrior to the next holiday season, the Packers exploredsev
Uploaded: 2024-03-20T06:57:05.000Z
Channel: Bartleby
Description: Case ProblemPrior to the next holiday season, the Packers exploredseveral alternatives for improving the catalog-order service.The current system includes the five original operators withcomputer terminals who work 8-hour days, 5 days per week.The P