Rebalance the process to maximize process capacity

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Reference no: EM132287982

Consider an insurance company called Feico, there are 5 steps to start an insurance file for a customer. Step 1 takes 4 minutes/insurance, step 2 takes 5 minutes/insurance, step 3 takes 7 minutes/ insurance, step 4 takes 2 minutes/insurance, and step 5 takes 4 minutes/insurance. There are 3 workers for these steps and their assignments are as follows. W1 does step 1, W2 does step 2 and 3, and W3 does steps 4 and 5.

a. How would you rebalance the process to maximize process capacity, assuming that all 5 steps must be carried out in the same order?

b.Now suppose that Feico still continues with its initial step assignments to its workers as written in 1. Assume Feico obtains $80 for each insurance it initiates. Feico faces fixed costs of $1200 per 8-hour work day, which includes the labor costs of $20 per hour for each employee. Variable costs for paper and express mailing are estimated to be $5 per insurance. By how much would Feico’s profit increase if it decreased the processing time of step 3 from 7 to 5 minutes per insurance? Note that there exists unlimited demand and the assignment of steps to the workers remains the same. (Please explain clearly each step that you take while finding the answer.)

Reference no: EM132287982

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