Operations Management Report -- Community Bank of Perth
The Community Bank of Perth has experienced tremendous growth in home loan refinancing in the past two years. This is due in part to continued growth of the Western Australian mining sector, as well as increased consumer interest in more innovative and economical loan terms. With rising competition in the market, more lenders are now aggressively working to boost their market share through a renewed focus on customer service and simple and speedy loan processing (Fluss 2009, p. 12). Faced with an ever-increasing numbers of home loans, Community Bank of Perth has developed new refinancing processes aimed at improving the quality of service to customers. This process was implemented last year and divided loan approvals into five distinct stages with new departments created for each stage.
However, recent customer feedback has indicated that loan approval processing still has room for improvement. Many customers have complained of lengthy processing times, multiple points of contact, complex forms, red tape, and uncoordinated closing processes that present inconveniences and frustrations. It is clear that Community Bank can enhance its overall customer relations by concentrating more closely on workforce optimization in the back-office. Community Bank can adopt a more systematic, data-driven processes to improve communication and collaboration, identify service gaps and trim loan approval timelines.
Introduction
Operations management involves analyzing work functions to increase organizational output (Menconi & Desmond 2000, p. 50). The design and improvement of operational processes and systems can be structured so that the resources required for delivering services are optimized to their full potential. Managers typically assume the challenge of improving productivity to grow and enhance the business -- an effort that spans all business units and departments including purchasing, manufacturing, shipping, packaging, supply chain, human resources, marketing, finance, and information technology (Bilich 2000, p. 15).
This also includes managing communication and dispersed knowledge within the organization. When information can get from one department to another quickly and accurately, it hastens the pace at which the company can operate and insures that all necessary parties -- including customers -- get the information and answers they need at critical junctures in the process. Such knowledge can improve efficiency, ensure responsiveness, impact customer service, and ultimately improve a company's competitive advantage (Ferreira & Andrade 2011, p. 649). Organizations that invest in this area and manage processes well survive; those that do not decline. All areas of Community Bank are interdependent (output from one area or business unit often directly impacts the capabilities and viability of another). Effective leadership begins with sound operations management to simplify processes and leverage the work being carried out across the organization (Fluss 2009, p. 48).
In April 2012, a group called Gatepoint Research invited select banking executives to participate in a survey themed Trends in Optimizing Retail Bank Loan Processing (Garratt & Keister 2009, p. 303). Over 100 executives were invited to participate. 87% of responders held positions at the VP level or above in global, regional, and community banks and credit unions. Results were very telling:
More than 50% of responders rated their loan-processing environment as either lagging the competition or merely adequate;
The chief priorities identified were continuous process improvement and reducing loan processing cycle times;
More than 25% of responders indicated that their loan processing personnel is increasing; and 28% of responders were evaluating or planning an upgrade or improvement to their loan processing workflow.
As the survey results suggest, the retail banking industry is undergoing major change. Customers are more savvy, demanding and active than they have ever been. Loan processing and operational workflows are a major concern to all lending institutions -- Community Bank is in good company. In the following pages, we will take a closer look at ways to improve, specifically standardizing and automating business processes.
Proper Planning
In complex business situations, planning helps organizations meet challenges, while at the same time minimize risk (Brandt 2012, p. 66). Planning is a prerequisite not only for achieving success, but also for surviving in a complex and competitive world. It forces organizations to look ahead and decide their future course of action so as to improve profitability. It also ensures that employees carry out their work in a systematic and methodical manner. Proper planning coordinates and controls various tasks making sure that resources are used optimally (Reinertsen 1999, p. 64). The benefits of planning appropriately includes business processes that are aligned with corporate objectives, decreased business risk and uncertainty, a sense of direction, guidelines for decision-making, and increased organizational effectiveness (Ferreira & Andrade 2011, p. 649).
Loan processing is...
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