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    Operations Management-II Case - Megacard Corporation

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    Dikshma Paul
    The document summarizes a case study about Megacard Corporation, which operates business travel centers. It discusses issues faced by the company's operations manager Bill O'Brien regarding overstaffing and forecasting call volumes. It analyzes the costs of maintaining a decentralized system with individual queues at each travel center versus transitioning to a centralized system with one queue. Calculations show the centralized system would require 10 fewer travel consultants and save around $500,000 annually, more than offsetting the one-time $160,000 setup cost. The conclusion is that O'Brien should implement a centralized system to improve efficiency and reduce costs.

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    Operations Management-II Case - Megacard Corporation

    Uploaded by

    Dikshma Paul
    224 views7 pages
    The document summarizes a case study about Megacard Corporation, which operates business travel centers. It discusses issues faced by the company's operations manager Bill O'Brien regarding overstaffing and forecasting call volumes. It analyzes the costs of maintaining a decentralized system with individual queues at each travel center versus transitioning to a centralized system with one queue. Calculations show the centralized system would require 10 fewer travel consultants and save around $500,000 annually, more than offsetting the one-time $160,000 setup cost. The conclusion is that O'Brien should implement a centralized system to improve efficiency and reduce costs.

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    The document summarizes a case study about Megacard Corporation, which operates business travel centers. It discusses issues faced by the company's operations manager Bill O'Brien regarding overstaffing and forecasting call volumes. It analyzes the costs of maintaining a decentralized system with individual queues at each travel center versus transitioning to a centralized system with one queue. Calculations show the centralized system would require 10 fewer travel consultants and save around $500,000 annually, more than offsetting the one-time $160,000 setup cost. The conclusion is that O'Brien should implement a centralized system to improve efficiency and reduce costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    224 views7 pages

    Operations Management-II Case - Megacard Corporation

    Uploaded by

    Dikshma Paul
    The document summarizes a case study about Megacard Corporation, which operates business travel centers. It discusses issues faced by the company's operations manager Bill O'Brien regarding overstaffing and forecasting call volumes. It analyzes the costs of maintaining a decentralized system with individual queues at each travel center versus transitioning to a centralized system with one queue. Calculations show the centralized system would require 10 fewer travel consultants and save around $500,000 annually, more than offsetting the one-time $160,000 setup cost. The conclusion is that O'Brien should implement a centralized system to improve efficiency and reduce costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 7

    Operations Management-II

    Case – Megacard Corporation

    Section E Group 8

    Darshita Doshi (2012PGP106)


    Naveen S (2012PGP219)
    Partha Pratim Panda (2012PGP248) 
    Srihari K V (2012PGP371)
    Swati Bhargava (2012PGP394)
    Yasarapu Vamsikrishna (2012PGP447)
    The Company – Megacard Corporation

    • Business Travel Centers was one of their depts


    • Had 20 BTCs spread throughout the US
    • Offered airline, hotel and car reservations
    • Received 10% commission from airlines
    • Provided management information reports
    and cost-control monitoring
    • Front end operation consisted of six functions-
    TC, Hotel Agents, Rate Agents, Ticketeers,
    Messengers, Prepaid agents.
    Issues faced by Bill O’Brien
    • Megacard is currently overstaffed for its operations. O’Brien feels it is
    better to overstaff than to under serve.
    • O’Brien is thinking about having a centralized system which essentially
    means a single queue for the entire company. Currently they have
    different queues for all the BTCs.
    • If forecast was too high and level of staff larger than necessary, profits
    would fall
    • Forecast of incoming calls was very difficult to forecast
    • If the forecast was too low and staff smaller than necessary, service
    quality, and ultimately profits would slip
    • Long waits on the line motivated callers who used more than one travel
    agent to try elsewhere
    • Quality and customer’s perception of quality were contrasting
    • Quality of service as perceived by corporations included reduced travel
    costs, monthly statements an reports
    Computations
    • Taking 1 min. as hold-time and 5 min. As
    average service time, we get 6 mins as average
    time a customer spends in the system
    • Assumptions : Total #working hours in a day
    are 10, with a one-hour break
    • Avg. Sales per call = $ 22,957
    • TC Salary costs = 68% Total employment
    expenses = 68% of 60% of BTC’s total expenses
    Comparison of Costs for two systems

    Decentralized system Centralized system


    • Number of TCs required at a • We can compute the number
    BTC = (#Daily Calls*Avg time of TCs required for the total
    per call)/Daily working hours number of expected calls and
    • Therefore, for Indianapolis BTC, therefore the total costs, given
    #TCs reqd. = (749*6)/(60*9) = we have one queue for the
    8.32 = 9 system.
    • Similarly for Kansas City, #TCs • The number of TCs would be
    reqd. = 5 less compared to the
    • For Dallas, #TCs reqd. = 4 decentralized system
    • Similar calculations can be
    done for the rest 17 BTCs
    assuming avg calls per sales
    volume in dollars
    BTC 1992 Expected Sales (000s) #Calls #TCs reqd Annual TC Salaries Total BTC Expenses
    New York 31437 1370 16 $ 4,80,000.00 $ 9,34,943.51
    Washington, D.C. 26048 1135 13 $ 3,90,000.00 $ 7,59,641.60
    Atlanta 9880 431 5 $ 1,50,000.00 $ 2,92,169.85
    Boston 5838 255 3 $ 90,000.00 $ 1,75,301.91
    Kansas City 10779 470 6 $ 1,80,000.00 $ 3,50,603.82
    Indianapolis 14552 634 8 $ 2,40,000.00 $ 4,67,471.76
    Denver 2246 98 2 $ 60,000.00 $ 1,16,867.94
    Boulder, CO 2426 106 2 $ 60,000.00 $ 1,16,867.94
    Phoenix 4554 199 3 $ 90,000.00 $ 1,75,301.91
    Dallas 8084 353 4 $ 1,20,000.00 $ 2,33,735.88
    Philadelphia 19761 861 10 $ 3,00,000.00 $ 5,84,339.70
    Baltimore 9880 431 5 $ 1,50,000.00 $ 2,92,169.85
    Stamford, CT 0 0 0 $ - $ -
    Newark 3862 169 2 $ 60,000.00 $ 1,16,867.94
    Charlotte, CT 13203 576 7 $ 2,10,000.00 $ 4,09,037.79
    Albany, NY 12484 544 7 $ 2,10,000.00 $ 4,09,037.79
    San Francisco 35928 1565 18 $ 5,40,000.00 $ 10,51,811.45
    Palo Alto, CA 3234 141 2 $ 60,000.00 $ 1,16,867.94
    Oakland, CA 4491 196 3 $ 90,000.00 $ 1,75,301.91
    Los Angeles 23354 1018 12 $ 3,60,000.00 $ 7,01,207.64

    Decentralized system 242041 10552 128 $ 38,40,000.00 $ 74,79,548.11 Difference


    Centralized System 242041 10552 118 $ 35,40,000.00 $ 68,95,208.41 $5,84,339.70
    Conclusion
    • As we see from the computations, the company will
    be able to do away with 10 TCs, saving approx. $0.5
    mn with a centralized system. The operating
    expenses have been considered as for a normal BTC
    in this computation as well.
    • Now, these savings are more than the annual
    expenses and one-time setup costs required for the
    centralized BTC which is $0.16 mn
    • They will still be saving approx. $ 0.4 mn for the first
    year and $0.5 mn per annum next year onwards.
    • Hence, O’Brien should go for a centralized system.

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