Green Title Company is analyzing its operations in an effort to improve performa

Question

Green Title Company is analyzing its operations in an effort to improve performance. The following data have been have been collected:

It takes an average of 4 hours to process and close a title, with the value-added time estimated at 20 minutes per title.

Each title officer is on payroll for 8 hours per day, though working 6 hours per day on average, accounting for lunches and breaks. Industry standard for labor utilization is 80%.

The company closes on 8 titles per day, with an industry standard of 10 titles per day for a comparable facility.

Determine process velocity, labor utilization, and efficiency for the company. Can you draw any conclusions?

Explanation / Answer

Average process time given is 4hours to, close a title with value-added time estimated at 20 minutes per title

Each title officer is on payroll for 8 hours, though working hours is 6 per day, therefore labor utilization = ( 6/8 )%

is estmated as 75% whereas Industry standard is given as 80%

Process velocity is defined as the ratio between the throughtput time and the value-added time for compltion of the product and or service. Throughtput time is given as 4 hours and value-added time is 20 minutes, therefore

Process velocity = ( 4*60) / 20 =12

Labor Utilization is the ratio between the actual time spend on working and the actual time employed, therefore as stated above = (6/8) *100 % = 75%

Efficiency is ratio between the actual output and some standard for the process, therefore it is calculated as

8 titles per day / industry standard of 10 titles per day = 80%

Conclusion: Company is having lower labor utilization than the Industry standard ( 75% as compared to 80% )

Working hours needs to be increased to 6.4 as against 6

Similarly, the actual output is below the Industry standard resulting 80% efficiency

Lower utilization and lower efficiency results in lower productivity of the company

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