Title Page Production and Operation Management Report

Compiled by: Duong Quang Vinh

Executive Summary Due to a booming business flows Colonial Savings Bank of Queensland has been facing a large amount of customer volume, especially in the area of Mortgage Refinancing. The bank has established 5 steps Loan Approval Process in order to manage the increasing flows of customers. However, from the customer perspectives, this process has been creating quite an unpleasant experience for some customers and reflected some critical flaws that require revision. This report covers 3 main sections: The first section re-analyzes the current refinancing process in order to clarify its productivity and connection correlation in respect with the large volume of customers inflow and the potential revenue. In this section, the relevance of the current service process is deeming to be appropriate for the large amount of customers in need of service. Through the stages, the new management team can review the operation in each processing progress and understand why it was originally created as such. Although the stages were set up in an appropriate order and each stage were appointed a specific role and responsibilities to accomplish in order to process the clients file properly, there were many major flaws in the processing details behind the scene that caused sluggish in the system and displeased many clients. The second section describes the problems incurring through the current refinancing process based on customers feedback and re-analyze of the current process. The problems are identified and analyzed the main causes. Factors for such problems are within the problems such as: customers lack of understanding of the procedures necessity due to uninformed, lack of communication and correlation between agents in the processing departments, poor account management and progress management, heavy work load focused in one stage, and lack of customer oriented. In addition, based on the customer feedback database, the loan approval process was re-analyzed and extracted a number of flaws. The third section describes the recommendation to improve the process and redesign a few steps in order to please the current and potential customers. The management team recommended modifying the operation through actions such as inform customers of necessity procedures and all the paperwork required in the upcoming processes, increase the human resource for stage 2 and assign specific responsibilities that connect with other processing departments in order to improve clients account management, enhanced transparency and correlation between departments to increase efficiency and productivity, and establish a customer contact point for a better customer relation and inform customer of their file progress. The enhanced operation set up along with the improved customer service will create better business flow and give more room for new potential customers in the mortgage refinance sector; thus Colonial Savings Bank of Queensland can maintain its business and increase its revenue rapidly.

Contents The original set up and its implementation explanation Potential credit risk reduction The problems in the current process Recommendation and Implementation Recommendation Implementation References

The original set up and its implementation explanation The current Loan Approve Process, at a glance, is quite suitable for the volume of increasing customers. It divided the service process into two parts: the visible front office and the invisible back office; though both plays important parts in completing the service process for the customers and are connected through communication. The front office was meant for direct contact with the incoming customers with the prospect of mortgage refinancing and quickly process the application in order to move onto the next flow of incoming customers while the previous application is sent to the back office for further service processing. In comparison, it is much faster than sitting with one customer all the way through for every single procedure. Thus it supposed to save time and create more business for the bank as the process is able to obtain more application. In addition, the current process is in a systematic order and follows with proper procedures to complete the clients file through the information requested in each stage. (Arash) Potential Credit risks reduction Further into analyzing the current process, it is designed as a check and balance system. By carefully accessing information from customers, loan processing officers can have a better understanding of the clients current financial condition and evaluate properly whether the clients are approved for the loan. Learning from the pass, carelessness and uncomplicated acceptance of mortgage loan could lead to high risk of default in payments and repeat the financial crisis in the mortgage sector. Thus credit risks can be reduced immensely. Therefore, this system was set up this way in the beginning through the mind set above and thrived for the best. However, implementation proved a few flaws that are going to be discussed in the following section. The Problems in the Current Process According to Arash Shahin, service blueprint is supposed to bring back effective result and bring in profits from proper implementation. In details, an effective service blueprinting can gain the firm of profits if the customers are pleased with the services and may create referrals. However, from the customer feedback database, the customers are, apparently, not content with the current process. The following are the probable causes of the complaints: Processing took too long (in certain case, 2 months) Appraisal Procedure is repetitive (the policy regardless and to ensure of accuracy of the properly value) Confusion of who to call on the process Lack of arrangement for closing loan Confusion of process and document submitted Error in payment notification even with auto-withdrawal from checking account Lack of confirmation regarding the necessity of written document (allow arrangement for customers to fill out information on the spot)

These problems reflect time consuming from lengthy processes, communication problems, account management problems, and most importantly the lack of customer orientation. In details, from one department to the other, the lack of connection and correlation between agents has contributed to the time consuming processes. From an internal aspect, the employees seem to be overwhelmed with information and lost track of the clients current process. Moreover, considering the work loads, the current process has too much weight on stage 2 and relied too much on the loan processor while the loan service specialist is only handling one major

task. In addition, the automatic payment system is also requiring some attention for technical error or human error. Analyzing each step with respect to the complaints, there are also a few flaws: Stage 1 Lack of information provided to the customers regarding the paperwork required for the follow up in the approval process. No explanations of the procedures that need to be carry out throughout the process.

Stage 2 Loan processor works in the background and should not deal directly with the loan agent who specializes in loan information and direct contact with customer flows. It would slow things down. Application form is not correlated closely to credit report. No establishment of time frame for the requested paperwork.

Stage 3 Considering that all customers work during the day, it is best to have the customer contacts the closing agent through phone and also email. Loan rate was not clearly presented earlier in the process for customer to select.

Stage 4 It is a bit out of place to have gone through all the processes and find out the customers did not finish with the previous loan and turn around get things done properly. In other words, all previous work would have been to waste. Also, if the new loan was not set up appropriately, the loan-servicing specialist should have noticed it before it is approved.

Stage 5 As mentioned above, the automatic payment system for customers needs to be monitored more closely to prevent notification error.

Overall, from a managerial aspect, the causes of the problems are within the communication, transparency, work load distribution, account management, and update duration.

Recommendation and implementation Recommendation Through the problems mentioned above, the new management team has analyzed the probable solutions that focus mainly on improving the service processes while considering the customer satisfaction. During the first step, as customers are pre-approved to apply for a loan, the loan agents need to ask the customer to provide all the information available regarding the necessary paperwork at hand in order to have a better

estimate of processing time for the customer discretion. Then, the loan agents must inform customers of policy and procedures that must carry out in uniformity and its importance to both the bank and the customers in regard of the Law and Real Estate Regulation Standards. In addition, the application form for customers to fill out has to be closely correlated to the credit report. This would increase the accuracy of the information provided to the loan processors as they work on the clients file. Besides, having most of the clients information ready before hand would decrease the time spent on requesting for additional information and at the same time created a shortcut to smooth out the servicing processes. Although it is inevitable that some paperwork are not necessary to be submitted in the early stage and must be requested later on during the process which may cause some delay; a period of time frame can be established within the agreement between the client and the loan processor or perhaps another agent that his/her main duty is also consisted of contacting clients for additional paperwork. In case the loan processor encounters problems in the clients processing progress, the loan processor is directly approach to the loan specialist, who monitors the loan agents and do not have to face directly with the incoming flow of customers, for advice. As customers are pre-approved to apply for a loan, the loan servicing specialist is required to work closely with the other departments to determine if the customers previous loans are paid off and to spot abnormality in the set up of the new loan. From the aspect of customer relation, establishment of form contact to customers is a necessity to provide better service and improve customer relation. Monitor closely of payments before contacting customers and check the internal databases every day for updates would help the bank in providing accurate information on the progress of the customer loan approval process as well as other information related to it. In regard of the work load in the processing department, it is recommended by the management team that Colonial Savings Bank of Queensland requires more human resource in order to aid the banks growing flow of business and to support the service processes more effectively and quickly. There is a call for the establishment of a position as account manager or account monitor to keep track of the customers process, to update account process daily as documents are filed, and to be the direct contact for customers in the whole process in cases of questions and concerns of the process. In fact, the clients accounts are required to be on an accessible database which provides the status of its progress details so that the proper departments can access to it for adding information and look up information in any cases. Taking all the recommendation above in account, the processing departments must be informed of the new route of activities and be proactive with the new set up so it can be implement well and efficiently. Implementation After discussing about the concept of how the new external and internal processing should be, we shall see an updated version of the stages in the Loan Approval Process as follow: Stage 1: Loan application The process begins with a customer completing a loan application for a loan agent. The loan agent discusses the refinancing option with the customer and performs quick calculations based on customer-reported data to see if the customer qualifies for loan approval. If the numbers work, the loan agent explains the procedures that are required during the process along with the type of paperwork needed to be submitted along with the time frame that the paperwork has to be turned in. The customer signs a few papers to allow a credit check and then goes home to wait for notification of further request and the loans approval.

Stage 2: Loan processing The customers file is then passed on to a loan processor, who requests a credit check, verification of loans or mortgages from other financial institutions, an appraisal of the property, and employment verification. If any problems are encountered, the loan processor goes to the loan specialist for advice. If other agencies have requested the credit report, the customer is required to explain the discrepancies in writing or fax. If the explanation is acceptable, the letter is placed in the customers file and the file is sent to the loan specialist (and sometimes the banks board) for final approval. Stage 3: Loan closing The customer receives a letter of loan approval and is asked to contact the closing agent to schedule a closing date and to lock in a loan rate if the customer has not already done so. The closing agent requests the name of the customers lawyer to forward the loan packet. The lawyer is responsible for arranging a termite inspection, a survey, a title search, and insurance, as well as preparing the closing papers. The lawyer and the closing agent correspond back and forth to verify fees, payment schedules, and payoff amounts. Stage 4: New account establishment The loan-servicing specialist makes sure that the previous loan is paid off and the new loan is set up properly. (The loan servicing specialist stage will blend in with stage 2 and stage 3 to ensure the customers account is right.) Stage 5: Loan payment setup (will become the Account Management Stage to shorten the process and simplify the amount of responsibility) After the closing takes place, the banks loan-account specialist takes care of issuing payment books or setting up the automatic withdrawal of mortgage fees and calculating the exact monthly payments. The loan-account specialist also monitors late payment of mortgages. With the new recommendation implemented, the frontal of the process stages did not seem to change much but behind the scene, all the action will takes place to improve the service processes. From this modification of the operation, the new set up is believed to bring better performance, better account management, which provides better services to customers and shall enhance the business of Colonial Savings Bank of Queensland. References