Analysis of service cost

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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
ANALYSIS OF SERVICE COSTS FOR OPTIMAL CAPACITY DETERMINATION IN A QUEUING SYSTEM E.C. Ubani Department of Project Management Technology, Federal University of Technology, Owerri – Nigeria

AUGUST 2011
VOL 3, NO 4

Abstract This study examines and analyses service costs for the determination of the optimalsystem capacity and utilization needed in the operations of multi-channel queuing system for customers’ services. Managers are usually faced with the challenges of deciding on the capacity requirement (number of servers) to contain with the expected number of customers in a service station. A survey method was used to capture data from the focused and target commercial bank operators with a view ofdetermining optimal system capacity that will enhance customers satisfaction and returns on investment. The data was analysed by subjecting it to iterative processes using appropriate multi-server infinite queuing table. The results of the analysis indicate that the optimal system capacity was found to be nine servers (channel) with operating cost of N10,603 per hour and a system utilization of64.20%. Managers should always strive to enhance system performance by periodic in-depth analysis of system capacity requirement as well as striking a balance between cost of providing the service and cost of queuing. Keywords: Operating characteristics, Traffic Intensity, Service Cost Analysis, Queue Discipline, Arrival And Service Rates, Total Expected Cost, Utilization, Objective Function.Introduction The service characteristics and operating capacity of commercial banking facilities could be viewed as a queuing system in which, customers arrive into the system randomly, spend random service and queuing times, and then depart. Queuing is one of the familiar settings in which managers encounter probabilistic model in the management of systems that create goods and/or provide services. Forinstance, service or manufacturing system can usually be represented as a network of queues in which customers wait to be served, raw materials wait to be processed, and parts wait to be assembled. Therefore, it is important to be able to make predictions about the behaviour of a queuing situation so that we are in a position to either manage the system better or even to eliminate the undesirableeffects of queues. Also, there is need to evaluate and analyse the traffic intensity and operating characteristics of queues so as to determine the optimal system capacity, type of queuing system structure to adopt and the number of servers to employ. These measures will go a long way in the improvement of service

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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

AUGUST 2011
VOL 3, NO 4

efficiency and customers satisfaction. The number of servers to employ, the total operating cost and expected benefit accruable from the system could be veritable factors in the managerial decision making process with respect to system design. The basic results of queuing model provide aconvenient method of optimizing the objective functions, estimating system performance, providing basic statistics of likely queuing characteristics, traffic intensity, average workload and mean machine or service capacities available. In Nigeria, the Information and Communication Technology (ICT), and ebanking have not been fully developed and complied with in providing services to the customers,hence commercial banks are characterized by long queues due to low service rate. There are also problems of indecision with respect to the number of severs and service stations, and facilities to be employed in operations systems, hence there is a research gap. Queues or waiting lines are usually characterized by high cost of operation such as service and queuing costs. The objectives of the study...