MANSCIEcasereport Paper 2 3

I.
Case Summary
Pacific National Bank is considered a medium- sized bank with its twentyone branches. The bank has always relied on an outside vendor to operate its
own automatic teller machines (ATMs). Since ninety percent of the ATM
customers prefer other banks to perform their transaction, Operations Vice
President Maria Perez wishes to improve the bank by offering a broader mix of
banking services with its own machines tied into its own data- processing
network. Moreover, by operating its own ATM machines, costs are expected to
lessen because fewer human tellers would be required for the same volume of
transactions as before.
Ms. Perez selected the Greenhills office as the test branch for a captive
ATM. Customers from that branch were enlisted to sign up for a Pacific ATM
card. Once a number of ATM card holders was established, statistics were kept
by recording the average number of arrivals of customers per period or schedule
of the bank. They are as follows:
Previous data show that customers arrive randomly at a stable mean rate, so the
assumption of a Poisson process is valid. Moreover, the mean time required to
complete customer transactions is two minutes, and the individual service times have a
frequency distribution with a pronounced positive skew, so an exponential distribution
may be used to approximate data.
Once Pacific National Bank start operating its own ATM machines, it is expected
that there will be a 30% diversion of regular business away from human tellers to the
ATM, which produced a further 2% expansion beyond the previous level of overall client
transactions. In addition to this, it is also expected that the mean service time at an ATM
is one-half minute, with an exponential distribution serving as an adequate
approximation to the unknown positively skewed unimodal distribution that actually
applies. Ms. Perez believes that, once the ATM is installed, the Greenhills human tellers
will be left with a greater proportion of the more involved and lengthy transactions,
raising their mean service time to 2.5 minutes.
II. Body
1. Assume that Pacific National Bank remains with human tellers only.
a. For each time period given in the table, determine the minimum number of tellers
needed on station to service the customer stream.
In order to know the minimum number of tellers needed on station
to service the customer stream, we first need to know how often do
customers arrive and the time allotted in serving these customers. These
can be determined by solving for the mean arrival rate and mean service
time. After solving for these, the mean arrival rate will then be divided by
the mean service time to get the minimum number of tellers needed. The
solution is as follows:
Period (1)
= no. of calling units/ unit of time
= 155 customers / 2 hours
= 77.5 customers / hour

= 2 minutes / customer
= 30 customers / hour
Minimum Number of Tellers
=/
= 77.5 / 30 = 2.583333 3 tellers
Period (2)
= 242 customers / 1 hour

=/
= 242 / 30 = 8.066666667 9 tellers
Period (3)

=/
= 145 / 30 = 4.833333 5 tellers
Period (4)
= 184.666667 customers / hour

=/
= 184.666667 / 30 = 6.1555556 7
tellers
To summarize, for periods one, two, three and four, three, nine, five and
seven tellers are needed, respectively.
b. Assume that the number of tellers found in part (a) is used. For each time period,
determine the mean customer waiting time.
In order to determine the mean customer waiting time, it is essential
to know the type of model the situation has in order to know the equations
to be used in solving for the missing data. In this particular case, the
problem follows a multi-server model with poisson arrivals and exponential
service times since, as the problem states, it is exponentially distributed
and may opt to follow a poisson process. Also, its servers are greater than
one and all have the same rate of service.
Once the type of model is determined, solution may begin. First, the
probability of having zero calling units in the system must be solved. Then,
the expected number of calling units must then be found. After solving for
these, the data determined will be used to get the mean customer waiting
time. The solution is as follows:
Period 1:
Probability of having 0 calling units:
Period 2:
Period 2:
Period 3:
Period 4:
c.
c. For each time period,

determine the mean customer waiting time when the number of tellers
is one more than that found in part (a).
Period 1:
Period 2:
Period 3:
Period 4:
2.
Past
experience shows that the drop-off in

clientele due to waiting translates into an expected new present value in lost profits of
P0.50 per minute For each time period, determine the average hourly queuing system
cost assuming that the bank uses the following service arrangement:
a. The minimum no. of human tellers necessary to service the customers
In order to determine the average hourly queuing system cost, data
such as mean arrival rate, expected time waiting in line and the amount of
possible lost in profits will be used and multiplied to each other. The
solution is as follows:
Period 1
AHQSC =3.5968609 X 0.50 X 77.5
= 139.39 pesos
Period 2
AHQSC =1.44438271 X 0.50 X 242
= 174.77 pesos
Period 3
AHQSC = 11.0134277 X 0.50 X 145
= 798.47 pesos
Period 4
AHQSC = 1.58159678 X 0.50 X 184.666667
= 146.03 pesos
b. One teller more than was found in part (a) of Question 1
Period 1
AHQSC = 0.49205654 X 0.50 X 77.5
= 19.07 pesos
Period 2
AHQSC
Period (3)
AHQSC
Period (4)
AHQSC
= 0.43884782 X 0.50 X 242

= 53.10 pesos
= 0.90700303 X 0.50 X 145
= 65.76 pesos
= 0.42769208 X 0.50 X 184.666667
= 39.49 pesos
3. Suppose that the ATM is installed and that customers themselves decide whether to use
human tellers or to use the ATM, and that two queues form independently for each.
Finally, assume that a 10% traffic increase is generated by the ATM within each open
time period and that all of it is for the ATM.
a. Determine for each period the mean arrival rate at the human teller windows.
In order to solve for the mean arrival rate, we simply divide
the no. of calling units by its unit of time. As for the number of
calling units, we need to take note of the thirty percent diversion
from the human tellers towards the ATMs, hence:
Period 1
No. of calling units
= Daily ave. no. of arrivals x % from human tellers

=155 x 70%
= 108.50
= no. of calling units / per unit of time

= 108.5 customers / 2 hours
= 54.25 54 customers / hour
Period 2

=242 x 70%
= 169.40
= 169.40 customers / 1 hour
Period 3

=290 x 70%
= 203
Period 4

= 554 x 70%
= 387.80
= 387.80 customers / 3 hours
b. Do the same with regard to the mean arrival rate at the ATM.
Period (1)
155 x 10%* = 15.5
*Assumed traffic increase by the ATM w/in each open time period
155 x 1%* = 1.55
*Half of the percentage of expansion beyond the previous level of overall
client transactions (absorbed by the ATM)
155 x 30%* = 46.5
*Percentage of diversion from human tellers to ATM
Total = 63.55 64 customers
Period (2)
242 x 10%* = 24.2
242 x 1%* = 2.42
242 x 30%* = 72.6

Period (3)
290 x 10%* = 29
290 x 1%* = 2.9
290 x 30%* = 87
Period (4)
554 x 10%* = 55.4
554 x 1%* = 5.54
554 x 30%* = 166.2
c. Find the minimum number of human tellers required to be on station during each time
period.
In order to solve for the minimum number of human tellers required
to be on station during each time period, we shall solve for s which is the
number of service facilities by dividing the mean arrival rate by mean
service time.
Period (1)
= 54 / hour
S = 54 / 24 = 2.25 3 tellers
Period (2)
= 169 / hour
S = 169 / 24 = 7.041666667
8 tellers
ALTERNATIVE SOLUTION:
Mean Arrival at Human Teller Window
Period (3)
= 102 / hour
S = 102 / 24 = 4.25 5 tellers
Period (4)
= 129 / hour
S =129 / 24 = 5.375 6 tellers
Period (1)
155 x 10% = 15.5 16
155 x 2% = 3.1 4 / 2 = 2
Total = 18
Period (2)
242 x 10% = 24.2 25
242 x 2% = 4.84 5 / 2 2.5 = 3
Total = 28
Period (3)
290 x 10% = 29
290 x 2% = 5.8 6 / 2 = 3
Total = 32
Period (4)
554 x 10% = 55.4 56
554 x 2% = 5.8 6 / 2 = 3
Total = 62
Mean Arrival Rate at ATM
Period (1)
155 x 0.30 = 46.5 47
Human Tellers 155 - 47 = 108
ATM
47 + 18 = 65
Period (2)
242 x 0.30 = 72.6 73
ATM
73 + 28 = 101
Period (3)
290 x 0.30 = 87
ATM
87 + 32 = 119
Period (4)
544 x 0.30 = 166.2 167
ATM
167 + 62 = 229
4. Assume that the number of human tellers is one more than that found in
part (c) of Question 3. Determine for Ms. Perez the mean customer waiting time
during each open period for those customers who seek the following:
a. Human tellers
Period 1
P(0)
1
(7.6796875)+1.067871094(2.285714286)
P(0)
P(0)
= =
54
s 4x24
1
10.12053571
0.098808998 or 9.88%
=
0.5625
Expected number of calling units in the queue

Lq
= 0.098808998 (54/24)4(0.5625)
4!(1-0.5625)2
= 0.3100857
Expected number of calling units in the system
Ls
= 0.3100857+ (54 / 24)
= 2.5600857
Expected time waiting in line
Wq
= 0.3100857 / 54
= 0.005742327 hr
= 0.3434396 mins or 20.67 secs
Period 2:
P(0) =
1
827.3348168+117.3048945(4.595744681)
P(0) =
1
1366.438162
P(0) = 0.000731829 or 0.07%
=
= 169 = 0.782407407
Expected number of calling units in the
s
9x24
queue
Lq
= 0.00731829 (169/24)9 (0.782407407)
9!(1-0.782407407)2
= 1.418634399
5.098839243

system
Ls
= 1.418635719 + (169 / 24)
= 8.460301066

Wq=
=
0.848839259 / (102)
=
0.00832195 hr
=
0.499317201 mins or 29.96s

Wq
= 1.418635719 / 169
= 0.008394286 hr
= 0.503657183 mins or 30.22 secs
Period 4:
= = 129 = 0.767857142
s 7x24
queue
Lq
= 0.003800289 (129/24)7(0.767857142)
7!(1-0.767857142)2
=
378.2216046
271.6071449
=
1.392531867
system
Ls
=
1.392531869 + (129 / 24)
=
6.767531867
Period 3:
= = 102
s 6x24
= 0.70833333

queue
Lq
=0.012455475 (102/24)6(0.70833333)
6!(1- 0.70833333 )2
=
51.99140482
61.25
=
0.848839242

Wq
= 1.392531869 / (129)
= 0.01079482 hr
= 0.64768924 mins or 38.86 secs

system
Ls
0.848839259 + (102 / 24)
b. Access to the ATM

Period 1:
= 32 customers/hour
= 32 customers/hour
= 30 seconds/customer
= 120 customers/hour
Expected Time Waiting in Line:

Wq = 32 / [120 (120 - 32)]
= 32/ [120 (88)]
= 32 / [10,560]
= 0.00303030 hours x 3,600 seconds/hour
= 10.91 seconds
Expected Time in the System:

Ws
= 1 / (120 - 32)
= 1 / 88
(or add 30 seconds service time)

= 0.01136364 hours x 3,600 seconds/hour
= 40.91 seconds
Period 2:
Wq = 100 / [120 (120 - 100)]
= 100 / [120 (20)]
= 100 / [2,400]
= 0.041666667 hours x 60
minutes/hour
= 2.5 mins or 2 mins. 30
secs.
Period 3:
= 59.5 customers/hour
= 59.5 customers/hour
Wq = 59.5 / [120 (120 - 59.5)]
= 59.5 / [120 (60.5)]
= 59.5 / [7,260]
= 0.008195592287 hours x
3,600 seconds/hour
= 29.50 seconds
Period 4:
= 76 customers/hour
= 76 customers/hour
Wq = 76 / [120 (120 - 76)]
= 76 / [120 (44.)]
= 76 / [5,280]
=0.0143939 hours x 3,600
seconds/hour
= 51.82 secs
Ws
= 1 / (120 - 100)
= 1 / 20
= 0.05 hours x 60 minutes/hour
= 3 minutes

Ws
= 1 / (120 - 59.5)
= 1 / 60.5
= 0.01652892562 hours x 3,600
seconds/hour
= 59.50 seconds
Ws
= 1 / (120 - 76)
= 1 / (44)
= 0.0227273 hours x 60
minutes/hour
= 1.36 minutes or 1 min. 22
secs.
5. Consider the complete 24-hour, 7-day picture. Incorporate whatever information you
need from Questions 1 through 4 and your solutions, plus any additional information in
the case and any necessary assumptions, to compare the net cost of operation with and
without the ATM. Then give your overall recommendation to Ms. Perez.
COMPARISON NO. 1: Without ATM min VS Without ATM min+1
WITHOUT ATM MIN
Total Tellers Wage
Peri
(# of tellers)(# of
od
hours)(wage rate)
Total AHQHC
(hourly AHQHC)(# of
hours)
Total Cost per Total Cost per

Day
Week
(1)
(3)(2)(50)
= 300
(139.39)(2)
= 278.78
578.78
2,893.90
(2)
(9)(1)(50)
= 450
(174.77)(1)
= 174.77
624.77
3,123.85
(3)
(5)(2)(50)
= 500
(798.47)(2)
= 1,596.94
2,096.94
10,484.70
(4)
(7)(3)(50)
= 1050
(146.03)(3)
= 438.09
1,488.09
1,488.09
TOTAL COSTS: P17,990.54

WITHOUT ATM MIN+1
Total Tellers Wage
Perio
(# of tellers)(# of
d
hours)(wage rate)
Total AHQHC
(hourly AHQHC)(# of
hours)

Day
Week
(1)
(4)(2)(50)
= 400
(19.07)(2)
= 38.14
438.14
2,190.70
(2)
(10)(1)(50) = 500
(53.10)(1)
= 53.1
553.1
2,765.50
(3)
(6)(2)(50) = 600
(65.76)(2)
= 131.52
731.52
3657.60
(4)
(8)(3)(50) = 1200
(39.49)(3)
= 118.47
1,318.47
1,318.47
TOTAL COSTS: P9,932.27

COMPARISON NO. 2: Without ATM min+1 VS With ATM min+1
WITHOUT ATM MIN+1
Perio Total Tellers Wage
d
(# of tellers)(# of
Total AHQHC
(hourly AHQHC)(# of

Day
Week
hours)(wage rate)
hours)
(1)
(4)(2)(50)
= 400
(19.07)(2)
= 38.14
438.14
2,190.70
(2)
(10)(1)(50) = 500
(53.10)(1)
= 53.1
553.1
2,765.50
(3)
(6)(2)(50) = 600
(65.76)(2)
= 131.52
731.52
3657.60
(4)
(8)(3)(50) = 1200
(39.49)(3)
= 118.47
1,318.47
1,318.47
Total Tellers
Wage
Total AHQHC
Total Cost per
(# of tellers)(# (hourly AHQHC)
Day
of hours)(wage (# of hours)
rate)
Total Cost per

Week
Period
(1)
(4)(2)(50)
= 400
(9.30)(2)
= 18.60
418.60
2,093.00
(2)
(9)(1)(50)
= 450
(42.56)(1)
= 42.56
542.56
2,462.80
(3)
(6)(2)(50)
= 600
(25.47)(2)
= 50.94
650.94
3,254.70
(4)
(7)(3)(50)
= 1050
(41.78)(3)
= 125.34
1,175.34
1,175.34
TOTAL COSTS: 9,932.27

WITH ATM MIN+1
TOTAL COSTS: 8,985.84
WITHOUT ATM MIN+1 VS. WITH ATM MIN+1
Total Cost per
Perio
Week
d
w/o ATM min+1
Total Cost per

Week
w/ ATM min+1
Net
Advantage
(1)
2,190.70
2,093.00
97.70
(2)
2,765.50
2,462.80
302.70
(3)
3657.60
3,254.70
402.90
(4)
1,318.47
1,175.34
143.13
TOTAL COST ADVANTAGE: 946.43

III. CONCLUSION AND RECOMMENDATION
With an ending cost advantage of P946.63, it can be said that Pacific National Bank
operating its own Automated Teller Machines (ATMs) is beneficial to the company. Despite the
added costs for security, expensive installation fees, installation costs, utilities costs, and repair
and maintenance costs, the pros still weigh more than the cons in this situation considering the
cost advantage, added customers and easier banking transactions.
Moreover, since the bank will be saving costs by operating its own Automated Teller
Machines, the saved costs may be used for numerous expenses. One of these is to improve
bank facilities. More chairs and better air conditioning may be the cause of an increase in
customers. Another is to improve the companys corporate social responsibility. The company
may opt to donate the saved costs to a foundation or start their own foundation. Last possible
expense is the company expansion. It is stated earlier that Pacific National Bank is considered
as a medium- sized bank with twentyone branches. Maybe the bank could save enough
money to put up more branches, therefore expanding the company.

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I.

= no. of calling units/ unit of time

Minimum Number of Tellers

= no. of calling units/ unit of time

Minimum Number of Tellers

= no. of calling units/ unit of time

Minimum Number of Tellers

= no. of calling units/ unit of time

Minimum Number of Tellers

c. For each time period,

experience shows that the drop-off in

= 0.43884782 X 0.50 X 242

= Daily ave. no. of arrivals x % from human tellers

= no. of calling units / per unit of time

= Daily ave. no. of arrivals x % from human tellers

= Daily ave. no. of arrivals x % from human tellers

= Daily ave. no. of arrivals x % from human tellers

Total = 99.22 100 customers

Expected number of calling units in the queue

Expected number of calling units in the

Expected time waiting in line

Expected time waiting in line

Expected number of calling units in the

Expected time waiting in line

Expected number of calling units in the

0.848839259 + (102 / 24)

b. Access to the ATM

Expected Time Waiting in Line:

Expected Time in the System:

(or add 30 seconds service time)

Expected Time in the System:

Total Cost per Total Cost per

TOTAL COSTS: P17,990.54

Total Cost per Total Cost per

TOTAL COSTS: P9,932.27

Total Cost per Total Cost per

Total Cost per

TOTAL COSTS: 9,932.27

Total Cost per

TOTAL COST ADVANTAGE: 946.43

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