Q1. Discuss the symptoms and three distinct causes of problems at Manzana’s Fruitvale branch.

Manzana’s Fruitvale Branch is suffering from a number of problems. First and foremost sympton is the net loss of $174,000 and $121,000 during the first two quarters of 1991, respectively. These are the first losses reported by their commercial insurance business in the last three years. Next, not only is the frequency of policy renewal requests being processed late steadily increasing but they have also experienced an uptick in lost renewals as a result. The culprit is Fruitvale’s turnaround time (TAT).

The calculated TAT for the week ending 9/6/1991 is 8.2 days which, when compared to the 1-day TAT promised by their largest competitor, Golden Gate, is exceptionally high. Their backlog of policy requests (WIPs) for said week is 82 and the number of new policies and endorsements do not seem to be generating as much revenue as in the past. As pricing and commission differences among insurance firms have narrowed, agents have increasingly made referrals based on customer service (i.e. quick TAT).

Fruitvale’s backlog and TAT indicate the presence of a bottleneck which is resulting in idle time for some employees while overburdening others. Moreover, they are losing renewal business to competitors while trying to keep their employees, especially the senior underwriters with many years of experience, from going to Golden Gate. Fruitvale Branch is in serious trouble and in need of major changes if they wish to become profitable again.

We focused on three major causes of the problems at Fruitvale. First, the FIFO method is not strictly enforced at Fruitvale. Employees prioritize RUNs and RAPs over RAINs and RERUNs. The general belief is that new policies are more profitable for the company so employees give the highest priority to RUNs and RAPs. RERUNs are