Devil Is in the Details
A credit card processing operation made an expensive investment in upgrading its hardware system for processing of customer payments. After a lengthy installation and training period, the operation went live.
Immediately, management noticed an increase in departmental performance and productivity. Data entry operators showed a slight increase in their speed.
After nine months of operation, management began to notice a slight decline in productivity and throughput. A few adjustments to the process were made.
The decline in departmental performance continued to grow over the next several months. None of the processing and workflow adjustments had any impact.
The vendor was contacted and informed that their system was no longer performing to specifications. The vendor sent a team of technicians to test the hardware and software for flaws or errors.
After a week of testing, the vendor’s team reported that there weren’t any problems with the system.
The customer continued to experience lower throughput. The customer was convinced that it wasn’t a management, workflow or staff issue and it had to be a problem with the system or hardware.
A Problem With the System
Again the vendor was contacted, and a team of engineers arrived on site for a week of testing and analysis.
At the end of a long week, the engineering team reported they could not find any problems with the equipment or the software.
The customer was convinced that the problem was with the system. Tempers flared, tension rose, and threats of lawsuits were made if the problem wasn’t corrected.
In a final act of desperation before legal action, both parties agreed to a review by an independent third party.
A Review by a Third Party
The first step in the analysis by the independent consultant was to gather historical data on volumes and mix of work.
The amount of work to process a credit card remittance depends on the type of payment the cardholder makes.
The customer can pay:
- The full amount due
- The minimum amount due
- A different amount
The full amount and minimum amount payments require a single keying of the paid amount. If the amount paid matches to either the full or minimum amount due the transaction is considered valid and accepted for payment.
When an alternative payment is made, the amount must be keyed independently by two separate operators. The amount entered by each operator are compared and if the amounts match the payment is accepted.
Failure to match results in additional data entry work or supervisor intervention to resolve the discrepancy.
The consultant’s analysis discovered that the mix of payment types had changed over the disputed period. Due to changes in the economy and higher interest rates, cardholders increasingly paid more alternative amounts.
Additionally, the minimum average amount due had increased from less than one hundred dollars to an amount greater than one hundred.
On completion of the data and analysis, the independent consultant reported to the relief of the vendor and anger of the client there was no problem with the equipment.
In fact, the hardware was performing better than contracted specifications.
The Root Cause
The root cause of the drop in throughput was due to the change in payments. An increase in the number of alternate payment transactions along with a larger (greater than $100) payment amount was accountable for the drop in throughput.
Increased Data Entry Work
In other words, more work and time were required to process the same volume, but not the same type of work. The increase in the dollar amount of the payment increased the number of keystrokes for each payment by 14%.
Before payments under $100 required five keystrokes for the amount and one keystroke for the enter key. Afterward, six keystrokes were required for the amount and one for entering.
The one additional keystroke due to a change in dollar amount accounted for a 14% increase in data entry work.
During the same period, alternative payment amounts increased from a normal 30% of total volume to greater than 50% of processed volume. Each alternative payment required double keying for validation of the payment amount.
A combination of factors was responsible for the decline in department performance. The catalyst for the change was the economy.
An increase in interest rates resulted in a larger amount due to outstanding balances. The greater payment amount resulted in more keystrokes per payment.
An increase in the percentage of payments for an alternative amount resulted in more work requiring double payment verification.
The combination of these factors had produced a thirty percent decline in overall department throughput. The decline was valid and quantifiable.
An interesting side note and discovery was that the average data entry speed of individual operators had increased as they became more familiar and confident in the processing system.
Had their data entry productivity not improved the throughput decline would have been greater.
The Managing Operations Workshop delivers training, practice and discussion of fundamental tools and skills for addressing similar operational challenges.