Case Problem 1 REGIONAL AIRLINES

Regional Airlines is establishing a new telephone system for handling flight reservations. During the 10:00 A.M. to 11:00 A.M. time period, calls to the reservation agent occur ran- domly at an average of one call every 3.75 minutes. Historical service time data show that a reservation agent spends an average of 3 minutes with each customer. The waiting line model assumptions of Poisson arrivals and exponential service times appear reasonable for the telephone reservation system.

Regional Airlines' management believes that offering an efficient telephone reserva- tion system is an important part of establishing an image as a service-oriented airline. If the system is properly implemented, Regional Airlines will establish good customer relations, which in the long run will increase business. However, if the telephone reservation system is frequently overloaded and customers have difficulty contacting an agent, a negative cus- tomer reaction may lead to an eventual loss of business. The cost of a ticket reservation agent is $20 per hour. Thus, management wants to provide good service, but it does not want to incur the cost of overstaffing the telephone reservation operation by using more agents than necessary.

At a planning meeting, Regional's management team agreed that an acceptable cus- tomer service goal is to answer at least 85% of the incoming calls immediately. During the planning meeting, Regional's vice president of administration pointed out that the data show that the average service rate for an agent is faster than the average arrival rate of the telephone calls. The vice president's conclusion was that personnel costs could be minimized by using one agent and that the single agent should be able to handle the tele- phone reservations and still have some idle time. The vice president of marketing restated the importance of customer service and expressed support for at least two reservation agents.

The current telephone reservation system design does not allow callers to wait. Callers who attempt to reach a reservation agent when all agents are occupied receive a busy sig- nal and are blocked from the system. A representative from the telephone company sug- gested that Regional Airlines consider an expanded system that accommodates waiting. In the expanded system, when a customer calls and all agents are busy, a recorded message tells the customer that the call is being held in the order received and that an agent will be available shortly. The customer can stay on the line and listen to background music while waiting for an agent. Regional's management will need more information before switching to the expanded system.

Managerial Report

Prepare a managerial report for Regional Airlines analyzing the telephone reservation sys- tem. Evaluate both the system that does not allow waiting and the expanded system that allows waiting. Include the following information in your report:

1. An analysis of the current reservation system that does not allow callers to wait. How many reservation agents are needed to meet the service goal?

2. An analysis of the expanded system proposed by the telephone company. How many agents are needed to meet the service goal?

3. Make a recommendation concerning which system to use and how many agents to hire. Provide supporting rationale for your recommendation.

4. The telephone arrival data presented are for the 10:00 A.M. to 11:00 A.M. time period; however, the arrival rate of incoming calls is expected to change from hour to hour. Describe how your waiting line analysis could be used to develop a ticket agent staffing plan that would enable the company to provide different levels of staffing for the ticket reservation system at different times during the day. Indicate the information that you would need to develop this staffing plan.