An existing insurance application process requires manual keying of three different forms by a team of data entry operators
The three forms' input times appear in the following table along with the numbers of each type of form anticipated for the coming year. A proposed refinement in the process would reduce the number of forms but make each slightly longer. This would be combined with a search of public records on the World Wide Web as necessary. These times and quantities appear in the lower half of the table. If the labor rate for the data entry operators is the same, which method is preferable?
Form Time to Input
(minutes) Quantity (forms/year)
Part A — Existing Method 3 1,200,000
Part B — Existing Method 3 1,200,000
Part C — Existing Method 4 1,100,000
P art A — Proposed Method 4 1,200,000
Part B — Proposed Method 4 1,200,000
Web Search — Proposed Method 2 650,000
Annual Labor Cost = (Time to Perform Process) × (Number of Times Performed/Year)
Existing Method
Part A 3 minutes × 1,200,000 = 3,600,000
Part B 3 minutes × 1,200,00 0 = 3,600,000
Part C 4 minutes × 1,100,000 = 4,400,000
Proposed Method
Part A 4 minutes × 1,200,000 = 4,800,000
Part B 4 minutes × 1,200,000 = 4,800,000
Part C (web) 2 minutes × 650,000 = 1,300,000
Total Proposed Process: 10,900,000 minutes - A savings of 700,000 minutes/year
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