Office Equipment, Inc.(OEI) leases automatic mailing machines to business customers inFort Wayne, Indiana. The company built its success on a reputationof providing timely maintenance and repair service. Each OEIservice contract states that a service technician will arrive at acustomer’s business site within an average of 3 hours from the timethat the customer notifies OEI of an equipment problem.
Currently, OEI has 10customers with service contracts. One service technician isresponsible for handling all service calls. A statistical analysisof historical service records indicates that a customer requests aservice call at an average rate of one call per 50 hours ofoperation. If the service technician is available when a customercalls for service, it takes the technician an average of 1 hour oftravel time to reach the customer’s office and an average of 1.5hours to complete the repair service. However, if the servicetechnician is busy with another customer when a new customer callsfor service, the technician completes the current service call andany other waiting service calls before responding to the newservice call. In such cases, after the technician is free from allexisting service commitments, the technician takes an average of 1hour of travel time to reach the new customer’s office and anaverage of 1.5 hours to complete the repair service. The cost ofthe service technician is $80 per hour. The downtime cost (waittime and service time) for customers is $100 per hour.
OEI is planning toexpand its business. Within 1 year, OEI projects that it will have20 customers, and within 2 years, OEI projects that it will have 30customers. Although OEI is satisfied that one service techniciancan handle the 10 existing customers, management is concerned aboutthe ability of one technician to meet the average 3-hour servicecall guarantee when the OEI customer base expands. In a recentplanning meeting, the marketing manager made a proposal to add asecond service technician when OEI reaches 20 customers and to adda third service technician when OEI reaches 30 customers. Beforemaking a final decision, management would like an analysis of OEIservice capabilities. OEI is particularly interested in meeting theaverage 3-hour waiting time guarantee at the lowest possible totalcost.
- What is your recommendation for the number of servicetechnicians to hire when OEI expands to 20 customers? Use theinformation that you developed in Question 4 (above) to justifyyour answer.
