and monitor workflows as a first step to help it adapt to its newly competitive status. Girobank, a Liverpool-based bank that specializes in processing payments made at the country's 19,000 post offices, plans later this year to adopt image-capture technology to cut costs and improve service offerings - the better to compete with giants Midland Bank, Barclays, Lloyds, and National Westminster. Girobank's challenges since privatization are similar to the pressures on U.S. banks to raise earnings, cut costs, and restructure operations. And the huge scale of Girobank's check processing operation resembles that of some of the largest U.S. banks. Girobank processes 147 million documents annually, which is not unusually high. But the Liverpool bank must track about 15,000 pouches of work coming in daily from post offices, with each pouch containing between a few checks and a couple of thousand. By contrast, even a large U.S. bank probably would receive fewer than 2,000 pouches a day from its branches. Until 1990, Girobank was the payments clearing system for the British post office. The post office, with its thousands of branch offices, historically was a more convenient place to do much day-to-day banking, such as paying bills, than many banks. Today, fully one quarter of British pound payments taken in by retail companies are processed by Girobank, according to bank officials. Annually, Girobank processes 147 million documents - like bill payments for electricity and gas boards, unemployment benefits, pension payments, and vouchers for milk. In 1990, Girobank was bought by Alliance & Leicester, a building society that is roughly similar to an American thrift. Last year, Alliance & Leicester folded the consumer business of the former Girobank into the building society. The new Girobank, which employs about 3,000, is expected to focus on and expand its corporate business. To better compete, Girobank is working to attract corporate customers by, among other things, offering service quality guarantees in return for business. But in order to meet service level guarantees, Girobank had first to understand how work flowed through its check processing facilities. Once Girobank was privatized, one of the biggest problems it faced was that it relied on the mail, rather than private couriers, to deliver the checks and other payment instruments. The vast majority of the approximately 15,000 pouches of documents received each business day came in during a period of three to five hours each night. Under this deluge, Girobank had little, if any, control over check delivery, nor did it have the means to track the post office's performance, so it didn't know why a particular check didn't clear. At best, Girobank could count about 4% of the deliveries coming in each day. That left the bank responsible for compensating customers when checks didn't clear as quickly as they should have - even when Girobank was not to blame. The bank couldn't prove that the fault occurred elsewhere. "We suffered from service failures, which impact on the quality of the service we offer to customers," said John Pendlebury Green, project manager at Girobank in Liverpool. "We wanted to put a high degree of control into the system." Mr. Green added, "We'd always thought from our sampling of deliveries that most of the failures occurred prior to the check's arrival in the bank, but we couldn't prove it. We had a big gray area to look at." In response to that problem, Girobank has installed PC-based software, from Littlewood Shain & Co., a unit of Automated Financial Systems, Exton, Pa. Using the workflow software, called CheckTrack Plus, Girobank can now monitor 85% of the mail pouches it receives, up from only 4% before it installed the software last year. "Now we can actually say it was delayed in the post office," said Mr. Green. The appropriate party can then be required to compensate the customer. The workflow software works like this: First, each post office outlet puts a bar code on the pouches it ships out. The bar code identifies the office and the day of the week the pouch has been sent. The pouch is sent to one of Girobank's two main processing sites in Wigan and Bootle, both in northwest England. The software is not yet in use at the bank's other three processing sites. At the processing centers, the bar code information is scanned into the CheckTrack Plus system using a hand-held laser scanner. The time of the delivery is noted. If the delivery is within ten minutes of its expected time of arrival, it is considered on time. If the delivery is later than that, Girobank begins to build a profile of work coming in from that post office outlet. "If some areas are particularly bad, as we've found, we can reschedule the delivery times," said Mr. Green. Another problem that has arisen is that post offices are not bar-coding all the pouches. "With the volume we've got, it's crucial that as many as possible be bar-coded," Mr. Green noted. Girobank employees now work at keeping the 20,000 post office outlets up to date, with pouches and books of bar codes. The workflow system has set the stage for moving to image capture technology. "When banks move to image technology, they lose some control, because the checks aren't balanced in the traditional way, as they are (when) manually encoded," said Daniel O'Donnell, a project manager at Littlewood Shain. Because operators aren't keeping close tabs on the process, the checks may temporarily be well out of balance after running through the image capture system. Workflow software won't prevent checks from being out of balance, Mr. O'Donnell said, but it will help the bank to keep better control of the process. By the second quarter of 1996, Girobank plans to have fully operational a high-speed image capture system from Unisys Corp. The workflow software will then feed into the image capture system. Girobank staffers formerly employed as proof encoders will be in charge of looking through the work coming from post offices - looking at the condition of the checks and generally monitoring the quality of the documents. Mr. Green plans to use the system to begin monitoring the quality of the presentation from each post office outlet. Employees will, for example, look at several hundred pouches per night to see if the right documentation is in the pouch, to make sure that there are no paper clips or rubber bands holding checks together. That information will be detailed on the personal computer, and, over time, profiles of the quality of work presented by each post office branch will be available. The bank will also be able to offer special services to key customers. If, for example, Girobank knows that a specific pouch holds corporate checks or a company's payroll, that pouch can get preferential treatment. Surprisingly, Mr. Green said he does not anticipate any layoffs at Girobank. Instead, employees are being redeployed to focus on problem areas in production. "We've significantly expanded the number of (post office) branches we monitor," he says. "All the staff savings have been absorbed into monitoring those offices."

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