I have recently been getting a striking reaction from many senior
management audiences. They all agree that products have got vastly
better over recent years, but they equally agree that the process of
ordering and buying them and getting them serviced has got worse!
They spontaneously tell me that while they love driving their upmarket
German premium brand cars, they will not buy another one because of
the terrible experiences trying to get them fixed when they go wrong,
which they seem to do all too often. Many of them wonder whether they
would have the same experience owning a Lexus, built with Toyota’s
fabled quality levels.
This is in fact a symptom of a deeper problem, from which we can learn a
lot. A decade ago as the Japanese car makers began to make serious
inroads into world markets, European car makers decided their future lay
in coming up with more distinctive designs, adding lots of new
technologies, offering a greater range of models and a huge choice of
specifications so customers could customise their cars to make them
distinctive. Business writers called this mass customisation. For a decade
or more it seemed to work. Now the chickens are coming home to roost!
The problem is not with the distinctive designs: when they work they
really attract attention, as they do unfortunately when they fail to hit the
mark! Adding technology is also not the problem, provided it is thoroughly
proven to work flawlessly in the highly demanding environment in which
we drive our cars and provided it delivers real value to customers, rather
than bewildering complexity. The problem is that we can only really cope
with so much choice. As our lives get busier we have less time to deal
with all these choices. Beyond a certain point the distinctions between
different models and options add little or no value at all.
The real problem is when this complexity begins to negatively impinge on
the ownership experience and on the cost base and profits of the
producer. It is not difficult to add several thousand pounds of options as
you specify your uniquely customised car. However when you come to sell
the car, maybe even to the same sales person, ou discover that these
options make no difference to the trade in price you are ffered! This
leaves a nasty taste in the mouth and makes you very reluctant to epeat
the experience. Next time you will probably choose a brand that offers a
package that fits your needs. Although the dealer loves the extra profit on
the options, these cars often sit around for much longer waiting for the
next owner, tying up capital in the meantime.
However the crunch comes when dealers are expected to fix all the
problems on this bewildering array of products and options, fitted with
unreliable technologies. There is no way they can diagnose and solve all
these problems and order and stock all the required replacement parts.
Not surprisingly their ability to complete service and repair jobs right first
time on time has fallen from the typical average around 60% to nearer
30%. That means two thirds of customers are frustrated and
disappointed! And they tell their friends and relatives.
Extended warranties mean that manufacturers are paying for all this.
Almost certainly most of the profits they traditionally make on selling
expensive options and spare parts are now being lost in ballooning
warranty costs. Product proliferation is not the way to compete with the
new industry leader, Toyota.
The longer term solution is to go back to the lean basics, to embed quality
at source into every step in the design and production process and to
review the product range and bundle the options. The short term solution
is to improve the parts system and dealers’ ability to fix today’s problems.
In
Lean Solutions
we show how the same lean techniques we use in the
factory can dramatically improve car dealers’ ability to get jobs fixed right
first time on time. Toyota is now beginning to roll these techniques across
its dealer networks across the world. It is surprising how other
manufacturers are blind to improving this most frequent point of contact
with their customers. Their future will critically depend on how long they
take to follow Toyota’s example. Most of them still do not measure the
right first time on time experience of their customers.
Yours sincerely
Professor
Daniel T Jones
