Tactica Purvodaya 2k17 | VGSoM, IIT Kharagpur Supp Suppll y Ch Chai n & Oper at i ons C Cll ub ( ScOp cOpe)
TACTICA Guidelines for the case analysis:
The following case lets test your knowledge on operational concepts and logical reasoning ability. Weightage will be given to: 1. Problem identification. 2. Ingenuity and applicability of ideas. 3. Concrete solutions and recommendations with the implementation strategy. 4. Unnecessary theories or explanations will not invite any attention. 5. Analysis on the basis of various parameters.
The rational assumptions, if any, have to be explicitly listed.
The case analysis must be submitted in form of presentation (.ppt) in a single PPT file (Tactica_[Team Name].ppt). Please include the team name, college and name of the members in the title slide.
Only the leader of the team needs to submit through registered e-mail id.
The total number of slides is maximum of 10 of slides including the title slide.
The second round of the TACTICA will be a campus round during Purvodaya 2017.
Details of the second round will be mailed to selected participants who qualify in the first round.
Please make use of information only from the case.
Try to be precise and to the point in analysis.
Please adhere to the timelines.
In case of any disputes the decision of the team SCOPE will be final.
Please submit your analysis by 12th January 2017, Thursday [EOD] through the given dropbox link naming the file as specified above. ( Tactica_[Team Name].ppt): https://www.dropbox.com/request/XFzdJ9oXuDpi3Wf7ov25
In case of any queries write to
[email protected]. Or contact the SPOC for the event. Best Wishes!!!
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TACTICA Mr. Mukerjee, Managing Director of Motorzone sat on his chair in his cabin on a Sunday evening and pondered about the business situation of Motorzone and overall business scenario in automobile service sector. He was facing many operational hurdles in his company which need to be addressed to overcome the recent decline in the revenues and cope up with the present market competitions.
The Indian automobile industry is one of the largest in the world. The industry accounts for 7.1 percent of the country's Gross Domestic Product (GDP). Sales of passenger vehicles increased by 16.7 percent units in August 2016 driven by better-than-expected monsoon and strong buying sentiment. The Government of India aims to make automobiles manufacturing, one of the main drivers of ‘Make in India’ initiative, as it expects passenger vehicles market to triple to 9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26. The Indian automotive sector has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 percent to India’s Gross Domestic Product.
According to an ICRA report, out of the total estimated turnover of $8 billion of the automotive replacement market, excluding the sales of batteries and tyres, around 75 percent is contributed by passenger vehicles. As per the report the size of the replacement market, including sales of auto spare parts and labour charges for car servicing, is estimated to have grown at 15 percent CAGR over the last five years. The growth curve clearly indicates the industry is likely to invite some more players. India is yet to witness any specific government body or association backing automotive maintenance and repair industry, and is, therefore, still lacking in quality and is fraught with price disparity.
From the days of Henry Ford's production line, the automobile industry has been based on a "supply-push" philosophy -- a strong bias toward "filling the factories" to cover high fixed costs. Dealer networks were created as logical extensions of the "supply-push" model. The networks were designed to hold inventory, leverage private capital (without threatening the manufacturers' control) and service and support what was then a less reliable and more
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TACTICA maintenance-intensive product. Those networks generally were built around entrepreneurs focused on a defined geographic area, servicing one or at most two brands. This distribution model has been remarkably resistant to change. Historically, dealer networks have become ingrained and protected over time by a web of habits, contracts, regulations and laws.
Motorzone
“Motorzone” is an automobile service centre located in Kolkata, West Bengal. Motorzone is an authorized service center for the passenger car segment (Sedan, Hatchback, and SUVs) of ‘ATM Automobiles Ltd.’. It has an exclusive service centre in Salt Lake City; and provides service to other brand automobiles and imported cars, which is carried out at its other service centre at Dumdum. With complete in-house facilities and well-trained manpower, Motorzone services all kind of passenger cars making it a one stop solution for automobile servicing needs.
Services offered by Motorzone are as follows: •
Routine maintenance jobs
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A/C overhaul & Gas charging
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Interior cleaning & upholstery works
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Gear box overhauling
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Computerised wheel alignment & wheel balancing
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Power steering repair
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Painting jobs
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Differential overhauling
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Engine overhauling
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Water wash & Lubrication Facility
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Accident repair jobs
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Automatic tyre changing
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TACTICA The revenue mix significantly changed over the last few years for Motorzone. Consumers are looking for smarter and more convenient service options. Considering slowing business, the company started exploring new customers to procure extra service revenues. The two biggest obstacles to attract new customers is the fiercely competitive marketplace and the customer expectations in terms of latest advanced tech servicing- at a low cost. Also, just as they work to attract new customers, it is imperative that the company retains the existing customers. Repeat business is consistently a major contributor to any service provider annual revenues and reputation. Motorzone realized that the new business come in door mainly through word of mouth and they need to reinvent the service delivery model.
The service center has adopted the on-demand model, where customers can reach them on-call and through their website for service requirements. The Service Advisor comes to the door step of the customers to diagnose the problems and advice on the services required and the cost involved. Motorzone also provides service-on-call facilities at customer doorstep for minor services and repairs through its trained skilled force. The company also offers annual maintenance contracts and provides various after-sales services, concentrating on long lasting trust bond with customers.
The services of Motorzone for passenger cars of ATM Automobiles Ltd. are broadly under 3 categories: 1. Maintenance – This comprises of oil changes, Filter changes, repairs in spark plugs, lubricant replenishment, engine tuning, brake shoe repairs, minor suspension Repairs, battery check-up, wheel balancing and alignment, cleaning, water wash, polishing etc. These jobs take less turnaround time and cars are mostly delivered within a day. Nominal charges apply to maintenance services. If the car is under warranty (warranty decided by SOP’s), the maintenance charges are billed to the company. If the car is not under warranty, services are billed directly to the customer. 2. Major repairs – like gear box repair/replacement, engine overhauling, suspension change, steering box repair/replacement which requires high turnaround time
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TACTICA (above 3 weeks). The same billing procedure as that of maintenance services is followed but with the constraint that whether the repair comes under warranty or not, is decided by the company. 3. Sublet services – Supplementary services that are outsourced to small specialized workshops nearby. Such services include radiator repairs, A/C repairs, Machine shop repairs, silencer repairs, upholstery items etc. These services are a subset of total services and billed directly to the customer with a certain margin. 4. Spares – All spare parts of the passenger vehicles of ATM Automobiles Ltd. are sold to Motorzone directly by OEM at discounted price below MRP. Motorzone either sells the parts on MRP or sometimes even sells at a discounted price after deriving a certain margin from it.
Working hours of Motorzone are well suited to customer convenience. With trained and experienced service personnel and customer centric approach Motorzone proves to be the desirable service center for customers. The technicians are trained by ATM automobiles on different repairs and Standard operating procedures which have to be maintained in the service center. The service personnel are also educated on handling the advanced equipment used in the center.
ATM Automobiles Ltd. – the principal expects the authorized service dealer to maintain high standards of service operations and aim for 100% customer satisfaction. The Service dealer (SD – here Motorzone) and ATM Automobiles Ltd. (ATM) are connected through an ERP system. Each and every transaction of SD is fully known to ATM. ATM expects SD to deliver services perfectly always (24*7).
Challenges
Motorzone, even though in the business for many, finds it difficult to rise to the expectation of ATM on many factors. These factors include variation in delivery times, customer
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TACTICA interaction, Inventory management, Human resource… etc. Each of the factors plays an important role in meeting customer satisfaction.
Delivery time plays an important role in achieving customer satisfaction. The dealership should ensure that the vehicle is ready and delivered to the customer as per the commitment given to him/her. As per company norms, the vehicle is supposed to be delivered within 24 hours. The major challenge for the dealership is to cater to customers coming in at odd timings and expecting delivery within 24 hours.
The first interaction with the customer plays an important role in building customer relationship. Availability of trained receptionists round the clock (24*7) is a major challenge for the dealership. Well trained receptionists are available only during normal business hours. Security and front office personnel who are available during odd hours are not competent enough to handle customer queries.
In recent times, customers have access to various options to get their vehicle serviced. There are many third party service providers catering to multiple brands which provide good service. The customers have high expectations from company authorised dealerships. They expect the dealerships to have sound technical expertise and provide good service quality using latest technology. Many vehicles are owned by call taxi service providers. They change drivers every alternate day. This is a great challenge to Motorzone to score on ATM expectations.
Proper Inventory management is one of the crucial factors responsible for providing effective and timely service to the customers. There are three categories of spare parts fast moving, medium moving and slow moving. Maintaining sufficient inventory levels of slow moving and expensive parts is a major challenge for the dealership because of high inventory carrying costs and space constraints. Maintaining 5S on the shop floor is difficult with high attrition rate.
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TACTICA On the human resource aspect one of the major challenges faced by the dealership is high attrition rate. The company and the dealership invest huge amount of money in training dealership personnel. When trained people having good technical expertise leave, it becomes very difficult for the dealership to manage because hiring and training new people incurs huge cost & time. Training can be provided to limited number of dealership personnel by ATM Automobiles Ltd. due to administrative and cost constraints. ATM Automobiles Ltd. expects trained service personnel to train others at the dealership but this becomes difficult when trained personnel leave. Also, training people on the shop floor is difficult.
Performance metrics help in assessing the performance of the dealership and provide the company good insights to improve service quality. There are various parameters on the basis of which the performance of the dealership is measured. Customer feedback is an important parameter that is given directly to the company which dealership can’t manipulate. If the customer satisfaction score of the dealership is below a minimum threshold consistently for a couple of quarters, the license of the dealership might get revoked by the principal company. So, it is very important for the dealership to maintain high customer satisfaction score. Maintaining high customer satisfaction score becomes a challenge considering the shop floor problems, infrastructure and administrative hurdles.
As per company’s norms, the vehicle has to run for a specified no. of kilometres without any problem after following specified service schedule which doesn’t happen practically due to various factors like lack of awareness and technical expertise, because the service technicians deployed at the dealership know the SOP’s but lack knowledge about the design aspects of the vehicle. The dealership has to explain to ATM Automobiles Ltd. regarding the non-conformity which is a major challenge for them. This also plays a vital role in deciding the service quality provided by the respective dealership.
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TACTICA Questions
Assuming you are the MD of MotorzoneQuestion 1: Address the challenges and come up with a comprehensive solution for Motorzone Question 2: Suggest the organizational and operational changes required to make Motorzone future ready.
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