Case Study Notes - Assignment 1 2020 PDF

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Frumherji analysis...

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INFS3604 Assignment Notes Case Study: Frumherji Ltd, Reykajvik – The Vehicle and Emissions Testing Process Summary Notes of the case - Frumherji highest market share in Iceland for vehicle inspection and emission testing (leading inspection, testing and legal metrology) - Iceland small population of 300,000 (word of mouth is vital in advertising) however recently been experiencing growth especially immigrants therefore increase in amount of private vehicles by 58% (124,915 to 197,809) - In 1997, Icelandic government outsourced inspection functions to the private sector ie, Frumherji was formed - Operates in 24 stations around Iceland - Frumherji held 75% market share of vehicle inspection in rural areas and 60% in the Reykajvik area (capital city) Sigurdsson’s (Senior Manager) ideas - Analyze current processes and operations in order to remodel business-wide (focused on Hesthals station due to large volume of business and cooperative manager). Services offered by Frumherji - Mandatory vehicle inspections and emissions tests (52% of the business with 7% being of private vehicles) - Driver testing - Carwash - Mandatory inspections of ships, boats, and fish processing plants External issues affecting current process - High variability with demand (no demand during Nov-Dec due to it being cold but May has three times the demand of these months) this also caused countless employees to be constantly rotated around each stations according to demand. Realistically there is not much they can do to solve this, however analysing their historical data is a crucial step to minimising this issue. - High employee turnover rate (22-23% per annum) however this problem was occurring amongst competitors so it was not isolated to Frumherji - Compensation limitations imposed by government regulations, which limited incentive schemes for mechanics in the inspection industry compared to other automotive industries (Not in Frumherji’s power to change this). Additionally, the regulations were extremely strict, procedures had to be standardized according to International Acts and the responsible technical manager was required to be certified and pass a one-month training examination.

Internal issues with current process - As seen in Exhibit 3, most of the KPI’s are focused on improving measurements such as, market share, inspection times, and prices. None of the KPI’s focus on improving the specifics of their process and are

just the final targets and therefore there’s no actionable items employees can take in order to understand how to achieve those KPI’s. - Single receptionist is allocated several jobs and are servicing varying types of customers which leads to long queue times. Assign multiple receptionists to distribute the flow of work and to make sure someone is always available for inspection customers. - Vehicles are being failed for minor errors in early stages of the inspection which causes delays for insignificant issues, Frumherji could identify and checklist these common errors to notify all customers beforehand. This would minimise the amount of redundant/wasted checks they were doing. Issues identified by the case - No mandatory inspections required for license plate numbering during November and December which happens to be a period lacking demand - Excess capacity in staffing during dry periods and wasted physical resources - Shortage of qualified mechanics - Staff holidays during Summer months which was the busiest period of the year

ASSIGNMENT QUESTION - In no more than 300 words provide an answer to the following question: What were the primary challenges facing Frumherji’s vehicle department? Which ones were most important and why? Issue – Unable to get accustomed to the changing demand which caused constant rotations in staff Issue – Long queue times due to flooding of tasks on receptionists without a clear streamlined workflow (Also vehicles constantly failing for minor errors which wastes time on redundant checks) Issue – Underestimating goals by setting KPI’s that have no actionable items for employees to take upon in order to improve their work ie, bad management Issue – Government restrictions which is a key factor in the high turnover of employees in this industry Answer Frumherji was faced with countless challenges that are severely impacting their value chain and producing several bottlenecks. Their biggest internal inefficiency revolves around their lack of managerial effectiveness as they have set numerous KPI’s to strive for in order to improve the performance of the business but are completely unrelated to their idealized to-be process model. Although the KPI’s set seem relevant none of them propose any actionable items that individual employees can take upon themselves to improve, there is no process but an expected final result. There is a clear separation between management and the typical employee, which is demonstrated by the legion of affairs highlighted in the early stages of the inspection process. These problems revolved around the overflowing tasks allocated to individual receptionists and the lack of communication with the customer which resulted in extremely large queue times, delays, and customer dissatisfaction. The lack of management is a crucial issue as it will serve to decrease Frumherji’s future growth, value, and competitive advantage. Furthermore, various external issues that are challenging Frumherji’s effectiveness in the market are the changing seasonal demand and mandatory government restrictions. The uncontrolled demand fluctuations have caused constant rotations in staff for Frumherji which affect the efficiency of

collaboration as the inspection process is quite complex and would be slightly different between locations. This could affect the timeliness of the process which would inevitably diminish the value being perceived by each customer due to the as-is process being longer and complicated. Additionally, the current government restrictions have limited the amount of qualified mechanics and significantly increased employee turnover within Iceland which further accentuates the issue of decreasing process value due to the lack of quality individuals being able to maintain and coordinate the process....