January 2001
Gus's Garage

Last month Gus and I looked at a warrantee claim that had three outcomes.

1. Poor CSI or customer dissatisfaction
2. Exposure of Gaps in operational effectiveness ("what is" and "what should be")
3. Negative profitability

As we sat down this month, I explained to Gus that customer satisfaction (demand), effective operating processes, and profitability are his primary business objectives.

Luckily for Gus, and most repair facilities, the quantity of warrantee claims is a low percentage of total sales. But as we saw last month, multiple breakdowns in Gus’s operations led to the instance of a warrantee claim.

If Gus had only one issue to focus on, the elimination of warrantee claims would most likely have the greatest positive impact on overall shop performance and profitability.

As in most operations, Gus commented that the only thing that seems to improve in the handling of warrantee claims is the ability of his staff members to "smooth-over" the complaining customer by using larger and larger doses of "bull-dung."

Mentally, Gus and his staff have to stop treating each warrantee claim as a "new adventure" and find solutions that minimize their frequency. The causes for his warrantee claims are due to repeated breakdowns.

To enable Gus and his staff to drill-down on problems and identify patterns by warrantee claim type and staff member, a process of categorizing, measuring, and reporting is needed. Weekly reporting of warrantee activity by reason codes and participants will provide performance feedback and organizational awareness.

I suggested that Gus use the following documents for the warrantee process:

• Warrantee Order Form
• Warrantee Report
• Warrantee Order List (WIP Report).

The Warrantee Order Form is the primary document and it essentially replaces a normal Customer Repair Order (and subsequent Work Order). The Form is used to record customer info, care of the customer (rental needs, notes, etc.), original Repair Order info, itemized customer claims or exceptions by reason code or category, corrective actions with itemized shop costs, and sign-offs by the estimator, technician(s), QC - production manager and/or other QC person who participates in satisfying the warrantee claim.

The Warrantee Report is a weekly report listing each technician (or team or department) and estimator and the quantity of Claims attributed to each and categorized with a ‘reason code’. This is used as both a management report and published performance report for shop personnel.

The Warrantee Order List is basically the same as the Daily RO WIP List, but for Warrantee Claims only.

I suggested to Gus that these documents be created in a red color to associate negativity for, and emphasis on, the warrantee claim.

Four Reason Codes are used to classify a warrantee claim or "comeback":

1. Product failure or defect
2. Part(s) owed
3. Repair(s) owed
4. No repair action necessary (customer request for re-check).

As Gus and I discussed the documents, he raised an issue with the "reason codes". Gus was trying to use his argument from last month that a "good comeback" could exist when the customer’s claim has been proven to be unsubstantiated, or when the "owed" parts or repairs had been paid for.

Gus, like many operators, he argued that Reason Code # 1 was the only valid code. My response to Gus was simply to ask the question of whether Reason Codes 2 - 4 could result in any of the following outcomes:

• Some type of unexpected company expense to administrate or resolve the claim (and was not built into the original sale price)
• Some type of unexpected inconvenience/cost to the customer (based on the initial sale’s agreement)
• Some type of customer dissatisfaction
• Lost opportunity to use resources to generate profits (while servicing the claim).

Finally, I had to warn Gus that targeting lower warrantee rates could sometimes be offset by an increase in internal ‘re-do’ rates. Many operations have very low warrantee rates, but internally, have very high defect or failure rates.

The objective is to achieve a low frequency of both Warrantee Claims and Internal Defects.

We next began to look upstream for areas where new steps or processes could be implemented that would eliminate some of the operational breakdowns that surface downstream when a vehicle is "in process." While attending NACE Seminars on "cycle time", Gus was introduced to the terms "staging" and "triage". I told him to forget about triage, which is a reactive response that categorizes repair types after they have already been scheduled and loaded, and focus on staging.

Staging is a process of getting ready. Prior to dispatching a vehicle into the production process, it must be properly prepared to receive processing. This means that all supporting activities (parts, materials, work instructions, authorizations) are successfully completed and quality checked. Staging is a point in the repair system where all the supporting processes are compiled, organized, and checked for accuracy so that repair teams can effectively and efficiently perform their assigned repair processes.

In a smaller shop like Gus’s Garage, staging for heavy hits, like the job that resulted in the warrantee claim, requires multiple steps and participants. Dedicated staging teams and staging spaces are not practical or cost effective. The staging team is basically the estimator, Gus, and the Heavy Hit Technician who will be assigned the job.

To start the Staging Process for tow-ins, Gus has to first determine what vehicle damages will be processed (repaired). This task requires input from two areas: the customer; the insurer (if a claim).

Next, Gus will have to make a repair (processing) determination in terms of replacement parts and materials and damaged parts that can be effectively refurbished and restored. This requires input from two areas: the vehicle; the estimating database.

Next month we will continue to outline for Gus a simple and effective Staging Process.