Auto Manufacturers Can Save Millions by Reducing Defect Detection-to- Correction Time

Delaying a Major Recall Can Cost as Much as $1 Million per Day



Dec 05, 2005, 00:00 ET from AMR Research

    BOSTON, Dec. 5 /PRNewswire/ -- As 2005 has proven to be a challenging year
 for the auto industry, manufacturers are under pressure to cut costs, but
 maintain quality.  In a year when almost as many cars will be recalled as sold
 in the U.S., one critical concept to understand is the Detection-to-Correction
 (DTC) metric, first published by AMR Research in 2004.  DTC is the amount of
 time it takes from when a manufacturer is first made aware of a quality issue
 until it corrects that issue.  Often, this metric is triggered with a warranty
 claim, but due to the internal processes and information exchange within the
 manufacturer, latency is introduced, often postponing corrective action by
 several months.  Most vehicle manufacturers take up to 120 days on average
 (some up to 220 days) to recognize and correct a problem, with each day
 costing up to $1 million (cost of service, labor, parts, and brand impact).
 With 16.6 million recalls already this year, manufacturers are looking to
 Early Warning Systems (EWS) to reduce the amount of time it takes to correct a
 defect by as much as 40%, saving the industry, manufacturers, and stockholders
 millions of dollars.
     "This is not just a company problem, this is an industry problem," said
 Kevin Mixer, vice president at AMR Research.  "Both brand owners and their
 supply base need to be tightly aligned around the whole concept of early
 warning and detection-to-correction.  Historically, information exchanged
 around quality spills that impact the end-consumer have been a bone of
 contention."
     The concept around sharing of warranty data, the physical part, and the
 customer experience brings its own level of latency into an organization's
 detection-to-correction metric.  In order for manufacturers to become more
 competitive when it comes to early warning and better quality, partnering with
 both the retail channel and the supply base is critical.  As an example, the
 largest single system impacted by 2005 recalls in the National Highway Traffic
 Safety Administration recall campaigns list has been with vehicle speed
 control (i.e., cruise control) at 4.7 million units, double the number of
 recalls by any other component category.  The responsibility for these systems
 lies with both the manufacturer and the component supplier.
     From a different angle, it is important to note that between 1987 and
 2005, the average number of new models launched per year was 35.  In 2007, AMR
 Research estimates there will be 70 new model launches, doubling the average.
 This, coupled with the fact that manufacturers are continuing to compress how
 fast a car comes to market (by as much as 72% from 2000-2010), requires a more
 granular level of visibility into both engineering and manufacturing.  With
 each new model introduced, manufacturers need to embrace early warning
 concepts to rapidly contain warranty issues and avoid lost revenue.
     Companies under 100 days detection-to-correction are continuing to scrape
 for reductions in each day.  Manufacturers just beginning the process will see
 immediate gains, but must change process as much as organization.  For
 information regarding the recent steps that automotive manufacturers are
 taking to correct this problem, please visit http://www.amrresearch.com or
 call 617-542-6600.
 
     About AMR Research:
     AMR Research provides world class research and actionable advice for
 executives tasked with delivering enhanced business process performance and
 cost savings with the aid of technology. Five thousand leaders in the Global
 1000 put their trust in AMR Research's integrity, depth of industry expertise,
 and passion for customer service to support their most critical business
 initiatives, including supply chain transformation, new product introduction,
 customer profitability, compliance and governance, and IT benefit realization.
 More information is available at http://www.amrresearch.com.
 
     Press Contact
      Kevin Reilly
      617-350-1754
      kreilly@amrresearch.com
 
 

SOURCE AMR Research
    BOSTON, Dec. 5 /PRNewswire/ -- As 2005 has proven to be a challenging year
 for the auto industry, manufacturers are under pressure to cut costs, but
 maintain quality.  In a year when almost as many cars will be recalled as sold
 in the U.S., one critical concept to understand is the Detection-to-Correction
 (DTC) metric, first published by AMR Research in 2004.  DTC is the amount of
 time it takes from when a manufacturer is first made aware of a quality issue
 until it corrects that issue.  Often, this metric is triggered with a warranty
 claim, but due to the internal processes and information exchange within the
 manufacturer, latency is introduced, often postponing corrective action by
 several months.  Most vehicle manufacturers take up to 120 days on average
 (some up to 220 days) to recognize and correct a problem, with each day
 costing up to $1 million (cost of service, labor, parts, and brand impact).
 With 16.6 million recalls already this year, manufacturers are looking to
 Early Warning Systems (EWS) to reduce the amount of time it takes to correct a
 defect by as much as 40%, saving the industry, manufacturers, and stockholders
 millions of dollars.
     "This is not just a company problem, this is an industry problem," said
 Kevin Mixer, vice president at AMR Research.  "Both brand owners and their
 supply base need to be tightly aligned around the whole concept of early
 warning and detection-to-correction.  Historically, information exchanged
 around quality spills that impact the end-consumer have been a bone of
 contention."
     The concept around sharing of warranty data, the physical part, and the
 customer experience brings its own level of latency into an organization's
 detection-to-correction metric.  In order for manufacturers to become more
 competitive when it comes to early warning and better quality, partnering with
 both the retail channel and the supply base is critical.  As an example, the
 largest single system impacted by 2005 recalls in the National Highway Traffic
 Safety Administration recall campaigns list has been with vehicle speed
 control (i.e., cruise control) at 4.7 million units, double the number of
 recalls by any other component category.  The responsibility for these systems
 lies with both the manufacturer and the component supplier.
     From a different angle, it is important to note that between 1987 and
 2005, the average number of new models launched per year was 35.  In 2007, AMR
 Research estimates there will be 70 new model launches, doubling the average.
 This, coupled with the fact that manufacturers are continuing to compress how
 fast a car comes to market (by as much as 72% from 2000-2010), requires a more
 granular level of visibility into both engineering and manufacturing.  With
 each new model introduced, manufacturers need to embrace early warning
 concepts to rapidly contain warranty issues and avoid lost revenue.
     Companies under 100 days detection-to-correction are continuing to scrape
 for reductions in each day.  Manufacturers just beginning the process will see
 immediate gains, but must change process as much as organization.  For
 information regarding the recent steps that automotive manufacturers are
 taking to correct this problem, please visit http://www.amrresearch.com or
 call 617-542-6600.
 
     About AMR Research:
     AMR Research provides world class research and actionable advice for
 executives tasked with delivering enhanced business process performance and
 cost savings with the aid of technology. Five thousand leaders in the Global
 1000 put their trust in AMR Research's integrity, depth of industry expertise,
 and passion for customer service to support their most critical business
 initiatives, including supply chain transformation, new product introduction,
 customer profitability, compliance and governance, and IT benefit realization.
 More information is available at http://www.amrresearch.com.
 
     Press Contact
      Kevin Reilly
      617-350-1754
      kreilly@amrresearch.com
 
 SOURCE  AMR Research