The Royal Automobile Club business overview

The Royal Automobile Club business overview The Royal Automobile Club was founded in 1897 to provide its members with roadside assistance. It is part of a hugely competitive market where it is involved in a continual tussle with The AA and Green Flag for market superiority. There are fundamental problems in RACs current operations. Customer service is vital aspect of the roadside recovery business and this is where RAC are failing. RAC have had a rising in the number of customer complaints coupled with poor retention of customers. The RAC has to supply its services and respond quickly to all callouts but faces difficulty dealing with the variation in demand. The problems were outlined by Martin Connor, the director of Operations who claimed the only big winners seemed to be the contractors who provide capacity during the night and during periods of overloading. This is a time while the RACs own patrol staff are earning more despite a decline in productivity. The RAC uses private contractors during weekends and at also at night times, they also supplement day patrols if the demand is unexpectedly high. As the contractors dont carry the full RAC branding, customer service was less of a priority to them. Market research had indicated that customers were less satisfied with the service provided by private contractors. The use of such contractors was also expensive, with the average price being  £36 plus. After working a standard forty hour week, at busy periods staff were offered overtime or the option of being on standby. Overtime was paid at time and a half and double on Sundays. Staff had no motivation to complete work as quick as possible as they would be paid however long jobs took. Similarly the standby system was fraught with problems, staff were paid a flat fee of  £6 per job completed. There was no difference in pay with regard to simple jobs that would take a few minutes and more difficult jobs which could take a long time. Staff could log off at any point and would frequently do so if they were offered time consuming jobs. This would force the RAC into delegating to contractors at the much higher cost The patrol attendance rate measures how many of the jobs the RAC undertakes were dealt with by their own staff. In 1999 the rate was averaging 80%. The importance of a high PAR is underlined in the costs which suggest that just a 1% decrease would cost about  £1 million per year in contractors fees. .The RAC has a reputation for offering high quality service a but at a high price. It faced losing its market share as a number of competitors surfaced. It was faced with the problem of improving its operations whilst keeping its membership costs at a competitive price. In an independent survey the RAC was ranked 2nd to the AA in terms of customer satisfaction. The critical customer service factors are in the call taking and how quickly patrols are on the scene and complete the job. Due to more advanced call taking technology the AA was able to offer its members better customer service than the RAC. The importance of a low membership costs could not be underestimated as Green Flag, which had poor customer service feedback from the survey was becoming a leading competitor due to its low costs. The SWOT analysis shows where the RAC need to improve. SWOT analysis Strengths Strong brand Large customer base Good profitability Weaknesses Old fashioned image Capacity easily overloaded. Opportunities Innovative technology New products Threats Competition Technology of cars improving reduction in breakdowns Increased customer expectation Workforce scheduling / Capacity management Literature Review In service industries the matching of capacity and demand is particularly difficult. Capacity management plays an important role in determining how effectively an organisation uses its assets to produce income. (Sun Services, 2007) Capacity management is the ability to balance demand from customers and the ability of the service delivery system to satisfy the demand. (Armistead et al, 1991) There is either too much demand for the capacity, putting a strain on resources, or too little demand, giving rise to unused capacity and a loss in revenue. This is known as the perishability factor. (Mudie et al, 2006) Both of these are an issue for the RAC due to the numerous factors that influence the demand on the patrols such as the weather. The manner in which workforce is deployed is a large determinant of the effectiveness of service organisations. Having more staff than is necessary to provide the desired level of customer service is costly and having fewer staff than is necessary risks poor customer service and the loss of current or future revenue. In an ideal scenario the company has just enough staff available to provide the desired level of service. Temporal variation in customer demand, even within a day, compounds the difficulty of providing the ideal number of staff. One solution is the use of planning intervals of an hour or less, in conjunction with overlapping shifts, and then allowing the number of employees scheduled to change from period to period. The task of providing the right number of employees at the right time is commonly known as workforce scheduling. (Thompson et al 2006) Rotating workforce scheduling is a typical constraint satisfaction problem which appears in a broad range of work places (Musliu, 2005). Poor workforce scheduling often leads to high personnel turnover, absenteeism, resentment, poor job performance and unfit mental and physical conditions situations that translate to loss of productivity, quality and even safety (Hung, 1992) One method to solve capacity issues is to address the schedules of the workers, a re-arranged workweek can be a great recruitment tool. Many people are enthusiastic about receiving one or more extra off-days per week and longer weekends (for the 4-day workweek, there are 52 extra off-days per year). Moreover, fewer work days means including less time and money on commuting and less expenses on meals and childcare. (Hung, 1992) Another factor that can affect capacity is motivation. This can be influenced by shift patterns dictated. Motivation can be increased by adapting work times to individual needs which can change over time, better working conditions (such as security and hygiene), creation of a team spirit or through professional mobility. For example, highly skilled staff can act as tutors to new employees. (Chan et al, 2006). Part time workers can increase the flexibility of operations. A common trend amongst the literature is to offer discounted prices at times to level off the demand. This is a possibility for the RAC who could offer breakdown packages such as weekends only or off peak packages at substantially discounted prices. Competitive Analysis RAC The basic RAC policy starts at  £28. On average there patrols are able to fix 80% at the roadside. The RAC web-site has an active forum, where members can communicate with one another to give advice, this creates an online community. RAC will attend the first five callouts made by a member free of charge and offer priority for vulnerable motorists. Having over 2000 patrols and over 100 years experience are key selling points for the RAC. All labour and fittings costs are included in membership, so members only have pay for the part itself. RAC advertise offers worth over  £500 to try and lure in new members, they include discounts on health insurance, roadside restaurants and UK holidays. (RAC, 2010) Green Flag The Green Flag slogan is driven by performance, Green flag compare themselves to both the RAC and The AA by advertising its average time is under 30 minutes in contrast to their 40 minute average. The claim is backed up with data from 837,962 call outs. Its basic plan begins at  £20, they fix 86% of customers cars at the roadside. A key asset of green flag policies is the availability of the customer to adapt a policy to fit their own circumstances, you dont have to pay the price of other peoples problems . Green Flag offer no callout discounts to members and offer free, unlimited call-outs when you breakdown. They aim to answer calls within 20 seconds. Green flag operates solely through outside contractors, which has a negative affect on its customer service. (Green Flag, 2010) The AA The AA claim to fix more breakdowns by the roadside than anyone else they have strong customer satisfaction and boast 95% of members would recommend the firm to friends. On average the AA arrive within around 40 minutes of members calls. With 3500 patrols the AA has the largest dedicated breakdown patrol force in the UK,; they attend a breakdown on average every 8.7 seconds and repair around 8 out of 10 breakdowns by the roadside. Only the AA has VIxEN, a unique on-board computer to help diagnose faults. At night, as at other times of the day, the AA serves its members with its own patrols and, as with other breakdown providers and some garage agents, when appropriate. (The AA, 2010) Strategic performance objectives The Objective of the RAC is to provide a fast and quality service to its members who breakdown at the roadside. To do this they need to define what the key performance indicators are and what is the expected level. A key performance indicator is a metric that allows you to evaluate whether you are meeting a certain goal. The five kpis for breakdown companies are: Quality : the level of customer service and efficiency of the recovery Cost The cost the customer has to pay Dependability To always have patrols ready for jobs. Flexibility To adapt to unexpected rises in demand. Speed To answer calls quickly, patrol arrive quickly, job completed quickly Recommendations 1 in every 5 jobs completed are being outsourced to contractors costing the RAC a huge amount of money and risking its reputation from its members who have expressed dissastisfaction by the service they have received from such patrols. Clearly changes have to focus around ensuring more callouts are attended by RAC patrols. To do this firstly the RAC need to invest in new calling and dispatch process. More effective call technology can identify the patrol most suitable to undertake each job and can improve customer service relations. More effective utilisation of patrols will ease capacity issues. The overtime payments need to be re-structured so that is no longer based on a per job basis. The current system is open to abuse by patrols who would avoid difficult jobs by logging off. This a key reason for the excessive use of contractors. The pay structure needs to adjusted, Proposed would be a rating scale for the difficulty of jobs completed, patrols could then receive a monthly bonus based on there performance. changed to offer staff incentives and motivation to ensure customer service is top of their priority. These can include monthly bonuses or share schmes. In most cases it may be necessary to establish some scale of gradation of jobs based on some objective assessment and to relate jobs measured on this scale to rates of pay (Wild, 1991) The PAR is reducing by as much as 3% during peak holiday season. A 1% drop in PAR costs  £1 million per year in contractor fees. Holidays need to be re-reanged so that they are equally dispersed around the year. December and January are the busiest months so there must be a limt especially around this time. Monday is the busiest day of the week for the RAC with the weekend the quietist time Workforce schedules can also be adjusted, the current shift system doesnt work. One option would be to switch workers to a four day week. Workers could then have more social hours and capacity could be increased at peak periods. Needs to continue its investment in materials that help drivers fix there own faults, with a particular emphasis on problems caused by winter conditions. This can be the most effective measure to combat capacity problems. Phone operators can try an identify the causes of problems and offer the potential for the member to fix there own vehicle. The staff at RAC are approaching retirement and therefore RAC will need to attract new recruits. It is important that the knowledge built up by years of experience by the senior employees is utilised to enable the training of the new younger employers to be more effective. Staff should be encouraged to present any ideas to senior management that they believe would improve operations. With attractive incentives offered for any ideas that put into practice, the job satisfaction and motivation of employees would be likely to increase. There will be a resistance to change, particularly from the patrols who are seeking more social hours and a generally easier working schedule. The diagram above shows how the proposed changes could improve the operations of the RAC. The main advantage would be seen in the flexibility of the patrols. The RAC need to communicate more effectively with members who broke down. Breakdowns can be highly stressful situations and therefore knowing approximately how long it will take for a patrol to arrive will be a reassurance to the member.