About six months ago, when I was buying a car, a friend of mine, in a typical The Good, the Bad and the Ugly fashion, told me that there were two kinds of cars: good cars, and French cars. I bought a French car. I bought a Peugeot 407 SW (Peugeot says their cars are engineered to be enjoyed) and although I could do so, I am not going to make this a post about what went wrong with this car already so far. This is going to be a post about how the simplest of the features of an ERP system can influence customer (dis)satisfaction, and create long term decisions for, or against a car vendor. Also, not typical for me, I am speaking from the shoes of a customer, rather than consultant, this time. Quite a change for me.
A few weeks ago I had to exchange my winter tires for summer ones. With a car engineered to be enjoyed, such as mine, you can’t just go to a typical tire installation mechanic, because Peugeot 407 has wheels engineered to be properly balanced using their own equipment only. My tire mechanic didn’t tell me so, he fooled me instead and gave me out unballanced tires, while somehow managing to break the safety screw tool, required to unscrew one of the five wheel screws. When I noticed that the car doesn’t handle the speed too well, I complained to Peugeot, and they told me I should get my car to their workshop to do the proper balancing. And it was so.
When I came to their shop, they explained that the unscrew tool is broken, and that they can’t fix the wheels using it, or they could but then they wouldn’t be able to unscrew them ever again, so I had to purchase four standard screws to replace the safety screws. Not a big deal, I thought, and went to their store, pissed off completely because they manage to manufacture the tools that can break after a single use (in a lifetime of such a car, one should be expected to use this tool at least ten times), yet happy that I will be able to unscrew my wheels to exchange the tires in the future.
Then the guy in the store explained that they had only one screw in stock.
One screw. One of a kind. Uno. Ein. Un, s’il vous plaît.
If you remember my old posts about ERP, this is called safety stock. And theirs is obviously every single bit as safe as their safety unscrew tool.
Now I have two alternatives: to drive a car with four screws per wheel, instead of five, until they order and get the other three wheels (this is called lead time and in their case it is up a week); and another alternative is that they screw the wheels so that God Almighty can’t unscrew them next time I need to take the wheels off for tire exchange, which is in about six months. Some choice, eh?
When I asked the guy about what kind of inventory management system they use, he gave me a blank stare. Then he showed the screen to me. It looked like some in-house developed system, developed either by Peugeot, of by their specification. The system is obviously every single bit as good as their tools, which pretty much explains why they had only a single screw there. I wonder where exactly do you put one screw in your warehouse bins, unless a single-screw-watchman carries it around in his own pocket safely buttoned and secured. A single screw, for heaven’s sake. It costs 4 US$.
Now, Peugeot is serving quite a customer base here in Croatia. They are very popular car manufacturer in Europe, I don’t know their exact market share, but I figure they are in top 5, or top 10 at most. Having a single screw in the warehouse serving a customer base of several thousand Peugeot vehicles in Zagreb, is pretty optimistic. Not even the Japanese trust their perfect cars that much. And all it takes to have a customer happy is just 16 US$ worth of wheel screws.
But the funniest thing happened when I returned to the workshop, to the mechanic. I complained to him that they only had a single screw and how things like this should never happen. He told me exactly this: “But what do you expect? Look here, we just had to replace the same four screws on this other car over here.” Even better 🙂 With obviously a known issue with their safety unscrew tools (two cars with the same uncommon issue in a ten minutes time slot can’t be a coincidence), they can live witouht a proper ERP system which would prevent them from going flat on these screws.
If I hadn’t have to go for a conference, in another city, with this very car (now unsafe because of four screws holding each wheel instead of five), I wouldn’t complain a single bit. But I don’t dare driving several hundred kilometers with unsafe car. Probably the ugliest of things you can make to a car customer who came to a shop by car, is have him leave the shop on foot. Whatta customer service! Peugeot, engineered to be enjoyed.
As soon as my lease time is over, I’ll let them enjoy it as much as they want, the next time I’ll go for the other kind of cars: the good ones.
That was a good read. I live in US, and I’ve learned to only buy Japanese cars the hard way as well.
what a coincidence, my peugeot broke down last saturday and altough the story behind that is quite funny by itself, it is worth mentioning that replacement part is on a seven day wait list
something is clearly wrong with their erp (or the lack of it)
I can’t believe this. I post an off-topic post (ok, an almost off-topic post) and I get 11 reads and two comments in lest than an hour 🙂 Maybe I should write about other problems I had with this 6 months old car, as well.
mrak: Yep, there is something fishy about their system.
ara3n: I hope my next car to be Japanese. These guys know how to make cars.
haha,
I KNOW my next car will be japanese 🙂
one question; since parts you needed were part of some service interval, would you say that requirement for them should be generated by some sales position (thru usual sales channel), or it should be planned thru some more sofisticated MRP alike system
(I see that the end effect is the same, but nevertheless)
Mrak: Unfortunately, I can’t know for sure if it will be Japanese 🙁 But I will actively envy you if you finally buy yourself that Lexus 😉 About your question, regardless of where do the material requirements come from, good ERP system should handle them all through the same Replenishment settings, which specify safety levels which then apply to manufacturing, sales, service, whatever. The only way to get down to a lean safety stock or reorder point of any item is to track consumption rate and take into account at least the lead time if not tons of other contributing factors (such as storage room required, frequency of deliveries of materials, cost of handling, impact on business if you run out of it). Definitely it is much easier to set up a lean scheme for a manufacturer, because they have a steady customer base, they know that the market in total requires 250.000 screws a day +/- a small percentage, and can easily set up their system (not the computer system, but the system as a whole) to meet the demand while keeping the costs down. A mechanic’s shop can’t handle this that easily, because the scale of their business is much smaller, their customer base is not steady, and any fluctuations affect them much more. But still, in the end, they can have a system which tracks the screw consumption, and based on knowledge that their lead time is e.g. a week, that their logistics can deliver at most e.g. 2 orders per week, and the average screw consumption is 60 screws per day, they can easily know that the safe level is probably much closer to 150 screws, and that having it at 1 is probably way too optimistic.
In the end, IMHO if anyone can’t set up a Just-In-Time system, they would be better off with a more costly Just-In-Case one, because exchanging a customer’s satisfaction for 12$ worth of missing screws is much more costly in the long run, than a Just-In-Case system with bigger warehouse and play-it-safe stock levels would ever be.
Tvrtke – SAP R/3 korisnici
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Peugeot Hrvatska d. d.
Cebini b.b.
contact detailes deleted
Mrsa: I don’t know what exactly did you mean by posting this info, but if Peugeot is indeed user of SAP R/3, that tells us all a lot either about the effectiveness of their investment in SAP, or about SAP R/3 itself, or probably both. If they really have SAP implemented, this might be a good time for them to finally start using it 🙂