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

AMR Research: Global. 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. 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. 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 have impacted 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 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. Detection-to-Correction (DTC) metric. Publ 20051205