Frumherji Ltd., Reyhjavik: The Vehicle Inspection and Emissions-Testing Process
The Icelandic government outsourced its testing and metrology functions in 1997, and in 2008 two firms competed for most of the vehicle emissions testing and inspection business in Iceland. Frumherji was one of the two. In a physically isolated island nation of just over 300,000 residents, word-of-mouth information about customer service could make or break a firm in the marketplace. Karl Sigurdssson, Senior Manager of Frumherji’s Vehicle Department, was seeking ways to enhance customer service, while at the same time retaining the high standards and integrity that were essential to the company’s continued contractual role with the Icelandic government. He hired a consultant to gather process data and make observations about customer service, and was considering how to use the information to identify problems and introduce solutions.
The case highlights current challenges for Frumherji, including perceived customer service, demand variability, waiting times, recording errors, and employee turnover. It also includes relevant information about Iceland’s immigration patterns, the growing market for vehicle inspection and emission testing, and goverment policies. The case presents a step-by-step description of the process for inspecting and testing private vehicles at Frumherji’s largest station, Hestháls, located in Reykjavik. Accompanying information includes processing times, reject rates (yield rates as the inverse), wait times, error loops, and problems introduced by the customers themselves. Images of the facility and photos of the work area at each step in the process bring a sense of reality to the descriptions.
The Frumherji Vehicle Inspection and Emissions Testing case, set in Reykjavik, Iceland, offers an opportunity for students to examine a service operation, describe process attributes using operations terminology, and recommend areas for improvement. It also may be used as a vehicle for teaching value stream mapping or service blueprinting, demonstrating how these visual tools can make process wastes more evident. The case lends itself to audiences in MBA, EMBA, and corporate learning environments, and may be used in courses on operations management, service operations management, and service marketing. The nature of Frumherji’s business and its links with governmental agencies make the case appropriate for students and executives in either the private or public sector.