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Coherent argument, logical structure, overall presentation of the report, and referencing 20 Well structured arguments with good design of the sections with well structure diagrams and flow of the report Well structured arguments and design with reasonable flow of the report Fair structure and design Poor structure and design with a reasonable flows of ideas Lack of all the above
RAC Motoring Services
‘I think that we all now fully understand the need for some fairly radical reorganisation of the way we plan and operate a rescue service, but I’m not convinced that we yet fully appreciate just how difficult this is going to be! The changes to our business environment in the last few years have been quite dramatic, and if we are to remain profitable we must now complete our negotiations with the unions in order to implement the new systems we have devised. Lex bought the RAC on the basis of its strong brand, large customer base and good profitability. However, if we don’t get this work completed quickly, our service levels will continue to be worse than some leading competitors, and could even fall. We will certainly lose market share, and our costs will rise inexorably. At the moment, the only big winners seem to be the contractors who provide capacity during the night and when we are overloaded. And whilst our own patrol staff are earning more and more, their productivity is continuing to decline. We have no choice: we must solve this one, or we will be in serious trouble.’ Martin Connor, the Director of Operations, was addressing the monthly meeting of the operations team, just prior to the commencement of a series of negotiations with representatives of the Transport and General Workers Union (TGWU), which was the recognised union for the majority of the manual employees.
The RAC had been established in the vehicle breakdown and recovery industry for over 100 years. It had its own branded patrol force which was deployed to rescue and fix customers vehicles at the roadside. The RAC was perceived to offer a high-quality service at a relatively high price. However, its image had sometimes been seen as somewhat old-fashioned. Its brand was very well established and trusted, but it was the number two in terms of customer awareness behind the AA (Automobile Association). For all of their long histories, until very recently both these organisations were owned by a specific group of their members, and were therefore not required to produce profits for external shareholders. Some commentators believed that this type of mutuality inevitably led to a sense of complacency, where market share was the most important measure of success. Underlying this image, however, the RAC had continued to invest in state-of-the-art technologies to efficiently receive members’ calls and to dispatch rescue patrols. It had also constructed eye-catching control centres at highly visible points on the motorway systems, signalling its presence as a modern service provider.
In order to overcome its slightly dated image, in 1997 the RAC had rebranded and changed its corporate colours, the aim being to project a more modern and dynamic image to appeal to younger market segments. This was primarily done to address the continuing erosion of market share, but the main reason for its declining customer base had been the increasing level of competition in the market. For many years the RAC and AA had dominated the market, but recent new players such as Green Flag had entered by offering a cheaper product using third-party con- tractors. This introduced price competition and redefined customer service expectation. Green Flag advertised aggressively that it would reach all customers within 35 minutes, and if it did not, then it would refund £10. This led to Green Flag rapidly gaining market share at the expense of the AA and RAC. In 1999 both the RAC and the AA gave up their mutuality when they were taken over by a large companies. The AA was acquired by Centrica, a utility services company, and the RAC by Lex plc, which included vehicle servicing businesses, vehicle leasing and the British School of Motoring. This brought a more commercial focus to both organisations. The RAC was determined not only to arrest the decline in customer numbers, but also to rapidly increase it. It could not do this by acquisition, and therefore the only option was to invest so that it could lead the market in terms of service quality. A recent independent survey, carried out by J D Power, ranked the RAC second behind the AA in terms of customer satisfaction. The AA was ahead in two key areas: the quality of its call-taking (when customers phone the organisation to request roadside assistance) and the efficiency of its dispatch system (getting patrols to the customer quickly). The roadside services provided by patrols from both organisations were similar. The AA’s more advanced call-taking and dispatch system resulted in quicker response times and better customer management during the period that customers were waiting for service. Therefore, for the RAC to grow its market share, it definitely needed to improve its call-taking and dispatch processes. It should be noted, however, that a leading ‘new’ competitor had scored consistently low in the J D Power survey for all aspects of its service, but continued to compete on the basis of lower annual membership charges. Customers were getting more demanding too. Expectations of service quality are continuously rising, and motorists who have broken down invariably feel stressed and anxious. The quality of every interaction between the RAC and its members will be of concern. Thus customers will perceive waiting time as critical, and the reliability of arrival time of the patrol will be under scrutiny. Martin Connor was only too aware of the importance of reliability, as failure to meet lead-time promises had a major effect on customer satisfaction levels, and these were measured regularly by independent market researchers.
The patrols – By 1999, the RAC was employing about 1350 patrols, and most of these had followed an earlier career as mechanics, undertaking garage servicing of vehicles. In many ways these were considered to be the elite of the mechanics trade, since they were capable, through experience and further training, of servicing a very wide range of vehicles and associated faults, usually in the presence of the distressed customer and in harsh roadside conditions. These skills were well rewarded by good earnings, including overtime payments, well above those of the garage trade. However, the average age of the patrols was becoming fairly high, and many were beginning to contemplate retirement. Surprisingly, patrol turnover was remarkably low, at around three per cent, Patrols worked on rotating patterns of shifts referred to as ‘Earlies’ (7:00 to 15:00), ‘Mids’ (11:00 to 19:00) and ‘Lates’ (15:00 to 23:00). However, very few patrols (around five per cent) were scheduled for the Mids, because demand for roadside assistance tended to be lower through the middle of the day, certainly on weekdays. Together, the normal patrols in any cell evenly covered all seven days of a week, with every patrol working a third of the days on Earlies, a third on Lates, and a third taking a break period. Each of the patrols was issued with its own fully equipped rescue vehicle, which was only needed during working hours. When not required, this vehicle would usually be parked outside home, ready for the next use. Although this resulted in low utilisation of this very expensive asset, this had been found to be the best way of ensuring that the equipment was kept in a good condition ready for use. It also ensured that the patrol could continue to work on a broken-down vehicle even beyond the end of its shift, without worrying about the delay in handing over to another patrol. It also allowed the patrol to be on ‘standby’, awaiting a request to attend a motorist outside the normal shift time. This provided the patrol an opportunity for overtime earnings, whilst giving the RAC extra capacity to call on at off-peak times.
● Managing the patrols- The patrols were organised into geographic ‘cells’. These varied in size from about 8 to 15 patrols, covering an area that allowed a patrol to travel to reach a motorist within about 20 minutes. Under average conditions, this would allow a patrol to attend about one job per hour: say 20 minutes travel, 20 minutes to undertake the repair and 20 minutes average delay awaiting the next call-out. During busy periods the average waiting time would become much lower. The office-based dispatching operations were conducted on the basis of these cells; motorists breaking down within a particular cell were normally serviced by a patrol from that cell. About 50 service managers were each responsible for teams of up to 28 patrols covering two or three cells. Their job was to ensure that service standards were achieved in their areas, within target productivity levels. However, an activity survey in 1998 indicated that they generally attempted to achieve this by undertaking a large number of odd jobs to ensure that their patrols were kept on the road. For example, they would obtain and deliver replacement uniforms and consumables to individual patrols. It was becoming very apparent that, in effect, they were spending their time circumventing or supplementing poor processes, rather than getting involved with the detailed operations management of their teams.
● Use of contractors- There was extensive use of private contractors during weekends and at night-time. Sometimes they would even be used to supplement capacity during the day if unexpectedly high demand occurred. Whilst these were responsible for the same activities as patrols, they did not carry the full RAC branding, and were often found to lack the full capabilities of the patrols. Market research indicated that members were generally less satisfied with the service provided by such contractors, but it had been necessary to use them to provide capacity at times when it was uneconomical to maintain a full coverage of RAC patrols. The cost of contractors was high (averaging £36 per job) and rising, and there was considerable concern that the amount of work put out to contract was increasing, at the same time that the productivity of the patrols was actually falling. The proportion of jobs covered by patrols was measured every month; the Patrol Attendance Rate (PAR) was averaging 80 per cent in 1999. It had been calculated that a one per cent fall in PAR would cost about £1 million per year in contractor fees. Therefore, in order to generally minimise the use of contractors, patrols had always been offered incentives to do some of the jobs at off-peak times. The PAR was often low at times when the patrols took holidays, for example many were on leave at the end of the holiday year (March), and many patrols wanted to take their holiday in August to be with their families. The PAR reached a record low of 77 per cent in August 1998.
● Overtime and standby The patrols were contracted to work shift rosters, as described earlier, over a standard 40-hour week. In general, when demand was expected to be sufficiently high, they were offered overtime work or per job payments known as ‘standby’. Overtime was paid at time-and-a-half rates (approximately £10 per hour) with double time on Sundays (approximately £14 per hour). On this basis, there was really no incentive to work fast and productively, since the patrols would be paid even whilst they waited for further instructions. Patrols could also choose to be on standby. For this to apply, they had to ‘log on’ to the communications system in their vehicle, awaiting jobs to be issued to them. For every job completed they would be paid a flat fee of £6. For simple jobs (starting problems, flat battery, etc.) a patrol in a busy area could complete up to four jobs in an hour. Thus their earning potential could be very high, but they retained the right to ‘log off’ at will. Experience indicated that this would often happen if a difficult job was offered, which the patrol knew would take a long time. If none of the patrols in a cell would accept that job, it would then be passed to a contractor. In 1999, only about 50–55 per cent of jobs were done within the duty roster. The remainder was covered by overtime, standby and contractors. A particular problem that arose from this system was that of inconsistent service level. The operation ran with the risk that off-peak but unexpectedly busy periods could not be adequately covered by patrols; the alternative use of contractors would often impact customer perceived service quality. Analysis of the customer feedback forms, filled in by RAC Motoring Services 215 motorists after receiving assistance, indicated a strong negative correlation between their overall satisfaction level (known as the Customer Satisfaction Index, or CSI) and the time they had waited for the patrol to arrive (known as the Average Time of Arrival, or ATA). Moreover, there was a significant seasonality in the CSI scores, with below-average levels in the winter months for two years running. The net result was that the productivity levels achieved by the RAC patrols had been falling for five years. During this period new competitors, such as Green Flag, did not carry the cost of directly employed patrols and their associated vehicles and equipment. They simply contracted all work to third parties. Clearly this situation could not be allowed to continue! Martin and his team had to rethink how the existing numbers of patrols, and their area service managers, could be reorganised to increase productivity and PAR. For the RAC to satisfy the changing demands of its customers and its employees, things would have to change! No longer could the organisation continue to place more and more work in the hands of contractors: it was much too costly and was certainly affecting customer satisfaction. Martin knew that there would be resistance to almost any proposed change. After all, many of the patrols were of an age where their families had left home so their living expenses were falling, and therefore they were seeking more social hours and a generally easier working schedule.
● Demand patterns The annual number of breakdowns attended by the patrols peaked in the mid-1990s at around 2.9million, but had then fallen steadily to about 2.4 million in 1999, despite an increase in membership. This fall was attributed to several underlying factors. Firstly, the most obvious reason was that new cars had become significantly more reliable! Secondly, because of strict testing requirements, many older and more unreliable vehicles were being scrapped earlier, or were being used less, as families became multiple car owners. Thirdly, the RAC had been proactive in encouraging its members to prevent common failures. For example, a very common task for patrols involved starting cars with flat batteries. Where one was found to be old and in poor condition, the member was now required to replace it immediately, with a clear understanding that failure to do so would disqualify them from receiving this service again. This change was known to account for a reduction of approximately 150 000 incidents of this type. A second change was the introduction of the ‘Fair Call Policy’ which entitled a member to a maximum of six free call-outs per year; the seventh and subsequent ones would become chargeable. About three per cent of customers had created about 20 per cent of call-outs, so this policy helped to contain demand, freeing capacity and responsiveness for the less-frequent users. Despite the significant reduction in the number of breakdowns, the number of patrols was maintained at around 1350. It was calculated that even with the reducing volume of demand, the RAC would need around 2000 patrols to cope with demand without the use of con- tractors and overtime working. Clearly, a 50 per cent increase in numbers employed would be impracticable and too costly in terms of both capital and revenue.
There was a significant seasonality in breakdowns. There are more call-outs in the winter, much of which can be explained by the weather. For example, electrical faults occur more frequently because extra loads are placed on the system by the greater use of lights, which are also used more of the time, providing more opportunities for failure to be noticed. Starter motors and alternators are subject to more load, and electrical systems can be affected by dampness and water ingress. In the summer, a greater proportion of the motoring population will be abroad on holiday, reducing demand on the motoring rescue services. However, to an extent offsetting this effect, a proportion of motorists take their cars on unusually long journeys on their summer holidays, sometimes heavily loaded and without adequate servicing, resulting in breakdowns such as overheating. There were ‘normal’ weekly and daily patterns of service breakdown (referred to as SB) volumes that varied relatively predictably throughout the year, but this could be greatly distorted by unusually severe weather conditions. These demand patterns had gradually changed during the latter half of the 1990s as a result of gradual social, behavioral and economic changes. For example, the working population of the UK increased, leading to more home-to-work travel by car at peak times. Many organisations, ranging from manufacturers to financial services’ call-centres had introduced new working patterns such as ‘continental shifts’, which required employees to cover operations for up to 168 hours a week. Weekend and evening shopping became much more popular, with some supermarkets staying open overnight. Fast food outlets, leisure facilities, and even universities began operating longer hours. These types of changes gradually led to a more spread-out pattern of car travel both for worker and consumers, and had noticeably reduced the weekday morning peaks SB levels.
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