Information Systems Help Kia

Case Study: Information Systems Help Kia Solve its quality problems 1. Why was it so difficult for Kia to identify sources of defects in the cars it produced? Answer: Kia systems had been using seven different systems to store different information like warranty claims, parts sales, vehicle identification number master storage files, vehicle inventories, etc. The most important thing in identifying the sources of defects would be in finding out the real cause of the defect/problem. Because of no proper linkage amongst all the different systems it was difficult for the management to analyze the real cause of the defect, predict the defects and take necessary corrective actions. Hence, it was difficult to get information and identify the source of defects in the cars it produced for Kia simply because there was no single data repository house of all the different departments which would have been useful for the management in identifying and analyzing the sources of defects to decrease the cost of warranty expenses.

2. What was the business impact of Kia not having an information system to track

defects? What other business processes besides manufacturing and production were affected? Answer: Since there was no proper information system to track defects, Kia had to face a lot of business impact. Following are some of the points that had been impacted: i)

Higher operating costs: Due to no information system and higher amount of defects, Kia had offered a 10 year/10,000 mile warranty program. Hence, with this they had to pay for repairs on all warrrantied items in its vehicle for many more years. This increased the operating costs of the company.

ii)

Decrease in sales: With poor quality and higher defects, it gather poorer customer referencing, hence there was decrease in sales.

iii)

Lower customer retention & higher churn: With higher defects and accidents, higher numbers of customers were shifting their preference of cars from Kia to other branded vehicles. Hence, there was lower customer retention.

iv)

Bad customer experience: With poor quality and higher defects, Kia had a bad customer image and overall a bad customer experience.

v)

Decrease in profitability: With higher operating costs, decrease in sales & higher churn, Kia had to face loss of higher amount of profits.

Besides manufacturing and production, below mentioned business processes were affected with the lack of quality information system: 

Sales: Sales of the cars were getting hampered due to higher defects and damages as it resulted to poorer customer referencing and experience.

Submitted by Richa Joshi, EMBA, Roll no. 12512

Case Study: Information Systems Help Kia Solve its quality problems 

Marketing: With higher defects and accidents, Kia cars had a negative image amongst the market. Hence, it was difficult to have a better brand image for the brand.



Financial profitability: Higher defects had higher operating costs as well as it decreased the sales of the company. This decreased the financial profitability of the company.

3. How did Kia's new defect reporting system improve the way it ran its business? Answer: Mandatory rule of reporting defects, accidents, or injuries involving it’s vehicles to the US NHTSA required Kia to develop an information system helpful for the above tasks. They could have manually gathered information from 7 different systems and provided the necessary information. But doing so, it wouldn’t have provided any other benefit to the company. Hence, they hired Infogain, who created an information system. The information system examined six systems for warranty claims, Parts sales, vehicle identification number master storage file, and vehicle inventories and stored the essential information in a signal common data repository. The data repository was then linked with Customer relationship management system which tracked consumer complaints received by Phone, E-mail, or Postal mail. Using the single and sole data warehouse, Kia used the Crystal Analysis software in identifying problems and sources of defects; analyzing problems with different data mining techniques from different perspectives (like on a daily basis, weekly , monthly,etc.) ; forecasting them & solving them before they arose. Hence with the new single defect reporting system, Kia improved quality of it’s vehicle, lowered cost of warranty repairs and most importantly determined the most cost-effective strategy for dealing with its quality problems.

4. What management, organization, and technology issues did Kia have to address when it adopted its new quality control system? Answer: Written below are the issues that Kia had to address when it adopted its new quality control system: i)

Technology: From technological perspective, Kia had to introduce a completely new information system for reporting the defects. It had to invest a lot of money in capital investment for one single data warehouse. Apart from that for adopting the new quality control system it had to use analysis software for analyzing and highlighting events, such as spikes in warranty claims related to a particular vehicle model, unusable increases in parts order, or high number of accidents.

ii)

Management: With the introduction of the new quality control system, the first and foremost thing that needed to be done was to educate and familiarize the management with the information system. The managers had to be educated about change management. As an

Submitted by Richa Joshi, EMBA, Roll no. 12512

Case Study: Information Systems Help Kia Solve its quality problems end-user, they had to be informed about how helpful the information system would be to them in making decisions which would increase the financial profitability of the company. They had to be trained and educated regarding how the information system could help them in analyzing the data on daily, weekly, or monthly basis and by specific car models, model year, and components and identifying problems and solving them with help of different data mining techniques from different perspectives. iii)

Organization: Before such change, the organization had to train and prepared the change management. With such positive change, organization could not only improve its quality and control defects but also decrease its operating costs, increase customer satisfaction & profitability of the company. Indirectly, it created a positive buzz for the organization.

5. What new business processes were enabled by Kia's new quality control system?

Answer: With the help of new information system, Kia could improve and initiate many new business processes. They could pinpoint the sources of defects and determine what percentage of its vehicles is likely to have problems. Following are some of them: i)

Manufacturing & production: New quality control system pinpointed the major sources

of defects in the cars during production and hence it helped the company in identifying the critical production process thus helping the company in improving the quality. ii)

Sales & Marketing: With better quality, the company had better customer satisfaction.

Hence, with this it could increase it’s sales of cars. iii) Finance & accounting: The Company used to face huge operating costs for warranty repairs. With better information system on identifying the sources of defects and helping in correcting them, the company could increase it’s financial profitability. iv) HRM: With the introduction of new quality control system, the company could not only train and educate it’s management on the use of information system but also hire new employees who were efficient and knowledgeable in that arena of work.

Hence overall with the introduction of the new quality control system, the company could improve its production processes before the problems become more widespread. Thus lowering down the operating costs for warranty period of repairs. This information helped Kia in determining the most cost - effective strategy for dealing with its quality problems.

Submitted by Richa Joshi, EMBA, Roll no. 12512