American Heat & Air: Improving Processes and Services for Customers

Question 1: Desired Outcomes from Process Mapping Exercise

Tom is challenging the organization to get better. He wants to embark on a process mapping exercise. What should be American Heat & Air’s desired outcomes from this exercise? Create a current process map, including physical product/activity as well as information flows.

What do American Heat & Air’s clients want? Do these expectations differ by type of service provided (e.g., emergency, non-emergency, maintenance)? What is the value proposition for each type of service?

When you consider the current overall process, what are some of the key problems? How would you improve the current operation (think about root causes not just symptoms)? If investments are needed, please discuss feasibility (e.g., cost, time, return, etc...)

How would you evaluate whether or not the business should shift away from emergency repairs toward maintenance services?

With respect to maintenance visits, technicians also keep a physical log of the parts used and the amount of time spent. The process for stockouts is very similar to the open repair tickets. Given that technicians estimate the supplies that they will need on the next maintenance visit, if those supplies are not available it causes significant frustration for the technicians. Currently, the inventory clerks at the depot see the technicians’ estimates, but the inventory clerks do not have the ability to order inventory until physical counts illustrate levels below the minimum quantities. With respect to billing, maintenance clients are billed a flat fee based on the maintenance agreement. The fees and agreements are the responsibility of the sales organization, which is located at headquarters. Occasionally, billing is asked to compile cost information for maintenance services, but this is cumbersome as costs are not easily tracked by type of service when multiple services (e.g., emergency repair and maintenance) are performed for a particular client. Tom believes that one of the main issues stems from emergency repair, given it is so difficult to predict. Additionally, emergency repair is highly seasonal (e.g., air conditioners fail in hot, not cold, weather).

He would like to move a larger percentage of the business to maintenance services. However, client complaints regarding lead-time and stockouts seem to be similar regardless of the type of service. There is a general belief that inventory is a “necessary evil” and no matter how it is managed you always have too much or not enough. About 40% of the inventory is common to most HVAC systems (e.g., filters, belts, fasteners). Another 20% of the inventory can be retrofitted by the technicians to work on many HVAC systems (e.g., duct components). The remaining inventory is specific to particular HVAC brands (e.g., fan motors, electronic components). Often the brand manufacturer offers warranties on these specific SKUS. To date, American Heat & Air has not had a system in place to reclaim warranty dollars when parts fail during the warranty window. Technicians complain about one HVAC manufacturer, in particular, having a lot of in-field failures. It is clear that some things have to change even if some “reasonable” investments are required (e.g., an additional depot, hiring more technicians). American Heat & Air cannot continue to lose customers to the competition.

How would you evaluate whether or not the business should shift away from emergency repairs toward maintenance services? Please make an effort to use Lean techniques in the evaluation.