2. Introduction about Kia motors
• Founded June 9, 1944
• Parent Hyundai Motor Group
• The company is 33.88% owned by the Hyundai
Motor Company
• Headquarters Seoul, South Korea
• Area served Worldwide
• Key people H-Keun (Hank) Lee, Vice
Chairman and CEO, Peter Schreyer Chief Design
Officer
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3. Case Summary
• Korean car manufacturer Kia Motors started selling in the North
American market, promising high-quality vehicles at prices well
below the competition.
• In 1994, Kia sold 12,000 cars, by 2004, Kia had sold 270,000 cars
and expected sells for 2010 was 5,00,000. From a marketing end
standpoint, Kia has been a phenomenal success.
• But until 2002 Kia ranked at the bottom of J. D. Power(Research Co.)
and Associates’ annual initial-quality survey of new vehicle owners.
• In 1997 when the average North American car had 1.1 defects per
vehicle, Kia had 2.75.
• In 2002 Kia had improved to 2.12 defects per vehicle, but the
industry average was 1.33. Kia had a long way to go, and it was
affecting its ability to sell cars, retain customers, and keep
operational costs down.
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4. Case Summary contd…
• Like all manufacturers of vehicles sold in North America, Kia
had to create a system by December 1, 2003 to report any
defects, accidents, or injuries involving its vehicles to the
U.S. National Highway Traffic Safety Administration
(NHTSA). Major challenge
• Kia Motors uses a manufacturing and production system to
help in identifying sources of defects in their automobiles.
• Kia uses the information from the system to improve its
production processes to eliminate or reduce defects.
Improving vehicle quality lowers Kia’s costs for warranty
repairs while increasing customer satisfaction.
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5. Case Study Questions
Q.1 why was it so difficult for to identify sources of defects in
the cars it produced?
• 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 fragmentation of this information in different system
prevented KIA from getting complete picture of defects.
• 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.
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6. Q: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?
(i) Higher operating costs:
(ii) Decrease in sales:
(iii) Lower customer retention & higher churn:
(iv) Bad customer experience:
(v) Decrease in profitability:
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7. Q:3 How did Kia's new defect reporting system
improve the way it ran its business?
Ans. Kia created a software "engine" that examine
six Kia systems for warranty claims, Parts sales,
vehicle identification number master storage file,
and vehicle inventories and store the essential
information in a single common data repository.
And use this information Kia tracking consumer
complaints received by Phone, E-mail, or Postal
mail. And from this information Kia improve its
vehicle quality.
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8. Q:4 What management, organization, and
technology issues did Kia have to address when it
adopted its new quality control system?
Ans. After installation of new quality control
system, managers have to analyze the data by daily,
weekly, or monthly reporting periods and by
specific car models, model year, and components
and highlighting events, such as spikes in warranty
claims related to a particular vehicle model,
unusual increases in parts order, or high number of
accidents.
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9. Q:5 What new business processes were enabled
by Kia's new quality control system?
Ans: Kia's new quality control system enabled it to
• Centralization of data
• Pinpoint the sources of defects and determine
what percentage of its vehicles is likely to have
problems,
• Customers’ feedback and complaints became
easily accessible
• Quick respond the market (As any problem arises
or shift in demand of consumers)
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