By louis
Published: May 10, 2007

Part One

Technician A drains fluids from vehicles on the lift and places the drain pan on the floor. Some of the fluid, falling from five feet up, goes into the pan, but a lot splatters on the floor. He uses absorbent mats to absorb the majority of the spillage, and tracks through the rest. When finished, the bay is mopped to clean up the mess and sits idle until it drys.

Technician B raises the drain pan close to the work area and prevents the spill. Both men get the fluid changed. Are there other things in a shop that are like this?

Part Two

There was a shipyard named Company A, that controlled a very large part of the ship building industry. They built very good ships and had a reputation for it. Slightly more expensive than the competition, but since they had a quality product, they could command a higher price.

Everything was great for many years. One day a new ship building company named Company B opened, and was very different from all the other ship building companies. It was much smaller than Company A at first and so they paid it little mind. They just kept building ships, just the same as they always had.

The way ships were built was that huge pieces of steel were cut to shape and then the edges ground smooth. Next holes were drilled around the edges of the plates so that rivets could be inserted to hold the plates together. If the holes didn’t line up perfectly, they were reamed to fit and then riveted. This left the seam a little loose, so it was welded to make it tight. This resulted in a good fit, and a tight ship.

After a few years, Company B was no longer small, they had grown to the same size as Company A and many of the other shipyards had closed. Company A realized they were losing clients and began to study Company B. They found Company B was building ships for about 20% less than they were. This must be the problem, we have to lower our price. They asked all the workers to take a cut in pay and laid off several of the higher paid people. Everyone was put on incentive pay and the more production the more they would be paid. They switched to a less expensive grade of steel, less expensive paint and put fewer coats on each ship. They also went to lighter duty engines and drive-lines. Now they could lower their prices by twenty percent and still make a profit, sales started to rise.

Soon they had many complaints and clients demanding their money back. The new lower price ships were flimsy, under powered and started to rust after a short period of time. There were also expensive law suites and soon Company A was in serious trouble. After a few years they closed down, along with most of the other shipyards and Company B opened two additional locations.

What happened to company A? Why is Company B successful? How does this relate to the auto repair industry?

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