Frumherji Ltd., Reyhjavik: The Vehicle Inspection and Emissions-Testing Process

The Icelandic government outsourced its testing and metrology functions in 1997, and in 2008 two firms competed for most of the vehicle emissions testing and inspection business in Iceland. Frumherji was one of the two. In a physically isolated island nation of just over 300,000 residents, word-of-mouth information about customer service could make or break a firm in the marketplace. Karl Sigurdssson, Senior Manager of Frumherji’s Vehicle Department, was seeking ways to enhance customer service, while at the same time retaining the high standards and integrity that were essential to the company’s continued contractual role with the Icelandic government. He hired a consultant to gather process data and make observations about customer service, and was considering how to use the information to identify problems and introduce solutions.

The case highlights current challenges for Frumherji, including perceived customer service, demand variability, waiting times, recording errors, and employee turnover. It also includes relevant information about Iceland’s immigration patterns, the growing market for vehicle inspection and emission testing, and goverment policies. The case presents a step-by-step description of the process for inspecting and testing private vehicles at Frumherji’s largest station, Hestháls, located in Reykjavik. Accompanying information includes processing times, reject rates (yield rates as the inverse), wait times, error loops, and problems introduced by the customers themselves. Images of the facility and photos of the work area at each step in the process bring a sense of reality to the descriptions.