AAA WASHINGTON

AAA Washington is one of the two regional automobile clubs affiliated with the American
Automobile Association (AAA or Triple A) operating in Washington State. In 1993, 69% of all
people belonging to automobile clubs were members of the American Automobile Association,
making it the largest automobile club in North America. AAA is a national association that
services its individual members through a federation of approximately 150 regional clubs that
have chosen to be affiliated with the national association. The national association sets a
certain no. of minimum standards with which the affiliated clubs must comply in order to retain
their affiliation with the association. Its own board of trustees & management administer each
regional club locally. The local management & trustees are responsible for recruiting &
retaining members within their assigned territories & for ensuring the financial health of the
regional clubs. Beyond compliance with the minimum standards set by the AAA, each regional
club is free to determine what additional products and services it will offer and how it will price
these products and services.

AAA Washington was founded in 1904. Its service territory comprises the 26 Washington
counties west of the Columbia river. The club offers its members a variety of Automobile and
automobile travel related services. Member benefits provided in cooperation with the national
association includes emergency road services; rating service for lodging, restaurants and
automotive repair shop; tour guides to AAA approved lodging, restaurants, camping and points
of interest; and advocacy for legislation and public spending in the best interest of the motoring
public. In addition to these services, AAA Washington offers its members expanded protection
plans for emergency road services; Financial services including affinity, credit cards, personal
lines of credit, checking and saving account , times deposits and no fee American Express
travelers cheques; access to a fleet of mobile diagnostic vans for determining the ‘health’ of a
member’s vehicle ; a travel agency and an insurance agency. The club provides these services
through a network of offices located in
BELLEVUE,BELLINGHAM,BREMERTON,EVERETT,LYNWOOD,OLYMPIA,RENTON,SEATTLE,TACOM
A,THE TRI CITIES(PASCO,RICHLAND AND KENNEWICK), VANCOUVER,WENANTCHE AND YAKIMA.

Club research has consistently shown that emergency road service benefit is the primary reason
that people join AAA. The importance of emergency line road service in securing members is
reflected in the three types of memberships offered by AAA Washington: Basic, AAA Plus and
AAA plus RV. Basic membership provides members 5 miles of towing from the point at which
their vehicle is disabled.AAA plus provides members with 100 miles of towing from the disabled
point. AAA Plus RV provides the 100-mile towing service to members who own recreational
vehicles in addition to passenger cars and light trucks. Providing emergency road service is also
the club’s single largest operating expense. It is projected that delivering emergency road
service will cost $ 9.5 million in the next fiscal year, 37% of the club’s annual operating budget.

Michael DeCoria, a CPA and MBA graduate of Eastern Washington University, had recently
joined the club’s management team as VP of the operations. One of the responsibilities Mr.
DeCoria assumed was the management of emergency road services. Early in his assessment of
the emergency road service operations, Mr.DeCoria discovered that emergency road service
costs had increased at a rate faster than could be justified by the rate of inflation and the
growth of club membership. Mr. DeCoria begin by analyzing the way the club delivers
emergency road service to determine if costs could be controlled more tightly in this area.

Emergency road service is delivered in one of the four ways: AAA Washington service fleet,
contracting companies, reciprocal reimbursement and direct reimbursement.AAA Washington’s
fleet of service vehicles respond to emergency road service calls from members who become
disabled in the downtown Seattle area. Within AAA Washington’s service area, but outside of
downtown Seattle, commercial towing companies that have contracted with AAA Washington
to provide this service respond to emergency road service calls. Members arrange for both of these
types of emergency road services by calling the club, s dispatch center. Should a member become
disabled outside of AAA Washington’s service area , the member can call the local AAA-affiliated club to
receive emergency road services .The affiliate club pays for this services and then bills AAA Washington
for reciprocal reimbursement through a clearing service provided by the national association . Finally,
members may contact a towing company of their choice directly, paying for the towing service and then
submitting a request for reimbursement to the club. AAA Washington reimburses the actual cost of the
towing or $50, whichever is less, directly to the member. After a careful examination of the club’s four
service delivery methods. Mr.DeCoria concluded that the club was controlling the cost of service
delivery as tightly as was practical.

Another possible source of increasing costs was a rise in the use of emergency road service.
Membership had been growing steadily for several years, but the increased cost was more than what
could be attributed to simple membership growth.

Mr.DeCoria then checked to see if there was a growth in emergency road service use on a per member
basis. He discovered that between fiscal year 1990 and the fiscal year 1991 the average number of
emergency road service calls per member grew by 3.28% from an average of 0.61 calls per member to
0.63 calls (AAA Washington’s fiscal year begins July 1). Concerned that a continuation of this trend will
have a negative impact on the club financially, Mr. DeCoria has gathered the data on emergency road
service call volume as presented in table.
QUESTIONS

1. Perform time series decomposition on the AAA emergency road service calls data?
2. Write a memo to Mr. DeCoria summarizing the important insights into changes in emergency
road service call volume that you discovered from your time series decomposition analysis?