Author: spr1311ballen2

American Airlines’ Baggage Claim

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With airlines always increasing the prices for checked baggage, so many people try to fit all of their travel items in one carry on suitcase. So while the whole plane is boarding, people are frantically trying to find an overhead bin that can fit their suitcases. The plane may be ready to take off, but the passengers are not all seated with their luggage stowed properly.  American Airlines has caught on to that.

After coming in second to last in 2012 in terms of on-time performance, American Airlines decided they needed to change the way they boarded their passengers. Starting May 16th, passengers with small carry on items that can be stored on the floor will board first. Those with suitcases will follow. The hopes are that the new boarding procedure will reduce rolling suitcases causing blockage in the aisles while boarding. The jets can then back away from the gates quicker and help American Airlines improve their on -time arrival rate. In this past March, about 20% of U.S. airlines’ flights were delayed, about 7% of those flights were delayed due to late-arriving planes.  A four week test showed that the new boarding procedure shaved an average of two minutes off of the flight loading, “which adds up,” said Daniel Bellavigna, American’s supervisor of continuous improvement.

That’s not the only problem American Airlines is having with their baggage. Half of the overhead bins on American’s older jets can’t even fit the new, popular roller bags “wheels first.” This is greatly limited the numbers of bags that the plane can accommodate. American is slowly replacing these jets but still has over 200 in its fleet. The overhead bins on one side of the plane require the roller bags to be placed sideways to fit. If your bag can’t squeeze in, the passenger is out of luck.

 

With the new procedures regarding baggage in place, many passengers may end up checking their bags for free at the gate and avoid the $25 fee that American charges at check-in. These baggage fees have been huge for the airline industry. Checked bag fees have produced more than $6 billion in annual revenue for the airline industry. Since the baggage fees have been in place, many more passengers carry on their suitcases in hopes to save money. The more passengers that do this, the longer it takes the plane to leave the gate. American Airlines believes that by shaving off some time of passengers rolling and stowing their suitcases, they can do better with their on-time performance.

Do you think that by changing their boarding process will help American Airlines improve their on-time performance? Do you think something else could have been changed so that things ran more efficiently and productively?

 

Source: http://www.businessweek.com/articles/2013-05-17/american-airlines-doesnt-want-your-bags-in-the-cabin#r=nav-r-story

The Cost of Cutting Costs

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Have you ever gone to the store only to find that the shelves are bare and you can’t get what you’re looking for? Many Walmart customers nationwide are complaining that they cannot find what they need at their local Walmarts. Because of this, Walmart lost many of their customers to their competitors such as Kohls, Target, and

Why the empty shelves? Since the recession, Walmart has tried to cut costs. To accomplish that, Walmart cut staff. “In the past five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 percent increase, according to company filings in late January. In the same period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent.” So as Walmart continues to open new stores throughout the country, they also continue to cut their workforce. This has had some severe consequences. Some of these include longer checkout lines, less help available to customers throughout the store, and disorganization.

These issues have caused Walmart to place last amongst department and discount stores in the American Customer Satisfaction Index. This is the sixth consecutive year that Walmart has tied or taken the last spot. The lack of customer service due to a lack in staff is definitely to blame. Walmart has so much inventory in back, but not enough staff to stock the items on the shelves. Customers cannot find what they are looking for and cannot find an employee to help them. When the customers go the check out, they are faced with long lines and few checkout lanes open.

In the past, other retailers have viewed labor as a controllable expense that is an easy way to cut costs. In the early 2000s, Home Depot had the same thoughts as Walmart. They could easily cut expenses and grow profits by cutting staff and relying on part time workers. Eventually customer services and satisfaction plummeted causing sales growth to fall throughout established Home Depots.  If Walmart continues to cut costs by cutting labor, they could face the same fate as Home Depot.

Adding five full time employees to Walmart’s U.S. stores would cost around $448 million a year. This would add about a half-percentage point to Walmart’s selling, general, and administrative expenses. For such a big company, a half-percentage point is nothing, especially when looking at the future and long run of the company.

If Walmart continues to cut costs by cutting labor, they will fall into a vicious cycle. With no staff to stock the shelves, the company cannot sell things that are not out and made available to customers. Eventually customers will choose Walmart’s competitors over Walmart for all their shopping needs. A change definitely needs to occur or Walmart will have many problems in the future. What are some ways that Walmart can cut costs without cutting out customer service and satisfaction?

 

Reference: http://www.businessweek.com/articles/2013-03-28/walmart-faces-the-cost-of-cost-cutting-empty-shelves#p1