Operations & Productivity

Spirit Airlines: We Know You Hate It, But We Don’t Care

Posted on by spr1313zmares

Spirit Airlines is an American airline company that is known for having low-cost flights. The company is more concerned about the prices they give out rather than the complaints they are receiving. Spirit has been acquring their fair share of criticism from customers and the media. A survey was made of some 16,000 customer ratings and Spirit Airlines was among the bottom of the list for flying in America. “That report did not ask the one big question of who offers the best prices. And hands down, the No. 1 thing we’re told by our customers is that the price matters,” says Spirit spokeswoman Misty Pinson. Let’s be honest, would you complain about a flight that is two and a half hours long and only cost 75 bucks?

Spirit AirlinesThe company strives to make the price for flights as low as possible. They have an average base price of only 79 dollars. One thing that customers hate about Spirit Airlines is the fact that they charge fees before and during the flights to passengers. These fees can add up to be 40 to 50 dollars for the majority of customers. Spirit Airlines does not even offer a free cup of water or have a video system while the passengers are in flight. There is not much leg room either so you are cramped, regardless of how short you are.

The airline company believes that is what the Spirit customers want when it comes to this airline business. Spirit believes they have travelers who would most likely be getting a bus seat if their airline service was not available. The Chief Executive Officer Ben Baldanza says, “Well, what we say is that we care about what our customers care about, which is price, and one of the things that Consumer Reports survey didn’t ask is where do you get the lowest fare? And so they asked about leg room, and they asked about check-in, and they asked about bag fees, and things like that. But the total price that customers pay on Spirit Airlines is less than they pay on anyone else, and that’s why they love us.”

Spirit Airline company should not be upset by all the criticism coming their way. Spirit is a very solid business as their sales rose 23 percent in just the past quarter. The planes are fuller than the rest of the other airline companies. The company has a rate of 85.1 percent in the first quarter  of 2013 when it comes to flights being full. That makes the company really profitable as they move forward.

The airline company still gets a lot of negative feedback from the press even when they are succeeding. So, is it fair that Spirit Airlines is getting this terrible assessment from the media when they are making profits and almost all of their flights are full? Does the base price really trump all the niceties that other airlines offer?Or should management try to improve their baggage fees and legroom in the flights in order to please the customers more?

Links:

http://www.businessweek.com/articles/2013-05-23/spirit-airlines-doesnt-care-if-you-hate-it

http://money.cnn.com/2012/05/03/news/companies/spirit-airlines-fees/index.htm

http://aviationblog.dallasnews.com/2013/05/spirit-airlines-ceo-we-have-the-lowest-prices-and-thats-what-customers-care-about.html/

McDonald’s goes on a McDiet

Posted on by spr1331edanos

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Most people associate McDonalds with the traditional meat and potatoes menu that they started with, the traditional cheeseburger and french fries.  However, in recent times the Oak Brook based chain, with its 68 million daily customers in over 119 countries has expanded their menu to include items that can satisfy all different types of taste buds   By implementing these new items, like the snack wraps, angus burgers, and steak bagels  McDonalds has tried to cover all territories of the fast food market.  They have even offered rib sandwiches and the most recent offering of mighty wings (traditional chicken wings). Since 2007, McDonalds has added over 60 items to their menu.

Lately, however McDonalds has started to eliminate items off of their menu.  Starting with the Angus Burger last month, McDonalds claims that 4 more items will soon be off their menu including the Caesar salads, McSkillet Burritos, Southern Style Biscuits and steak bagels.  This is in an effort to better manage a menu that has grown in the past 7 years.

Because McDonalds is such an excellent example of quality and process management, this article serves as a good example to look at the way the McDonalds handles and controls its processes.  The traditional idea of McDonalds was that it was a company that could do the basics and do them better than anyone else meaning serve traditional Cheeseburgers and fries in a quick, clean, and friendly restaurant and atmosphere better than any of its competitors.  Clearly it has done this as it is the biggest fast food chain in the world and as a matter of necessity for an ever expanding target market, the menu has swollen to a size the original owners would have never thought.

Therein lies obvious potential problems which I believe McDonalds has realized.  By having so many different products, it becomes difficult to effectively offer the same consistent quality of all of these items across the board.  This I believe is because of the numerous different processes each different item must go through before it reaches the consumer.  This ranges from ingredient storage, cooking, preparing, and delivery.  This also can cause process variation in McDonalds training process as the menu becomes harder to master for its employees.  With new items so frequently being added, McDonalds lends itself to a host of possible errors in everyday preparation of these items to its customers.

What McDonalds is doing by reducing its menu items slowly is going back to basics somewhat.  By creating a more manageable menu, McDonalds can better focus on improving on its continued improvement of processes already associated with existing menu items.  By Improving their base menu items, McDonalds should see an increase in customer satisfaction across the multiple countries it occupies.

Do you think that eliminating the numerous menu items listed and more will help McDonalds achieve a higher quality standard for its other items and improve more so on its current operations? How else could this move help McDonalds achieve higher quality across the company.

 

Sources:

Crains ” More food disappearing from McDonalds”

http://www.chicagobusiness.com/article/20130517/BLOGS08/130519794/more-food-disappearing-from-mcdonalds-menu

” WikiPedia McDonalds”

http://en.wikipedia.org/wiki/McDonald’s

Bloomberg New “McDonalds Cutting its Menu”

http://finance.yahoo.com/news/mcdonalds-reduce-menu-bloomberg-reports-101556997.html

Business Insider “McDonalds to Start Cutting Menu Items”

http://www.businessinsider.com/mcdonalds-to-start-cutting-menu-items-2013-5

 

American Airlines’ Baggage Claim

Posted on by spr1311ballen2

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

Can You Have Your Cake and Eat It Too

Posted on by spr1311dferek

As I’m lounging on the sofa in the family room watching my husband decorate the cakes that he baked for both our moms on Mother’s Day, thoughts about how he plans the whole process are running through my head. While my husband wasn’t enthused about the interruption, I was busy asking him multiple questions regarding how to forecast future demand, how to manage quality and quantity, and finally what inventory method is used by businesses that produce wedding cakes.

Forecasting is a critical aspect of the business to effectively manage overhead costs, ingredient inventories and most importantly, volume projections to meet demand while maintaining a profitable business. To achieve desired profitability, the business should deliver a wide variety of designs at competitive prices.

In class, I had learned about five quantitative forecasting methods. The simplest method to forecast how many wedding cakes will be produced next month is looking back at the last month’s production quantity. Another forecasting model is using the moving averages forecast method. This method uses an average of the most recent periods of data to predict of how many wedding cakes need to be produced next period. For example, the bakery may use a 3-month moving average by adding the last 3-month production of wedding cakes and dividing by 3 months. However, to use this method, we would assume that the market for wedding cake demands is quite stable.

Next important aspect for a Wedding Cake business is how to efficiently manage the quantity and quality of the cakes. Higher quality of ingredients used during production will lead to a better reputation for the business and create higher customer satisfaction, leading to repeat customers. Moreover, business would save ingredient costs by purchasing larger volumes.

This reminded me of what I had recently learned in my class about product focus. Some bakery businesses focus on producing high volumes and low variety. For example, one business can focus on a niche market and produce only wedding cakes that will deliver a high volume but limited designs. But such a business will need to be highly completive in the market in order to be successful. On the other hand, another bakery might produce low volume of cakes, but cater to a much broader customer base such as birthdays, graduations, anniversaries, Bar Mitzvahs, etc.

Managing inventory of raw ingredients as well as finished goods is another critical aspect that has to be closely managed. The perishable nature of the products makes it very important to effectively manage inventory of seasonal products, while maintaining stocks for rush orders. Also, inventory management is crucial in maintaining business profitability by reducing waste of both raw ingredients and expired finished products.

Although I learned a great deal regarding the wedding cake industry from my husband, I”m still left with a few questions: What is the best way to forecast wedding cakes? What process strategies should be used by bakeries? Would it be more profitable to use process focus or mass customization strategy?

http://smallbusiness.chron.com/examples-management-strategies-cake-bakery-business-12208.html

Infer: Better Math Can Produce More Sales

Posted on by spr1313zmares

Infer is a company that develops technology that allows company’s sales-tracking system to rank customer leads based on how likely they are going to purchase something. The company has raised 10 million over the last two years while working on this technology. Infer is rather simple as its software starts with basic information. For example, if a customer decides to enter their name, address and company when signing up for a product. The Infer system will then start doing research behind the person that signed up for the product.

The CEO, Vik Singh is young as he is only 28 years old, but he believes that his mathematical formulas will increase sales. Vik Singh and his 10-employee team are in the midst of improving sales by using better math.

Vik doesn’t seem to be short on confidence as he feels that this new  innovation is sure to help increase sales. The problem is the fact that he is  very young and there may not be that many people that believe in his new ideas. He may not be the best person to trust for sales, but he certainly has the right engineering track record. He worked with Google fine tuning search systems before moving to Microsoft. At Microsoft, he developed technology with Jim Gray, who of the greatest computer scientists of the last half century. He finished working with Microsoft and built a new Yahoo search system.

Vik Singh has worked with some of the biggest technology gurus in the world. Vik Singh says, ” The way the typical company manages data is piss-poor in comparison and there is more science at Facebook (FB) behind seeing which of your friends are getting drunk across the street from you.” This seems to be a common theme with all the new web-savvy engineers that are trying to make new rules for business applications. Vik Singh wants to treat sales deals like a puzzle. If Infer can makes their sales deal like a puzzle then it can be solved with an algorithm rather than a dinner between people who have ideas.

Infer has worked with Box and other customers to verify their research. It works with historic sales and compares outcomes with their own predictions. Singh continues to tell everyone that the experiments come out nearly perfect, but he has not released any proof of this for businesses to see. In my opinion, there are a lot of other things that factor in when dealing with sales. There needs to be more facts when trying to rely on just math to increase sales. From a management point of view, I don’t know if Vik is taking things a little too far with all these math equations, but he does have the technology background to speak for him. Then again who has time for someone that is only 28 years old and is trying to change the way selling works?

Links:

http://www.businessweek.com/articles/2013-04-24/infer-promises-more-sales-through-better-math

http://techcrunch.com/2013/04/23/infer/

http://blog.studentrnd.org/post/37455656817/why-asians-are-better-than-americans-at-math

Getting Better with Age?

Posted on by spr1311dferek

 

While on a trip to Willamette Valley Vineyards in France, I tasted a wine that was aged for ten years, and I found that aged wines have a unique taste than newly produce wine. However, while consuming the wine, my mind started wondering how the end- to -end process flow works, what are the critical process controls, what are the priorities of operation managers, and finally how to manage the inventory.

First, I would like to share how the process flow works. Below is the end-to-end diagram that explains that process.

Many steps need to be completed in order to have an aged bottle of wine. My mind was wondering about all the steps because what I had recently learned in the class about network diagrams. For example, the vineyard, crusher, fermentation, and aging need to be completed first in order to have bottling and packaging operation. To find the critical path analysis, it is important to know how long it will take to complete each activity. In addition, it depends about the variety of grape, what kind of wine we need to produce and how long it needs to be aged before the final activity occurs. For example, with most Merlots, it could be aged between 2-12 years.

There are important critical process controls in the operational flow for achieving high quality of wine. Factors, such as crap quality, sorting, fermentation, aging, and filtration process all quality of wine. All these processes are controlled carefully as any deviation can lower the quality of the final product.

In addition, critical areas to focus on the superior customer response time or service are distributor, retail, and tasting rooms as direct sale. These were chosen because wine industries can receive instant feedback from the customers in order to provide exceptional customer service. By getting the customer feedback, wine businesses will be able to respond and react fast enough to correct or solve the issue. Also implementing an information system to streamline and automate data flow for business processes will improve performance and gain access to real time data.

Operation Management is another integral role in the process. Close attention to the areas of labor, equipment, raw material, and inventory must be paid to insure the success of the production operations. Focus on achieving the highest efficiency in production operation is very critical to wineries because of the highly competitive nature of the industry. Inventory control system is another area that requires a lot of attention because a huge stock of inventory needs to be held for aging. The quality of these inventories need to be closely monitored and highly managed in order to generate desired revenue and profit.

What kind of inventory method wineries are using? Is it worth paying more money for aged wine? Is wine getting better with age?

 

http://www.ourtribune.com/article.php?id=15070

http://www.takepart.com/article/2013/03/25/what-are-green-wines-sustainable

http://www.smartplanet.com/blog/business-brains/how-winery-domain-chandon-got-smarter-about-customer-habits/22189

 

@Twitter: “Running late, no time for coffee #drivingtowork”

Posted on by f1222rgitlevich

These days everybody has a cell phone…Not just any cell phone, most of us have iPhones, Droids and dare I say it…Blackberries. All of these devices have texting, tweeting and facebooking capabilities. Due to this “on-the-go” potential, more and more users are doing these things while driving. Since then, the number of car accidents has gone up substantially. In 2011, 23% of auto collisions involved cell phone distractions, in other words, that’s 1.3 million crashes. http://www.textinganddrivingsafety.com/texting-and-driving-stats/

Automakers believe that voice control is the solution that will permit drivers to safely text, tweet and update their Facebook pages to inform the world of the amazing fact that they are in the act of driving to work.  The problem with the notion of voice control as a cure for distraction is that it still is a distraction.

MIT researchers are working with Toyota’s Collaborative Safety Research Center to find the answer to the issue. Their goal is to measure the workload involved in the operation of a voice-command system.

The researchers equipped a car with cameras to monitor drivers’ eyes as they watch the road. Test subjects are also wired up with a heart-rate monitor and an instrument that measures galvanic skin response (like a lie detector) to assess their stress levels. The team will study the drivers while they perform physical controls and voice controls. This would allow them to predict the deterioration in driving ability that will result. http://bottomline.nbcnews.com/_news/2012/09/26/13967296-some-day-voice-control-may-cut-drivers-gizmo-distractions

 

The issue that arises is how necessary are these studies? Do we really want to include something in a vehicle that allows for these types of capabilities?

 

Transforming Waste into Profit

Posted on by suhanip301s12

Deishin Lee, a professor at Harvard Business School, is conducting a research paper on the way manufacturing companies can turn their waste into by-products.  By-product synergy (BPS) is basically taking waste from one part of the production process and using that waste in order to generate a new product.  The idea of BPS in not a new, as it is most often used in the agriculture industry.   Furthermore, she explains that in order for a manufacturing company to implement such an idea, it is important for the managers to “stop thinking of yourself as a company that creates a certain product and instead think about how you can use them to produce as much value possible.”

Since Lee is researching about recycling, she talked with Gordon Forward, CEO of Chaparral Steel.  His company use wastes from producing steel to make cement.  After an interview with Forward, she concluded that the main challenge as mentioned above is thinking outside the box, to produce an innovative product that companies/consumers will be able to purchase.

As a result of her research, Lee was able to come up with three scenarios for BPS.

1)      In a case where the by-product is a low value, a company may choose to maximize profits by using only a partial amount of the waste to produce a new product.

2)      In the second case, if the value of the new product/by-product increases, then the company might choose to actually increase the production of the primary product in order to create more “waste.”

3)      Lastly, Lee proposes a scenario in which the by-product ends up being more profitable then the primary product.  She suggests it would be wise for a company to find virgin material to make more of the secondary product.

Although using the wastes of a particular product can be beneficial to the company, it may not end up being so good for the environment.  Lee points out that sometimes using by-product to make new products can lead to more pollution.  Do you think companies should push manager into thinking “outside the box,” in order to find ways to use the waste?

Source: http://hbswk.hbs.edu/item/6800.html