There are some interesting points to be made here. To begin, the first video asserts that US manufacturing jobs lead to more ancillary jobs than service jobs (i.e., there is a bigger multiplier on manufacturing jobs). This certainly makes sense. This is partly due to the disaggregated nature of manufacturing jobs while many service jobs are inherently more integrated. One auto worker cannot on his own really deliver much of value. He needs people to staff the rest of the assembly line. Even an assembly plant worth of workers is pretty much useless without an army of workers at suppliers. In contrast, one service worker on her own can actually create quite a bit of value. Think of a nurse practitioner staffing a walk-in clinic; on her own she can actually do quite a bit. So that’s why everyone talks about good manufacturing jobs. What highlighting a higher job multiplier though doesn’t say is where those jobs are located. In an integrated global economy, auto parts may be made in Mexico as opposed to Ohio.

A second point made in the video is that because of the need for design and manufacturing to interact, higher skilled jobs are prone to following low skilled ones overseas. That is an argument that has been around for years and it is hard to say it is wrong. Now there is arguably a new twist to it. Specifically, design work will naturally move to growing market. Sound like a crock? Check out this quote from a BusinessWeek article on how GM is using leveraging cars designed for China into models sold around the world (China Dictates Design as GM Sail Big Back Seat Goes Global: Cars, Jan 18).

“In the future, what is made for the Chinese will also be made for the world,” said Burt Wong, chief production designer at the Pan Asia Technical Automotive Center in Shanghai, the research and development joint venture between GM and its Chinese partner SAIC Motor Corp. …

In the past, Detroit-based GM had brought models designed for the North American market and adapted them to Chinese needs, Wong said. Now, the center cooperates with Michigan colleagues as early as four years in advance on new and refreshed car designs, he said.

Detroit and Shanghai-based engineers worked together to design the 2010 Buick Lacrosse, with the Chinese center taking the lead in interior design. The Shanghai center, which employs about 2,000 staff, is currently developing a new sport-utility vehicle for global introduction, Wong said.

Now to the NYT articles. “How the US Lost…” has some really interesting observations about why Apple (along with pretty much every other electronic manufacturer) is in China.

For over two years, the company had been working on a project — code-named Purple 2 — that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality — with an unscratchable screen, for instance — while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?

The answers, almost every time, were found outside the United States. Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China. …

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

So you do assembly in Asia because everything else is there. Further, you get unbelievably flexibility. Here is probably the most scandalous part of the article.

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Which gets us back to Jan’s post. Yes, American politicians love the idea of manufacturing jobs but I doubt that few would subscribe to the idea that workers should be on call to ramp up at the whim of some buyer. These are not “good” manufacturing jobs. The question is whether the average American cares that someone in China has to put up with such work conditions enough to stop buying Apple products.

The article “In China, Human Costs…” further discusses working conditions in factories building shiny i-devices. The interesting part here is how much sway Apple has over its suppliers.

Apple typically asks suppliers to specify how much every part costs, how many workers are needed and the size of their salaries. Executives want to know every financial detail. Afterward, Apple calculates how much it will pay for a part. Most suppliers are allowed only the slimmest of profits.

So suppliers often try to cut corners, replace expensive chemicals with less costly alternatives, or push their employees to work faster and longer, according to people at those companies.

“The only way you make money working for Apple is figuring out how to do things more efficiently or cheaper,” said an executive at one company that helped bring the iPad to market. “And then they’ll come back the next year, and force a 10 percent price cut.”

The question then is what can give. Apple will not sacrificing quality or using second-rate components. That puts worker safety high on the list of things that can be cut.

And again we circle back to what Western consumers will put up with. Truth be told, I have toured some US-based high tech factories that seemed pretty miserable places to work. Back when IBM made personal computers, their North Carolina assembly plant was run with almost 90% temp workers and even the plant manager had to walk through a metal detector when entering or leaving the factory floor. It didn’t really strike me as a great environment. But that said, workers could be pretty confident that their pay check would be calculated correctly and that basic safety issues had been addressed. The same cannot be said of China. Of course, while Name Your Favorite Non-Apple Tech Company has not been under the same scrutiny as Apple, I have not seen a really compelling analysis that shows that HP or Samsung has problem free operations. That to some extent is the real conundrum for consumers. If one wants a modern life with a smartphone and a tablet, it is not clear that any device is really guilt-free.

We love our iPhones and iPads.

We love the prices of our iPhones and iPads.

We love the super-high profit margins of Apple, Inc., the maker of our iPhones and iPads.

And that’s why it’s disconcerting to remember that the low prices of our iPhones and iPads–and the super-high profit margins of Apple–are only possible because our iPhones and iPads are made with labor practices that would be illegal in the United States.

The article summarizes a recent episode of NPR’s This American Life which did a special on Apple’s manufacturing.  Foxconn, one of the companies that builds iPhones and iPads (and products for many other electronics companies), has a factory in Shenzhen that employs 430,000 people. Apparently, an estimated 5% of them are kids (12 to 14 years) old; the standard shift is 12 hours and can extend to 14 – 16 hours; while the reporter is in Shenzhen, a Foxcon worker dies after working a 34-hour shift; the hands of workers who are using the neuro-toxin Hexane (which evaporates faster than other cleaners) to clean iPhone screens are shaking uncontrollably; etc.  All this for a wage of less than $1 an hour.

Henry concludes:

The bottom line is that iPhones and iPads cost what they do because they are built using labor practices that would be illegal in this country–because people in this country consider those practices grossly unfair.

That’s not a value judgment. It’s a fact.

So, next time you pick up your iPhone or iPad, ask yourself how you feel about that.

A good question indeed and you should ask how you feel. (Interestingly, respondents to this story span the entire spectrum.)  But let me ask whether Apple should care about this?  The answer is an emphatic “but off course.” Anyone familiar with “non-market strategies” knows that even a small fraction of the population can provide sufficient activism to bring a company to its senses.  (If you are not familiar, read “Reputation Rules” by my colleauge Daniel Diermeier.)  The momentum is already building: this weekend Forbes asked whether this is Apple’s Nike moment? Of course we hold big, successful companies to a higher standard; tall trees catch much wind.

So what will Apple do?  Well, it seems it already mounted campaigns–recently it disclosed for the first time its list of suppliers (without any addresses we should add–they still don’t want to make it easy, but it’s a first step). More interestingly, however, is the question how they will deal with the Foxcon issue: even Apple may not (nor want to) be in a position to control a company that runs a factory with 430,000 people.  Indeed, in a follow-up blog my colleague Marty will write about another key reason (besides cost) that Foxcon is so attractive: fast response at massive scale.

But this is not the first time Foxcon suicides are in the news (see May 2010 article) and Foxcon isn’t know for respect of its employees (recently the CEO called its employees “animals“). So Apple likely has been working on addressing this for a while.  Could the amazing $8 billion in announced capital investment at suppliers (see this earlier blog entry) include automation to reduce the human stress and risk factor? It surely would be in line with Apple’s strategic quest for high quality (i.e., consistency, low tolerances, etc.) while retaining high scale.  However, it would imply a faster-than-expected transition in China from low-level assembly by hand to higher job requirement for much fewer people.  Starts sounding like our job quandary?

On the one hand, it may not be surprising that there are few retailers on the list. My first job was in the camera department of a Caldor store. It was boring and tedious with pretty minimal compensation. On the other, front-line employees are the face of a retailer and are what separate bricks-and-mortar stores from the on-line competition. Supposedly, “superior” customer service is a reason to go into Best Buy as opposed to just ordering on line. Indeed, there has been much in the press recently about how retailers are aiming for better service as a way to compete.

So why then does it seem like retailers are going out of their way to make life hard for employees?

A recent study called  “Discounted Jobs: How Retailers Sell Workers Short” has gotten a lot of press. (See here for the New York Times report and here for a PDF of the actual report.) The study interviewed nonunion retail workers around New York City about their pay and working conditions. As the word “nonunion” might suggest, the group behind this study – Retail Action Project — has an agenda. But even with that caveat, the studies findings are rather grim.

For example, the report emphasizes how many retailers have come to rely on a “core-periphery” labor strategy with a small core of full-time workers and “a constantly churning periphery of part-timers and temporary employees.” The latter qualify for few if any benefits. Worse, part-time work has changed. My Caldor job was part-time but I had a consistent 20 hours a week and minimal variation in schedule from week to week. (For what it is worth, Caldor was a union shop.) Part-time retail work now means being on call and having little predictability in the volume or schedule of hours. Here is how one interviewed worker describes his experience.

Irregular schedules are a big issue for me. I’m given my schedule just a day or two ahead of time. Since I am in college, it’s really important that I’m not scheduled during class.

There’s so much turnover, I don’t know my coworkers’ phone numbers in case I need to switch shifts. To make matters worse, my schedule is posted in the store, but not e-mailed to me. If the schedule is posted when I’m not working, I have to call in – sometimes I’m on hold for half an hour.

Additionally, there is only one manager at my store who can change employee’s schedules. If I’m not working when he’s working, I have to track him down on my day off. Everyone’s hours fluctuate. I have been scheduled for as few as six hours in a week, and as many as 40, so my paycheck is always different.

There are a couple of points to be made here. First, one has to acknowledge that retailing is a very tough business. For example, no one has my old Caldor job since the chain went bankrupt years ago. Margins are slim and labor is one of the biggest expenses. Hence, aggressively managing staffing is a necessity. However, it is not clear to me that that necessarily translates into highly unpredictable schedules. Yes, demand varies over the week but Saturday is always busier than Tuesday afternoon.

One could also argue that a core-periphery strategy makes sense in an industry with high turnover. That is, one needs a deep bench of employees when everyone’s a free agent and could be gone next week. Fair enough, but that raises the question of what is the cart and what is the horse. Are these systems set up to tolerate high turnover or do they engender high turnover? If retail jobs are structured to require minimal training and little firm specific knowledge, then employees can switch firms, essentially be equally as productive, and take no real hit in their wages. Of course, if jobs are set up to require little specific knowledge, it is not clear that workers are providing much in the way of service to customers. That is, if your workers can’t do much for customers, how elastic are sales to staffing levels? If sales don’t respond to staffing, then why do you need an army of part-timers?

Finally, there has to be a tradeoff in compensation and schedule uncertainty. Significant swings in weekly hours mean that employees face risk and that risk needs to be compensated for. Thus firms should be able to trade some consistency in hours for lower wages.

United’s strategy works when the winds are calm, and it allows the airline to operate less expensive aircraft with fewer cabin-crew members to an array of European cities that wouldn’t generate enough traffic to justify larger planes. But by pushing its international Boeing Co. 757s to nearly the limit of their roughly 4,000-nautical-mile range, United is leaving little room for error when stiff winds increase the amount of fuel the planes’ twin engines burn.

This is an interesting and classical problem in operations.   The firm needs to decide which plane to allocate to which route. Take for example routes to less popular European cities. The airline can choose a relatively small plane, ensuring high seat utilization, and the ability to charge a relatively high price per seat, but exposing itself to the risk of running out of fuel when flights take longer than expected, and the costly implication of angry customers, long delays, and missed connections. The airlines can also choose a larger plane with clear benefits and disadvantages.   When determining the exact allocation of planes to routes, the weather and winds are not known, and thus one has to account for the different possible scenarios and the associated consequences. From reading the article we learn that last month, United’s 757s had to stop 43 times to refuel out of nearly 1,100 flights headed to the U.S. A year earlier, there were only 12 unscheduled stops on roughly the same volume of 757 flights. Which means, that this is not a very rare event. We also learn that this year’s likelihood of such an event has gone up by an order of 4. At what ratio will the cost dominate the benefits? Even if it happens with this likelihood, it does not mean that this is a bad decision. It is clearly a PR disaster, but I am not sure that it is an operational one.  This problem is not identical to the newsvendor problem, but it’s pretty close.

We should note however, that the airline could affect the likelihood of running out of fuel by trying to increase the amount of fuel or reduce the weight, and thus increase the range.

Gordon Bethune, a former Boeing executive who went on to become Continental’s chief executive and retired in 2004, said Wednesday that the airline talked to Boeing about installing extra fuel tanks in the bellies of the aircraft. “But you give up a lot of luggage space and it’s not economical,” he said. “And it’s fairly complicated.”

Again, it’s all about tradeoffs.  A very related problem is faced by the FAA, which has been struggling to approve the 757 for the longer routes.

“The report did note that some controllers and a pilot-union safety official “expressed concerns regarding the use of Boeing 757s on long, overseas routes,” particularly when westbound flights from Europe ended at congested airports in the Northeast.”

As a United customer myself, I am quite sure to start formulating my own decision tree, and adding this issue to the on-time-performance I already account to.

While listening to the podcast, take a gander at this graphic on the evolution of American manufacturing from the Wall Street Journal (The Factory Floor Has a Ceiling on Job Creation, Jan 12).

On New Year’s Eve, Dan Whaley, a tech entrepreneur in San Francisco, got into a black Town Car and was driven one mile to a holiday party. The ride cost him $27. At the end of the night out, Mr. Whaley took a Town Car home from the party. This time, the exact same ride cost $135.

That’s right. Uber was using dynamic pricing, applying a multiplier to their basic rates depending on how much demand there was. Here is what customers saw when they ordered a car.

The Times article emphasizes that many customers were rather ticked by the seemingly exorbitant rates; because Uber prices by the mile and you don’t tell them where your going until the driver arrives, some amount of sticker shock at the end of your trip may be unavoidable.

But the Times actually sells short just what the firm is doing. Yes, dynamically raising the price chokes off some demand but it also brings more capacity to the market.As far as I can tell from their site, Uber doesn’t own any cars or hire any drivers. Rather they are working as a middleman matching customers with customers with independent car services in the city. Rising rates then also gets more drivers to commit to Uber customers.  Here is how their blog explained the plan before New Year’s Eve.

In the last several days, we’ve received a ton of questions about how reliable Uber will be on New Year’s Eve. “Will there be a car available?” “Can I count on you guys for the New Year’s festivities?”

On New Year’s Eve, yes that’s tonight  , we are aiming to provide a reliable ride to anybody who needs one, no matter how crazy demand is or what is going on in the city. We won’t be perfect, but we’ll be damn close; and as you might expect, there’s a price to that kind of reliability and convenience during such a massive spike in demand. We’re rolling out what we call Surge Pricing in order to achieve such a high level of service on NYE. …

We are able to get a far greater number of drivers on the system when Surge Pricing is in effect – it’s basic economics. Higher prices encourages more supply to come online. It gets some drivers out to work on NYE. It keeps other drivers from going to alternatives like renting their car out for the night, or trying their luck at hustling rides on the street. Higher prices means more cars, means more rides, means more people getting around the city efficiently, safely AND in style 

(Note the emoticons are theirs, not mine.)

So how did this all work? This is what they recount in their blog after things hit the fan and users complained about the cost of Twitter etc.

The higher the price would go, the more people would choose not to use it, but there was an almost unlimited amount of demand to suck up the limited supply. At UberMissionControl, it felt like there was no sensitivity to price, but what was really going on was a massive torrent of desperate demand with a very small fraction (still huge # of people) willing to pay anything for a ride.

To our dismay, the pricing multiplier kept going up. The math was doing its job—you could start to see the utilization figures getting some slack, but then another wave of demand would hit, and continue the price surge. At some point the east coast cities started breaking 6x multipliers—we accepted defeat at that point—the unbending demand breaking our will. We would bring cities down to 3x, only to see conversion go up, supply go down, cars get saturated, and “zeroes” popping everywhere (zeroes is an internal term we use when an app opens and there are no available cars). The surge algorithms would bring the prices back up, and we would again take prices down again.  The numbers beared out what we were trying to accomplish. Uber provided 60% more rides than our biggest day ever with the average fare at 1.75x (75% greater) than normal.

The whole experience was at once exhilarating and a bit defeating. We knew to keep cars available, we had to let the price go where it needed to. But the higher the price, the more vulnerable we were to a customer support nightmare.

In thinking about this, I have to admit that as a consumer if I were blindsided by this kind of pricing, I would annoyed.  And let’s face it, consumers will be blindsided. Who after midnight on New Year’s Eve remembers how much the car ride over cost? Further who can multiply that by 6.25 after a couple of glasses of champagne?

But from an operations economics perspective, I think this is totally awesome. On the one hand, it is pretty standard dynamic pricing akin to what airlines and car rental companies do, but the relationship to the drivers adds such an interesting twist. For airlines, capacity is basically fixed. If United always flies a 737 on some route, they are unlikely to change planes as demand picks up and only the price adjusts. Car rental firms have a little more flexibility on capacity and if an uptick in demand is recognized early enough, more vehicles can be sent into the market. Importantly, the vehicles have no choice. The people doing the pricing also control the capacity and can choose to add supply.

For Uber, though, they do not control the capacity directly and have to keep drivers interested. Further, drivers can game the system. A given driver might be willing to take a ride at four times over the normal rate but if the premium was six 20 minutes ago, why not wait to see what happens with the price? It is an intriguing complication to the problem.

With that background, check out this graphic from today’s Wall Street Journal (Small Cars Test Ford Resolve, Jan 11):

So Ford has a lot of small cars. As the article notes, the party line in the industry is that 60 days is the “right” amount of inventory. Ford currently has 126 days of Fiestas and 92 days of Focuses (or should that be Foci?).

Here is the author discussing Ford’s problem.

It should be noted that both of these are not the Detroit compacts that you remember and likely abhor. Generally, these vehicles have been well reviewed and selling at or near their MSRP.

Jessica Caldwell, an analyst for car research site Edmunds.com, said Ford has been sticking to its pricing on both the Focus and Fiesta, staying away from large discounts, subsidized leases and other incentives. The result is that the average price customers pay for a Focus, $20,589, is higher than the average prices paid for all other competing models except Volkswagen AG’s Jetta, according to Edmunds. Historically Detroit’s passenger cars have fetched lower prices that import-brand models. The Fiesta’s average price is higher than all rivals except the Honda Motor Co. Fit, Edmunds’s data show.

“That has led to more profitability for Ford, but it may have been at the expense of having lower sales than they expected,” Ms. Caldwell said.

Profit margins for its North American region averaged 10% last year, boosting Ford’s performance. Mr. Fields said Ford expects to either maintain or grow that 10% margin in 2012.

Of course, growing inventory and full price sales are not mutually agreeable over a long time frame. At some point something has to give. If demand doesn’t pick up (which may happen with, say, Iranian saber rattling and rising gas prices), Ford will have to cut production or price. My bet is they will trim production. Aggressively discounting — even if it is the more profitable option — will likely bring too much negative press.

Another option would be to export cars, which I don’t think they are doing much of currently. The video gets into a discussion of the role small cars play in Ford’s global strategy. That is all true but a bit of a distraction from the topic at hand if Ford does not export from its US factories. Ford is currently expanding overseas and the success of those plants will depend on having attractive small vehicles. But that has no impact on its US inventories if, say, Asian markets are served only by Asian factories.

U.S. manufacturing labor costs per unit of output in 2010 were 13% below the level of a decade earlier as workers became more productive, according to the U.S. Bureau of Labor Statistics. The U.S. outperformed Germany, where unit labor costs increased 2.3%; Canada, where they rose 18%, and South Korea, up 15%.

The graph at right illustrates the change. There are a couple of issues behind this are worth mentioning. First, changing work rules and greater employee flexibility is part of this. The article highlights labor disputes between US manufacturers and Canadian workers that in some instances have resulted in the closing of Canadian factories. Navistar, for example, closed an Ontario plant in part because its American workers (represented by the UAW) agreed that any of Navistar’s plants should be able to build Navistar’s products.

The second point is that exchange rates matter. The Loonie, in particular, has appreciated against the US dollar and that has made making stuff in the Midwest more attractive. Of course, that advantage is more fleeting that changes in work rules and increases in productivity.

Speaking of productivity, the Economist reports:

After falling in the first half of the year, American labour productivity (output per hour) was 2.3% higher in the third quarter of 2011 than in the same period a year earlier. This was the fastest quarterly rise in 18 months. Manufacturing productivity in that quarter rose by 2.9% compared with a year earlier. America’s productivity growth has been more robust than most other rich countries’—a feat many ascribe to its flexible labour market and a culture of enterprise.

Yet some analysts expect productivity growth to stall soon. Hard-pressed workers are feeling grouchy: workforce surveys report record levels of job dissatisfaction. Many firms have been “starving the organisation to see how it can do with a lower cost structure,” says Carsten Stendevad of Citigroup, a bank. Unless the economy picks up, he predicts that productivity growth will slow in 2012. (He admits, however, that he wrongly predicted the same thing would happen in 2011.)

Further Businessweek adds:

The U.S. produces almost one-quarter more goods and services today than it did in 1999, while using almost precisely the same number of workers. It’s as if $2.5 trillion worth of stuff—the equivalent of the entire U.S. economy circa 1958—materialized out of thin air.

Although businesses haven’t added many people, they’ve certainly bulked up on machines. Spending on equipment and software hit an all-time high in the third quarter of 2011.

So maybe even the US productivity advantage may be in jeopardy. The Businessweek article goes on to note that while US firms have been buying capital equipment it has largely been replacing stuff that has worn out. That is, the financial crisis caused many firms to kick replacing and upgrading equipment down the road. Thus, investment we see now is more treading water than a real increase in capability.

The Businessweek article closes with the following:

One thing that’s different now: Instead of lifting all boats, as it once did, technology is sorting workers into winners and losers. Over the past three decades job growth has been fastest among high- and low-skill jobs, while mid-skill occupations atrophied, according to economists Jaison Abel and Richard Deitz of the Federal Reserve Bank of New York. Although the economy created nearly 50 million new nonfarm positions in that period, technology cut the ranks of some workforce mainstays, such as machine operators, by more than half.

That increasing divide between skilled and unskilled work is the focus of the Atlantic piece, which is really a wonderful read. It focuses on Standard Motor Products, a maker and distributor aftermarket auto parts. The article discusses the pressure the company is under. 40 years ago, no one customer represented more than 1% of the firm’s business. Now their four biggest customers (major chains of auto part stores like Autozone) are 50% of their business and they must respond to pressure to cut prices. That means Standard has to think carefully about what stuff it makes itself and where to make the stuff that it keeps in-house.

Among the things it makes in an American plant are fuel injectors. There are roughly two-step to making these things, precision machining and assembly. The article profiles workers involved in each of these stages. The one running the precision machining equipment spent time at a technical college and has studied math and computer programming. The one doing assembly has no schooling past high school. She has a job because if the firm replaced her with a robot, they wouldn’t earn payback in its targeted two years.

The more interesting points in the article, however, are what Alaska and Delta — two of the worst performers in past surveys — have done to improve performance.

Alaska, which launched an operational overhaul in 2007 after several years of dismal reliability, was first among major airlines in on-time arrivals. The carrier has set internal standards: There are 50 different check points on a timeline for each departure, with data collected on each one. Flight attendants have to be on board 45 minutes before scheduled departure; customer-service agents board the first passenger 40 minutes before departure, and 90% of passengers need to be boarded 10 minutes before departure. What time the fuel truck hooks up and what time it disconnects its hose are measured. When flights arrive, the time the belt-loader pulls up to the plane is tracked. The cargo door is supposed to be opened three minutes after arrival; the first bag needs to be dropped on the carousel before 15 minutes after arrival.

“There are so many moving parts. You just can’t tell people to get the airplane out on time,” said Ben Minicucci, Alaska’s chief operating officer.

So Alaska has reengineered their turn around process and (just as importantly) has put systems in place to make sure that targeted times are being hit. In the audio piece that accompanies the article, the author explains that Delta has taken similar steps in scripting processes. They have also invested in additional resources and new technology.

In the past two years, Delta opened maintenance operations in nine cities that aren’t hubs for the airline, such as Miami, Portland, Ore., and Philadelphia, to keep more of its fleet ready to fly. Once it was done integrating with Northwest Airlines, Delta invested in new baggage systems in Atlanta, plus new technology in its operations control center and retraining for customer-service workers.

“There are a lot of side benefits to running a good, clean operation,” said David Holtz, Delta’s vice president of operations control.

One of the outcomes of this spending is the ability of Delta passengers to track their checked bag on their smart phone (which we posted about last April).

This all raises the question of whether American and United can up their game and spare Chicagoans from delays and lost bags. Unfortunately, it is hard to be optimistic. This all takes money (especially for technology solutions like Delta’s) and decent employee relations. With American in bankruptcy and United still trying to integrate with Continental, it seems unlikely that they will be able to do much any time soon.

Radio-frequency ID cards (RFID) chips are key to making this work.

The system, built around radio-frequency ID cards (RFID), is similar to toll tags used on highways and bridges. Top-level frequent fliers get an ID card that is flashed at a kiosk in the ticketing area. In seconds, the system finds the reservation for that day, assigns a seat based on personal preferences if one wasn’t pre-selected and checks the passenger in. When everything is good to go, a beacon illuminates.

To check luggage, the passenger goes to a baggage drop point, flashes the frequent-flier card in front of a reader and drops luggage on a baggage belt. The bag is weighed, and lasers measure its dimensions to make sure it complies with limits.

Top-level frequent fliers have heavy-duty RFID tags called “Q Bag Tags” for their bags that replace paper luggage tags. The technology reads the bag’s “identity” as it moves from luggage belts to carts to airport tarmacs. This ensures luggage gets loaded on the same flight as its owner. Other travelers get a paper tag for their bag with an imbedded RFID chip.

Development of the system began several years ago. Qantas was running out of room at its large domestic terminal in Sydney and needed to come up with something new to reduce frequent backups at counters. The airline studied customer habits and worked on finding ways to eliminate lines. The conclusion: eliminate the “pain points” in the airport, such as checking in, checking bags and lining up to board, Ms. Bulkin said.

The carrier decided to invest in technology rather than adding floor space. With kiosks positioned in four V-shaped patterns, it’s almost impossible for travelers to bunch up in a long line. There’s still an old-fashioned check-in counter, but most of the baggage drop points are self service.

So will this come to the US? I am not sure. For one, US airlines have no money. Beyond that, the size of the network might matter since one needs a hardware investment in each sizable airport. Poking around the Qantas website, it seems that they have this system at about 50 airports. Southwest flies to 72 airports, so they could perhaps think of something like this. Airlines with commuter arms that go to smaller cities may have a harder time.  They would either need to invest in each smaller city or have to run two sets of processes at their hubs, one for bags from large cities with RFID tags and one from smaller burgs with conventional tags.