One of the most basic tools in yield management is overbooking. For any service provider, capacity is perishable. Having an airline seat, restaurant table, or doctor sit idle is expensive so if you cannot be certain that every scheduled passenger, diner, or patient is going to show up, overbooking reduces the chance that capacity goes unused. Indeed, we have had a number of posts on overbooking over the years.
Given the prevalence of overbooking, it is rather remarkable that JetBlue does not. They announce this right on their website. But as BusinessWeek note, one has to wonder why they don’t (JetBlue Never Bumps Passengers. Maybe It Should, Feb 5).
Because it doesn’t overbook, JetBlue enjoys the lowest rate of involuntary denied boardings in the industry: only 18 people out of 21.3 million passengers through the first three quarters of 2013, the latest period for which data are available. Virgin America, with a bump rating close to JetBlue’s, oversells only on certain flights and usually limits the number of seats directly to the number of no-shows it expects in coach, spokeswoman Jennifer Thomas said in an e-mail. On the other end of the spectrum, Southwest subsidiary AirTran Airways had the highest rate among U.S. non-regional airlines required to report oversales, with 1.28 passengers bumped for every 10,000 travelers (or 1,800 customers in total during the period).
Several analysts expressed puzzlement over why JetBlue has avoided a common industry practice that can tip a particular flight’s financial performance from loss to profit. The airline also doesn’t advertise its practice, so most people are unaware that it doesn’t overbook—including at least one Wall Street analyst who covers the company. “It’s a bit of a head-scratcher,” says Seth Kaplan, managing partner of Airline Weekly, an industry journal. “It’s all about the extra few hundred dollars that can turn a flight profitable, especially when it’s relatively free money.”
Continue Reading »
Posted in Airlines, Demand management | Tagged Airlines, Demand management, JetBlue, overbooking, Revenue Management | 2 Comments »
I keep an empty wine bottle from Chateau de La Rivière in my office. It says right on the front label “Mis en bouteille au chateau,” that is, that the wine was bottled at the winery. It turns out that at least in the British wine market bottling at the winery is becoming the exception, not the rule. According to the Financial Times, a large numbers of wines imported into the United Kingdom are now imported in plastic bladders (see the image above) and bottled in the UK (Crate expectations, Jan 31).
In the past few years there has been a huge structural change in how wine is delivered to those who drink it. The UK, for example, is the most important market for one of the world’s most enthusiastic wine exporters, Australia. In 2008, fewer than three in every 10 bottles of Australian wine on British shelves contained wine that had been shipped from Australia in bulk rather than in bottle. Four years later that figure was eight in every 10, and the total amount of wine shipped out of Australia in bulk overtook the volume exported in bottle.
Australia is far from the only country to ship substantial quantities of wine sloshing around in a tank inside a container rather than neatly sealed in bottles. Spain and Italy export far more wine in bulk than any non-European wine producer, and 65 per cent of all South African wine exports were bulk last year. (Chile is an enthusiastic exporter of bulk wine and earns the highest average price per litre for it.) According to the OIV, the global wine statistics-gatherer, the total volume of wine shipped around the world in bulk rose 61 per cent between 2005 and 2012 to represent more than 40 per cent of all exported wine.
So what is driving this rapid conversion from bottle to bulk? Continue Reading »
Posted in Green ops, Logistics, Supply Chain, Sustainability | Tagged Green ops, Logistics, Supply Chain, Sustainability | 2 Comments »
Ford has a new version of its F-150 pick up coming out. That per se isn’t all that exciting to me, but everyone says that thus truck is a big deal because of it represents a shift from steel to aluminum. Here is how Dan Neil put it in the Wall Street Journal (Detroit’s Big Three Are Returning to Excellence, Jan 17).
But now, without further eloquence, the news: Ford changed the game this week when it unveiled its aluminum-intensive pickup truck, the 2015 F-150, that is as much as 700 pounds lighter than a comparable steel-bodied vehicle. In an industry that celebrates the power of small numbers and incremental weight savings, 700 pounds is a staggering figure, and it is weight savings that directly and proportionally improves hauling and towing capacity and fuel economy, which are prime metrics in the truck segment.
Wait, Upper West Sider, don’t rush off to the wine column. To the casual observer, the anticipated 3 mpg (20%) increase gained by Ford’s high-tech “light weighting” (a term of art) may seem marginal, but I assure you it is a figure of immediate and national consequence. … By virtue of the hundreds of millions of miles rolled up by the F-series annually, you are looking at the single biggest real-world advance in fuel economy in any vehicle since the Arab oil embargo.
So all that aluminum gives us a game changer — and not just in the realm of fuel economy. Automotive News reports that it has major implications for Ford dealers and their body shops (Ford dealers will gear up to fix new F-150, Feb 3). Ford’s collision marketing manager (that’s just a great job title) says that 80% of repairs on the new F-150 can be done in a standard body shop but that other 20% is going to require special capabilities — in part because aluminum dust reacts badly with steel parts so aluminum work must be kept physically separate from the rest of the shop. All told, a dealer needs to spend 30 to 50 grand in order to be ready for the F-150.
How is Ford going to make that happen? Continue Reading »
Posted in Auto Industry, Contracting, Supply Chain | Tagged Auto Industry, Ford, supply chain contracts | Leave a Comment »
There has been a lot written recently about the state and future of making stuff in the US. Just in the past month, Strategy & Business has touted new technology and software as a way forward for American manufacturing (America’s Real Manufacturing Advantage, Jan 20) while Steven Rattner, the administration’s former Car Czar, took the New York Times pooh-poohing talk of a revitalized manufacturing base (The Myth of Industrial Rebound, Jan 25). As Rattner sees it, whatever boost there has been in manufacturing has been inconsequential and not beneficial for workers.
But we need to get real about the so-called renaissance, which has in reality been a trickle of jobs, often dependent on huge public subsidies. Most important, in order to compete with China and other low-wage countries, these new jobs offer less in health care, pension and benefits than industrial workers historically received. …
This disturbing trend is particularly pronounced in the automobile industry. When Volkswagen opened a plant in Chattanooga, Tenn., in 2011, the company was hailed for bringing around 2,000 fresh auto jobs to America. Little attention was paid to the fact that the beginning wage for assembly line workers was $14.50 per hour, about half of what traditional, unionized workers employed by General Motors or Ford received.
With benefits added in, those workers cost Volkswagen $27 per hour. Consider, though, that in Germany, the average autoworker earns $67 per hour. In effect, even factoring in future pay increases for the Chattanooga employees, Volkswagen has moved production from a high-wage country (Germany) to a low-wage country (the United States).
This all gets us to a different New York Times on Harley Davidson that describes changes the firm made to save itself (Building a Harley Faster, Jan 28). What is interesting is that Harley’s approach differs fundamentally from either of the approaches above. They are relying on humans over widespread automation and working with their existing, unionized workforce as opposed to hightailing it to a location with cheaper labor. Continue Reading »
Posted in Automation, Human resources, Manufacturing, Operations Strategy | Tagged automation, Harley-Davidson, Human resources, Manufacturing, Operations Strategy | 1 Comment »
How long is too long to hang out at a fast food restaurant? Does it matter if we are talking about a McDonald’s instead of a Starbucks? Those questions are part of a spat between a New York McDonald’s outlet and a group of elderly Korean customers (Fighting a McDonald’s in Queens for the Right to Sit. And Sit. And Sit., New York Times, Jan 14).
For the past several months, a number of elderly Korean patrons and this McDonald’s they frequent have been battling over the benches inside. The restaurant says the people who colonize the seats on a daily basis are quashing business, taking up tables for hours while splitting a small packet of French fries ($1.39); the group say they are customers and entitled to take their time. A lot of time.
“Do you think you can drink a large coffee within 20 minutes?” David Choi, 77, said. “No, it’s impossible.”
And though they have treated the corner restaurant as their own personal meeting place for more than five years, they say, the situation has escalated in recent months. The police said there had been four 911 calls since November requesting the removal of the entrenched older patrons. Officers have stopped in as frequently as three times a day while on patrol, according to the patrons, who sidle away only to boomerang right back. Medium cups of coffee ($1.09 each) have been spilled; harsh words have been exchanged. And still — proud, defiant and stuck in their ways — they file in each morning, staging a de facto sit-in amid the McNuggets. …
“It’s a McDonald’s,” said Martha Anderson, the general manager, “not a senior center.” She said she called the police after the group refused to budge and other customers asked for refunds because there was nowhere to sit.
You can also check out this oddly awesome video.
Continue Reading »
Posted in Fast Food, Restaurants, Services | Tagged McDonald's, Restaurants, Services | 1 Comment »
How to get passengers onto planes has been a recurring topic on this blog. It is one of the few topics (possibly the only one) we have covered as much as MythBusters has.
Now we get a claim that a professor and a student from Clarkson University have found a better way (Faster Method of Boarding Planes Devised by Clarkson University Researchers, Jan 6). Here they discussing their proposal.
Their work is published in Journal of Air Transport Management and can be found here. Here is the outline of their method.
The key aspect of our proposed method is that it assigns airplane passengers to seats so that their carry-on luggage is spread roughly evenly throughout the plane. This reduces the time passengers take to find available storage in the overhead bins when storing their luggage. We assume each passenger is carrying onto the plane either two bags, one bag, or zero bags which require storage in the overhead bin. In the first two steps of our method, we assign a set of two, one, or zero bags to the seats of the airplane without being concerned about which individual passenger carries that many bags. The third step of our method assigns an individual passenger carrying a specified number of bags to a particular seat designated through the first two steps as being allocated for someone carrying that specified number of bags. Finally, the fourth step of our method has passengers board according to the Steffen sequence based on their assigned seats. The key difference between our method and that of Steffen is that Steffen assumes passengers have been assigned to seats irrespective of the luggage they carry and our method assigns passengers to seats so that the luggage is distributed evenly throughout the plane. Below is our four-step procedure for how passengers should board an airplane.
What to make of this? I think the proper assessment is a Yogi-Berraesque quote (that apparently doesn’t come from Yogi Berra) “In theory, there is no difference between theory and practice. But, in practice, there is.”
Continue Reading »
Posted in Airlines | Tagged Airlines | 5 Comments »