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Posts Tagged ‘Services’

Kiosk-Boarding-Pass-Delta-Air-Lines-updated-TSA-PRE-CHECK-wording-Delta-Points-blog

Pity the Transportation Security Administration! They have a tricky capacity planning problem with their Pre✓™ program. Here is how the TSA describes Pre✓™:

TSA Pre✓™ allows low-risk travelers to experience expedited, more efficient security screening at participating U.S. airport checkpoints for domestic and international travel.

The perks of the program of the program include being able to leave your shoes on, not having to take out your laptop, and leaving your baggie of toothpaste buried in your carry-on. All of that gets you faster screening and — in theory — a faster moving line. The program started off being by invitation but has broadened to include those enrolled in the Custom and Boarder Patrol Global Entry program. Now anyone can apply. The trade off for travelers is that you have to pony up for a background check. For the TSA, it allows them to expend fewer resources on people it knows something about so more time can be spent on those it has no information on.

So what’s the problem? The issue is how the system has to be implemented at airports. Pre✓™ flyers go in a separate line and then through separate equipment and personnel. But, as the Wall Street Journal tells it, that is costly for the TSA and they cannot readily justify dedicating the current resource levels unless they can get more flyers signed up (Trouble Selling Fliers on the Fast Airport Security Line, Apr 16).

TSA wants lots more people enrolled in Precheck to make better use of its designated security lanes, which currently number 590 at 118 U.S. airports. Since December, TSA has encouraged travelers to apply to the program directly. The agency is opening enrollment centers across the country, letting people who are U.S. citizens or permanent legal residents to make an appointment or drop in and have fingerprints taken digitally. The $85 background-check fee buys five years of enrollment.

“It’s one of the last great bargains the U.S. government is offering,” TSA Administrator John Pistole joked at an enrollment-center opening last week at Dallas-Fort Worth International Airport.

TSA said more than 1.2 million people as of December were able to use Precheck, mostly because they had enrolled in Global Entry. Since TSA began taking applications directly, some 170,000 additional people have signed up for Precheck. The program appears on track, but if more travelers don’t sign up TSA will have to scale back the number of Precheck lanes at airports, Mr. Pistole said. TSA hasn’t set an optimum number of enrollees for the program, he said.

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Which is worse, having your flight delayed two hours or having your flight cancelled and being rebooked on a flight two hours later? According to Delta Airlines, customers generally prefer a simple delay to a cancellation and rebooking. That has led to Delta working hard to minimize the number of cancelled flights. According to the Wall Street Journal’s Middle Seat column, last year Delta cancelled just 0.3% of its flights — well below the industry average of 1.7% — and at one point went 72 straight days without canceling a single flight (A World Where Flights Aren’t Canceled, Apr 2). As the graphic above and the video below demonstrate, this has taken a lot of operational refinements.

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How heavily should a firm use its resources? Resources — be they people, equipment, or facilities — are expensive so there is an obvious case to be made for keeping utilization rates as high as possible. But there is also something to be said for not pushing utilization too high. Many systems need some slack to work well. It is slack that allows firms to absorb the unpredictable or to address problems that go beyond immediate firefighting. That is the point of a recent Strategy & Business article (Cut Your Company’s Fat but Keep Some Slack, Spring 2014). The authors main point is that “slack is routinely undervalued.”

Here is the example given to lead off the article.

In 2002, the operating rooms at St. John’s Regional Health Center, an acute-care hospital in Missouri, were at 100 percent capacity. When emergency cases—which made up about 20 percent of the full load—arose, the hospital was forced to bump long-scheduled surgeries. As a result, according to one study, doctors often waited several hours to perform two-hour procedures and sometimes operated at 2 a.m., and staff members regularly worked unplanned overtime. The hospital was constantly behind.

Administrators brought in an outside advisor, who came up with a rather surprising solution: Leave one room unused. To many, this seemed crazy. The facility was already being squeezed, and now comes a recommendation to take away even more capacity? Yet there was a profound logic to this recommendation, a logic that is instructive for the management of scarcity.

On the surface, St. John’s lacked operating rooms. But what it actually lacked was the ability to accommodate emergencies. Because planned procedures were taking up all the rooms, unplanned surgeries required a continual rearranging of the schedule—which had serious repercussions for costs and even quality of care. The key to finding a solution was the fact that the term unplanned surgery is a bit misleading. The hospital can’t predict each individual procedure, but it knows that there will always be emergencies. Once a room was set aside specifically for unscheduled cases, all the other operating rooms could be packed well and proceed unencumbered by surprises. The empty room thus added much-needed slack to the system. Soon after implementing this plan, the hospital was able to accommodate 5.1 percent more surgical cases overall, the number of surgeries performed after 3 p.m. fell by 45 percent, and revenue increased. And in the two years that followed, the hospital experienced a 7 and 11 percent annual increase in surgical volume.

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What exactly constitutes manufacturing? There are some settings that are very clear. If you work at an assembly plant building cars, you are in manufacturing. If you work at a university that educates students and produces research, then you ain’t. But there are other situations that are not as clean cut. Check out this example from the Wall Street Journal (U.S. Agencies Consider Redefining Manufacturing, Mar 14).

“If someone asks me at a party, I say we make binoculars,” said the president of Carson Optical Inc., a small company tucked in an industrial park in this New York City suburb, adding, “It’s a little bit more vague than saying we manufacture them.” …

A stroll through Carson Optical shows why companies like these can be hard to label. Mr. Cameron, a former banker, started the firm 23 years ago after a stint working in Asia, where he saw the potential to import optical goods from Japan.

But the firm today has evolved far beyond just importing the things that others create. In a conference room near the front, the walls are lined with products Carson’s three-person engineering team has designed, including a hand-held microscope used by medical-marijuana growers to study their plants and an anti-reflective lens device that can be clamped onto binoculars and gun sights.

Carson holds 94 U.S. and overseas patents. The company closely monitors how its goods are made, in some cases buying materials needed to make them and sending them to the factories in Asia.

And the evolution continues. Mr. Cameron is shopping for his first computer-guided production machine and is preparing to move to a bigger nearby building to accommodate his growing design and development operation. He plans to use the new machine to make better prototypes but doesn’t rule out someday making some of his own goods.

So is this manufacturing? On the one hand, they are not doing the nitty-gritty tasks of molding parts or fastening them together. On the other, they are doing most of the high value work like product design as well as sourcing material and setting quality standards. Carson Optical may fail a Potter Stewart I-know-it-when-I-see-it test, but it is holding onto the parts of modern manufacturing that create meaningful value.

Why does this matter? Because the federal government is reconsidering how to define manufacturing and more specifically wrestling with the likes of Carson Optical. (more…)

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Having an accurate forecast of store traffic is an important part of setting staff levels. This is particularly true when converting store visits into sales depends heavily on consulting with in-store personnel. But how can a store build a good forecast? According to Businessweek, satellite imaging is a possible tool (The Most Powerful Sales Tool at Lowe’s: Satellites, Feb 26).

Lowe’s said on Wednesday that it has been gauging traffic at its almost 1,900 stores from space, scanning satellite images of its parking lots to find out how many shoppers it can expect at every hour of every day. It has also started syncing its parking lot observations with actual transaction counts to see how many people drove away without making a purchase.

The space snooping is a particularly great way for Lowe’s to manage its workforce, scheduling surges in floor staff when parking spaces are about to become hard to come by.

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Imagine that you are a service provider and you have two ways of reaching customers. One way has you selling directly to customer while the other goes through a middleman and requires paying a commission. If you have a limited capacity, how much should you allocate to one channel over the other? What if you have to sell though the channel requiring a commission first so you cannot easily reallocate capacity between the channels?

That is the challenge facing many restaurants who offer reservations through OpenTable. Many restauranteurs game the system and may be less than honest on OpenTable about available capacity. Here is how MainStreet explains the issue (How to Tell if the Restaurant Is Lying to You, Feb 10).

Longtime OpenTable user Marcy Schackne offers testimonial validation. She checked OpenTable to book at the Palm steakhouse in Bal Harbour, Fla; it showed up full, but when she called and asked for a table, she was promptly given a reservation.

Precisely the same happens at hundreds of restaurants every night.

What gives? Dennis Lombardi, executive vice president for food services strategies at retail consulting firm WD, said that for many restaurants, the $1 per diner they pay OpenTable for a booking – on top of a fixed monthly fee – “rankles.”

They think they can book diners more cheaply themselves,” he said.

Adi Bittan, CEO of feedback service OwnerListens, with many restaurant clients, added: “For times when they expect to be full based on past experience, they do not want or need to take the OpenTable reservation. They’re taking a gamble, because they could end up with empty tables — and then the diner will walk by and see it — but it’s a calculated gamble based on probability. Since most of us, restaurant managers included, are not economists or mathematicians, we understand this dynamic intuitively but will often get those exact probabilities wrong.”

Meaning the restaurant bets that it doesn’t need OpenTable, but the empty chairs it winds up with make a mockery of their inductive capabilities.

I’m not really an economist nor a mathematician, but I have thought about this problem. (more…)

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Uber is an interesting company. While you might argue that their business model is based solely on ignoring the existing regulatory structure of the taxi industry, they certainly have brought innovation to a staid market. They have gotten a lot of attention for the surge pricing program but it is also worth noting that they are doing something novel on the capacity management side of things. Uber does not employ it drivers. Instead, it deals with drivers as independent contractors. In particular, it does not schedule drivers the way, say, a city bus service would. The bus service can tell drivers when and where they are working. Uber can’t do that. It has to offer an incentive for drivers to be available when demand will be high. At the same time, it basically promises its customers that they won’t have to wait long for a ride. Obviously, surge pricing is part of this. Uber takes a fixed percentage of the fare. So if the fare is consistently 50% higher at rush hour, there is a clear reason to be willing to drive at rush hour.

But more generally there is a question of what is it like to drive for Uber. That gets to an interview with John Pepper (What happened when Boloco founder John Pepper became an Uber driver, boston.com, Feb 7 — with a hat tip to my sister for sending this to me). Pepper was the CEO of Boloco, a regional burrito chain, until he had falling out with his board. He then starting driving for UberX. UberX is the Uber service more or less anyone can get into. It competes with Lyft and Sidecar and is premised on people driving their own, standard vehicles. (In contrast, other Uber offerings are for black car service and require a sufficiently lux vehicle and a commercial driver’s license.) Pepper may have quit his job but he doesn’t mean he has to be doing this to put food on the table. He talks about dropping his kids off at a private school and then picking an Uber customer in his Tesla. What makes this interesting is that he brings the perspective of a person who for many years ran a business that hired lots of lower wage workers. Here are some of his interesting observations.

Q. Did you sign up because you wanted to learn about Uber?

A. Whatever business I do next, there’s a lot to learn from their model. Wherever possible, they leverage skills we already have– people already know how to drive. They set very, very clear expectations as to what constitutes success, and then they follow through with the metrics. There are no stories [from drivers] — they don’t want to hear why this customer was wrong, or that customer was crazy. There are these things that are rigid and effective, but I think they could really effect the world of restaurants and retail. …

Q. You write a lot about the ratings that customers give drivers, and how they made you pretty anxious.

A. Right now, the review process of employees is pretty broken in corporate America. Most of us have read Jack Welch’s book about how GE was so diligent about ranking people. But it’s hard to give fair and just performance appraisal. At Uber, they’re not evaluating drivers in that way. The drivers are being evaluated by someone who sees the full experience from start to finish. There’s no conversation to have, no discussion. It’s very compelling. People know moment to moment that they’re being evaluated. It becomes a norm, not a stress point. The good people surface to the top, and the people who can’t deliver consistently good service don’t make it. But they definitely expect the customers to weed out the bad drivers. …

Q. Does it feel like it would be a good job?

A. It’s very free. You can do nine hours, and stop on your own time, and not work the next day. There’s value to that flexibility. They’re guaranteeing $20 an hour at times, and I happened to make about that even when there wasn’t a guaranteed rate. I worked when I wanted to, and didn’t work when I didn’t want to. That sounds pretty good compared to working at a fast food restaurant, making $10, and not being very in control of your life.

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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.

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We have had several stories over the last couple years about retailers using inventories at their stores to fill web orders. At one time or another, there have been stories about Nordstrom, Wal-Mart and Macy’s all treating that big box at the mall as a warehouse. Now the Wall Street Journal reports that even more chains — including Sears and Office Deport  – are hopping on the bandwagon (Retailers Turn Store Clerks Into Web Shippers, Dec 9). You can here the reporter discussing her findings here:


It is not surprising that more retailers are going this way. They are all facing pressure from on-line competitors and finding some way to utilize their existing physical network is appealing. If nothing else, I suspect that everyone in the C-suite wants to be able to tell the board they are trying something.

But how can you set up this up quickly? You need to develop a system that updates inventories in real time while dispatching staff to fetch what has been ordered and scheduling the shipper to pick stuff up. Nordstrom is often identified as the first mover on this. The New York Times reports that it took them a couple of years to get it set up. How can a Johnny-come-lately ramp this up quickly? By working with UPS and FedEx.

UPS and FedEx Corp. which were critical to helping launch the e-commerce boom, are now eager to help traditional retailers deal with it. They have engineered new strategies for jockeying inventory across the country to avoid overstocks and markdowns and to keep customers from defecting to Amazon, a big problem last year. The strategy is also important this holiday season as clothing retailers are threatened with heavy inventories.

UPS says it is working with about 40 retailers on implementing these strategies—about double the number a year ago. FedEx said these partnerships helped boost revenue in its ground delivery business 11% in its fiscal first quarter. Both forecast record holiday-season deliveries: UPS with 34 million packages on Dec. 16 and FedEx with 22 million packages on Cyber Monday.

In the case of Sears, UPS provided software that shows shipment statuses of all orders across the entire system. It also sends tracking numbers.

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For all the faults of its roll out, the Affordable Care Act should ultimately provide more people with health insurance and thus a way to pay for basic health care. That implicitly assumes that there is enough health-care capacity to go around. There is a very real concern that there is not enough capacity — particularly in primary care — to properly cope with an influx of newly insured patients who will want to do basic things like see a doctor.

If capacity is going to be tight, then there is a premium on making sure it is not wasted. That, as Marketplace reports, means that clinics are experimenting with overbooking (How post-ACA health care is like the airline business, Dec 5).


Here is the part I want to talk about:

Cooper University Hospital is expecting a huge wave of patients starting next month, as millions of consumers get health insurance, some for the first time. The question for hospital executives in Camden, and around the country, is how to manage this new population. For one, there is a chance this new patient population will exacerbate existing problems at Cooper.

Today, “the patient no-show rate is in high 20s, 25, 30 percent,” says Jonathan Vogan, the associate director for financial and performance measurement at Cooper’s outpatient clinic, the Urban Health Institute.

The Urban Health Institute serves more than 8,000 patients, virtually all of them low-income. Vogan says the poorer the patients, the more likely they’ll miss their appointments. And that’s an expensive problem. But Vogan says the solution is simple.

“If not all of your patients show up then the easiest thing to do is, well, just book more of them,” he says.

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