Table of Contents
The main objective of carrying out this research was geared towards establishing the operations of southwest airlines and linking them to the dynamic managerial operations that constitute the holistic aspect of supply chain management. Among the specific benchmarks southwest airlines has incorporated in its effective operations are issues pertaining to the supply management, financial aspects and comparable variables, factors that influence decisions when considering technical business aspects and advantages outside the core business of the airline company.
The research has further incorporated additional impacts or influences a customer may consider such as quality customer service delivery, operational managerial strategies and extent of market penetration to influence customers from various geographical locations. The major concern of this research is to come up with a distinct crosscut between supply and demand of the southwest airlines so as to develop a basis for evaluation of effectiveness of its supply management chain.
The research questions for this applied research in support of the data gathered from southwest airlines include the following;
1. What has been the operations trend of southwest airlines particularly in the last 3 years?
2. What are the main influencing factors for customers relying on certain flight orders especially with southwest airlines?
3. What actions can be taken to improve and enhance supply and technical operations of southwest airlines?
4. Can Southwest airlines deal with external pressures and competition from other leading businesses in the same field and what is their SWOT analysis position?
1. This research is directed to an analysis of recent performance years of southwest airlines, especially from 2010 to date, to try and come up with various aspects matching its demand to supply. Given the recent increase in customer turnover locally and globally, it is therefore very crucial to have a closer look at the operational trends of this airline to establish its functional capacity and capabilities.
2.Southwest airlines is currently forming network alliances with other airline companies in-order to promote its inventory levels.Nevertheless,the turnover in numbers of passengers has increased significantly over the past few years, a factor that has saw the company incurring extra costs to meet the objectives of their existence in the flight business.
3. Southwest establish ways of creating more supply. This process is aimed at easing transport prices a bit over a considerable period of time and would probably not cause significant and dramatic decline in inherent operations. The advancement in technology also facilitates the airline to be on the fore-front to provide excellent services with greater ease and at a lower cost.
4. A majority of underlying financial aspects and ratios in the airline change. This can mainly be attributed to certain specific organizational variables such as effects of uncertain demands, costs incurred in further installations, various projects being managed by the airline and other operational costs. All these tend to have an effect on the systematic match between supply and demand southwest airlines.
Taking into account the progress of supply chain management of the airline over the last 3 years, it is evidently clear that there has been sufficient incorporation of efficient demand and supply strategies that has boosted the overall business position of the airline. Here are the multiple variables considered throughout this research study;
(1)Supply Chain management, (SCM)
This refers to the systematic designing of internal operations of an organization and improvement of the systems, concerned with the creation and delivery of a firm’s products and services. It further entails the systematic management of interconnected businesses whose main aim is to monitor and execute transactions with the overall objective of maximizing an organization’s wealth and create net positive position. It is strategy that synchronizes demand with supply as a measure of performance evaluation. As a general rule, supply chain of any organization will always be based on the various action put in place by top management. This implies that if strategies adopted are all effective, then the organization will stand a favorable place in the market share unlike when organizational links are poor thus resulting to ineffective disruption in the supply chain model that could subject the organization to various challenge such as incentive conflicts and problems of demand exceeding supply, an implication of wastage of resources and finances.
Southwest airlines has been able to practice effective supply management in the last 3 years owing to the fact that it has proper mechanisms put in place to manage this aspect some of which include;
(I) Close supervision of demand and supply variability-This has been effected in the way the airline company ensures that despite the customer turnover in any given period, it is in a position to meet all the customers’ expectations with ease. It has further been facilitated by exploration into quality methods of management that ensures there are no instances of incentive problems in the airline and the tendency of demand variability being so much than what the airline can handle or manage with uttermost competence.
(II) Market forecasting and integration-Southwest has managed this aspect by establishing its SWOT analysis to distinguish it from its competitors and determine its market strength and position. This acts as a reflection of the airline’s internal strengths and weaknesses that are usually manageable within the normal organizational setting and also the opportunities and threats that are probably beyond the management’s control. All these issues are directed towards ensuring the supply chain between the airline and middlemen has been sufficiently enhanced to curtail the challenge of demand variability to increase abnormally. This is represented by analysis of SWOT analysis as illustrated by the pie chart below.
(2)Estimation and reduction of labor cost
Considering the overall objective of any firm revolves around maximizing profits as much as possible, this aspect of cost reduction incorporates various means that aid in cost incurrent but still upholding value and quality of services offered. An organization need not maximize the utilization of every resource used in a process but should come up with strategic mechanisms that increase profit viability though at a reduced cost.Thus, this is an implication that any business should be able to evaluate its production capabilities to ensure they produce amount demanded in-order to reduce wastages that translate to further operational costs being incurred in the entire process.
This is a measure that southwest airlines has been successful in implementing since it has several alternatives like purchase of advanced aircrafts fitted with modern facilities and upgraded with electronic decks whose main purpose is to cut down operational costs. It is successful strategy southwest implemented in 2010 and has contributed to a great deal of their operations.
Though it has not been easy to consistently reduce costs by southwest airlines, it has been able to reduce costs considerably especially through the use of mechanisms like price hedging. This is in the case where at some point; it was able to insulate against fuel price fluctuations prevalent in recent trading periods. All these measures have ensured that the airline company reduces labor cost significantly through providing a lie balance that ensures that there is no mismatch in demand and supply.
(3)Operations and finance system
Finance is a key aspect to any organization involved in business operations. It constitutes the capital invested in the business with an expectation of yielding returns later or at a future period. More often than not, individuals invest their money in a business venture with the expectation in mind of getting higher returns than what was invested. In economics sense, this represents the economic value expected which should be positive to reflect favorable operations.
Finance is closely linked to an organization’s operations since some processes like supply that may involve use of intermediaries, may require some cash being utilized.Availablity of sufficient finance in a firm facilitates faster completion of tasks and various processes so as to satisfy the needs and preferences of different customers.
In the context of this research, southwest airlines has been able to realize positive economic value over the past 3 years from it operations. This is especially through value realization of money invested in the airline. As a point of emphasis, the airline has been able to realize huge profits from its operations and is on the verge of expanding globally and beyond. This has further been facilitated by the following aspects;
I. Recruitment of competent, skilled personnel and employees who look up to the financial stabilization of the airline. This enhances positive overall position of the airline, a factor that places it ahead of its competitors.
II.Application of proper business intelligence to effectively manage and operate the amounts of huge capital invested into the airline to realize profits and avoid instances of intentional loss making.
The financial performance of southwest airlines has increased considerably over the past three years, (2010-2012) and this data could be represented as follows;
Linear representation of southwest airline
The linear graph represents the reflection of financial performance (In dollars) of southwest airlines since 2010 and years proceeding after. From the data analyzed above, there is a clear indication that the airline has indeed grown steadily and the profitability presently is at its peak compared to earlier years.
(4) Project management
Project management forms a significant part of the operations of any business venture. The ability to effectively manage projects rests with the management capability to deal with viable projects. In most cases, projects are initiated for specific reasons and purposes to attain a certain objective or goal. They are usually non-repetitive in nature and mostly involve large capital outlay during their initial stages. Projects do operate with a specific time frame depending on their nature and complexity of being handled and executed.
Every organization should ensure project management is handled with uttermost diligence so as to make sure organizational operations involving demand and supply are executed in the best manner position to avoid mismatches.
Southwest airlines has been on the verge of enhancing its project management strategies by engaging in viable projects that bring the airline positive returns. A good example of this aspect is in 2012 where southwest has been able to get into a merger agreement that facilitated it to begin handling internal services which allowed the conversion of its business into international in nature. This has resulted to a multiple of benefits for the airline some of which include the following;
-Enhanced corporate image and reputation. This aids in the increased market share of southwest airlines and for it to be among the most admired airlines globally.
-Increased profits each subsequent year with the airline reporting millions of profits or revenues generated from its recent project and flight operations.
-Increased customer base or turn-over which in return creates trust and loyalty on the airline services.
(5) Evaluation of process capacity
Process capacity refers to the maximum amount of operations that can be undertaken through certain production lines to achieve some desired output.Majorly,in any organizational setting, the attempt to strictly match demand and supply is a crucial aspect that measures the to be produced in a given time frame.
The evaluation of process capacity will majorly involve an in-depth analysis of the specific processes that constitute the entire organization. This is crucial so as to understand the activities involved and how they contribute to the overall demand of the organization. It has been argued that in-order to effectively do this, certain mechanisms have to be put in place to ensure efficiency, and these include aspects such as, computing utilization of various processes and measuring performance.
In light of southwest airlines, this aspect has been incorporated in the manner in which the airline coordinates the number of flight trips to attain a certain standard. Due to this, the airplane has purchased more aircrafts that has increased the number of destinations. To mention but a few of those destinations are Los Angeles, Las Vegas, Carribean, Atlanta and México, which also represent the top served cities.
A graphical presentation could be as follows;
Further, southwest has extended its capacity from domestic into global diversification. It has been able to extend to other countries of the world, which has boosted its demand to greater extents.Currently; the airline has been consistent in maintaining its fleet that consists of various aircrafts.
(6)Variability and its impact on waiting time problem
The theory of time is money is very fundamental to any organization or business. Time forms a crucial element in any processes carried out by an organization. In the day to day operations, there seems to be disparities in demand and supply probably due to issues of waiting time. A typical example of waiting time could be shoppers lining up in a supermarket waiting to be served. It is therefore very fundamental to ensure waiting time is kept at its minimal levels as it could result to unforeseen losses or loss of potential customers. Waiting time in most instances occur when expected demand exceeds supply over a certain period of time which lead to implied utilization that could be over 100%and in case of variability, implied utilization is usually below 100%,a factor that causes waiting time to be uncertain.
Southwest has been in a position to manage this problem by ensuring the reduction of aircraft turnaround time particularly at the gates. This has reduced the time passengers usually spend when waiting for their flights to take off. As a result, it enhances faster trips being made to different destinations as scheduled.
This refers to the streamlining of the various activities involved in operation processes carried out by an organization. Quality management revolves around ensuring transparency in all aspects of management of every organizational process. This is to mean that any shortcomings should not be hidden intentionally from the customers even if they can be corrected and go unrealized within the processes taking place.
Quality management should be a leading factor in any business as it will form a firm foundation to the levels of demand and supply within an organization, and if anything should go wrong in between the production processes, such problems could have profound impacts on the overall performance and stability of a business venture. Similarly, southwest has managed quality management over the past 3 years through various ways that include;
- Putting in place mechanisms that ensure employees deliver their best services so as to enhance the company’s image and reputation. This has been made possible through fair treatment of employees while paying them their remunerations or dues as stipulated by the Airlines Act.
- Incorporating business intelligence in the Airline operations so as to facilitate efficient operations. This is through the instigation of skillful practices by skillful and knowledgeable managers with an excellent span of control and evaluation into the airline business.
- Development of personalized customer service delivery to ensure that the customer knows everything deemed important that pertain certain processes so as to maintain credibility and uphold trust in the airline operations.
Southwest airline has always been on the forefront in their management system due to efficient delegation of duties to competent personnel who handle their work with uttermost care and skills. This has enabled the airline to liaise with other airline companies in carrying out their duties. The result of that is there has been formation of trade agreements especially over the last four years of operation which has seen southwest expand its horizons to greater lengths.
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This pertains unexpected increase or decrease in demand rates that could arise in a given period of time. This aspect usually makes it difficult to match demand and supply. For instance, it can prove to be difficult to forecast the demand in a given period especially if supply is unknown. It is therefore very crucial to know and determine how much to produce to avoid future losses due to unexpected demand rise or fall.
The issue of uncertain demand in the airline company has been addressed through establishment of extra capacity that can accommodate any unexpected or unforeseen demand rises. This has been made possible through the existence of more aircrafts that can be readily available at any point in time. Southwest has seen to it that it has implemented the purchase of more aircrafts to solve any instances when demand goes overboard. It further expands the operations of the airline which only translate to increased profitability and achievement in their field of operations. This has been made successful by the airline doing the following,
1. Southwest has entered and negotiated various contracts with other airlines companies so as to address this particular issue. The more recent one was the agreement in 2010 with West Jet airline which provided the facility of selling seats on each other’s flights to whatever destination. This aspect has really aided in the transportation of customer whose numbers has steadily increased over the years.
2. Creation of buffer capacity in cases where demand exceed supply. This acts to take care of the excess demand so as to avoid frustrating customers in whatever manner. This has really assisted the airline because in each year of operation, there tends to be increased customer turnover that necessitates the need to have efficient buffer capacity.
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Risk pooling is majorly concerned with combining various alternatives available so as to hedge against future contingencies. It can take the form of redesigning the entire supply chain model, the products and commodities involved so as to reduce any uncertainties in the entire process. These measures act as mitigating factors to ensure that the organization is in a better position to continue the verge of its operations.
Though a multinational airline, southwest incorporates various ways of pooling together its risks to ensure the company doesn’t suffer immense losses that could lead to cessation of its major processes and activities. A good illustration of this is when southwest was able to hedge against business risk after gaining a reputable image through the assistance of other multi-national airlines. By this, the airline was in a position to spread out its risks to some extent that allowed room for pro-active risk management. This has enabled southwest to enjoy much positive financial boost from its operating skills generally.
The fundamental principal of supply and operations management clearly stipulates that it is very crucial and important to incorporate expertise in any supply chain system in order to maximize returns for a specific firm. Holding other things constant, managers should understand the whole logic behind supply and operations management in order to be in a position to make sound and concrete decisions that have positive long-term effects to an organization or company.