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CASE 02 --- > South West Airlines-QUESTIONS TO BE ANSWERED

1.What sort of Quality Management Principles do you find in SWA?


South-West Airlines has adopted many strategies to promote customer satisfaction. The
company is able to reduce costs by applying these strategies and this is the indicator of quality
management. Customer satisfaction has been brought by the cheap air tickets and it has been
consistent in that service over a period of time. The frequent, convenient timed flights, the Point
to Point service offered by Southwest Airlines is yet another strategy for the highly satisfactory
service provided to the customers. The turnaround time of 25 minutes is significantly lesser than
the industry average of 35 to 60 minutes. Southwest Airlines is able to provide cheap service
because of factors like highly productive employees, its effective hedging process of oil prices.
They were able to meet up their cost by utilizing such strategy and hence are able to earn good
margin. South-West employed just 66 employees per aircraft which is very less when compared
to 75 employees per aircraft (industry average) in 2007. This is the key factor for providing
cheap service due to huge savings.

The task which was once completed by 75 employees in average in the industry has now
been carried out just by 66 employees. This indicates how involved the employees are, in
providing satisfactory service to customers. The Continuous Improvement or KAIZEN approach
seen in the cost cuttings and Quality service provided to the customers by Southwest airlines is
yet another strategy to bring down the ticket fare and enhance customer satisfaction. Also the
number of services (in terms of aircrafts and frequency of services) offered by Southwest
Airlines has seen an increasing trend which signifies that the company is following Kaizen
approach for offering satisfactory service.

2.Suggest few Control Charts that can be used by SWA & mention the
use of those charts?
SPC Technique is being employed by SWA to find out whether the process is in control
or not and to have an optimal process design that maximizes the productivity and enables the
company to retain its customers. The control chart which can be adopted in this case can be
control chart for Variable: - X-chart and R-chart. The Variable that can be studied under these
charts can be the utilization of Available Seat (AS) which is given by monthly Filled Seat
Percentage. The observation of this variable can be made every month for all the 8 years. The
Mean of this value for an year would be X and mean of means for all the 8 years would be X.
Range would be the difference between the maximum and minimum monthly values of Filled
Seat Percentage. From these values the control limits can be computed. The Upper Control Limit
for this can be 100. But to find out what made the process to be so effective, it is must to have a
control limit which is estimated as per the calculation. The best process which brings about
higher utilization can be implemented permanently in the company.
3.Use any two demand forecasting technique that can be used to forecast
the demand at S.W.A?
Demand is the desire backed by ability and willingness of the customer. Demand in South
West Airlines is expressed in terms of Actual Seat miles travelled over period of years (2001-
2008). The Forecasting technique, which the company can adopt, may be moving average
method or exponential smoothing method, etc. The accuracy of the forecast can be estimated by
methods namely Mean Absolute Percentage Error (MAPE) and Mean Absolute Deviation.The
Actual Seat miles can be computed by multiplying Filled Seat Percentage by Available Seat
Miles (ASM). The following table will show the forecast figures.

Seat Miles AD APE (%)


Filled Forecasted
Year ASM
Seat % Actual Forecasted (ESM MA ESM MA ESM
(2 Period MA)
α=0.2)

2001 68 65295 44400.6 - - - - - -

2002 66 68887 45465.42 44400.6 44400.6 1064.8 1064.8 2.34 2.342

2003 67 71790 48099.3 44933.01 44613.56 3166.29 3485.74 6.58 7.25

2004 69 76861 53034.09 46782.36 45310.71 6251.73 7723.38 11.79 14.56

2005 71 85173 60472.83 50566.7 46855.39 9906.13 13617.44 16.38 22.52

2006 73 92780 67729.4 56753.46 49578.88 10975.94 18150.52 16.21 26.8

2007 72.6 99636 72335.74 64101.12 53208.98 8234.62 19126.76 11.38 26.44

2008 71.2 103271 73528.95 70032.57 57034.33 3496.38 16494.62 4.76 22.43

Mean 6156.56 11380.47 9.92 17.48

The table depicted above, mentioned that the best method is 2 period Moving Average.
This is substantiated by the Deviation denoted by Mean absolute Deviation and Mean Absolute
Percentage Error. The deviation of the forecasted value from the actual value is relatively more
in the last 4 years. This may be because of the down trend in these periods due to which many
business class people did not travel much.

Southwest Airlines has adopted many strategies as mentioned above to be the best in the
industry in terms of Profitability, ASM, etc. Though the service offered by Southwest Airlines is
only domestic, still it can make huge profit for 35 consecutive years by providing low fare tickets
for the passengers and this is the “Secret of Success” for Southwest Airlines.