Morgan's Supply Chain News--When supply chains focus on being better, not cheaper, they achieve both goals (and other lessons we learned flying on JetBlue)
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The Sky’s No Limit For An “Excellence” Strategy
When supply chains focus on being flawless, not cheaper, they end up achieving both goals (and other lessons we learned from flying JetBlue).
22 June 2021 // It may not have beenexactly ironic, but we were inspired listening to apodcast interviewwithJetBluefounder David Neeleman during a recent day of what currently passes for commercial air travel.
In an industry with high failure rates, brutally low margins and volatile fuel costs, Neeleman has founded not just one butfivesuccessful airlines. And, despite competing in the discount fare segment, his winning strategy has been to pursue excellence at all costs. Ride on one of his planes and you’ll get better service, more amenities and more efficient operations—all at the best price for that value.
Take JetBlue, for example: When it debuted in 1998, the airline changed low-cost travel with hubs in the places travelers wanted to travel—for example, flights to and from JFK airport in New York, instead of Islip nearly 2 hours away from the city on Brand X. Flight attendants were friendly. Every seat had free television and satellite radio. And, there was a chance Neeleman, himself, might be on board to serve snacks and ask passengers how he could do even better.
“Too much overkill is never enough,” Neeleman explained, describing his business philosophy to “How I Built This” podcast host Guy Raz. “Let’s keep layering it on, make it better and better.”
Neeleman brought that same focus to what we might recognize as operational visibility when he invented the very first ticketless reservation at his initial airline,Morris Air. Up to that time, he said, “everything was done on a flat file. So, there was no relational database system. The database was actually your [paper] ticket. If you lost your ticket, it became a negotiable document, and [the airline] didn’t have any other way of tracking it.”
His team set out to solve that problem, lowering costs and improving customer experience. It turned out, though, that investment in visibility paid much larger returns.
Until ticketless travel, airlines “had no forward-looking ability,” Neeleman said. “They would look at things in the rearview mirror, what happened three or four months ago…. By us building that system, we allowed people the ability to have real-time information on all their reservations coming in. We could tell them what the average fare was, what their load factor was on each flight, all this stuff that they never had before. It was a revolutionary change for the airline business.”
For his zeal, Neeleman was fired from the executive team at Southwest after its acquisition of Morris Air. Neeleman told Raz that Southwest failed to realize that the biggest value they had purchased was that ticketless reservation system. Also, rival managers didn’t want to adopt Morris systems, and Neeleman pushed too hard for change. “They asked me to take two years to integrate Morris into Southwest. Within six months, I had it all done,” Neeleman says.
On the day Neeleman was fired, Southwest CEO Herb Kelleher told him, “It was supposed to take you longer to do all that stuff,.” It’s no coincidence that Neeleman founded rival JetBlue the day his non-compete agreement expired.
At Morgan, we have been in the business of transformation for more than 30 years. We’ve seen first-hand how an obsession with excellence can lead to unexpected gains. For instance, when we first invented the technology behindChronosCloud, we aimed to improve multi-party visibility in manufacturing supply chains. What we’ve learned since then is that, like Neeleman’s reservation system, our software platform is a tool for much more—automating financial transactions, managing inventory and, oh yeah, also improving operational efficiency. Today, ChronosCloud has grown into a separate, stand-alone enterprise.
We could tell you similar stories about the value realized from ourtransportation transformationsor our first-of-its-kindInventory On Demand™outsourced supply chain finance solution. It’s amazing what happens when a company focuses every day on not just working harder but doing things better. “On every single level, you need to be completely flawless,” Neeleman argued. We couldn’t agree more.
By the way, David Neeleman is starting a new airline this month, calledBreeze. Wherever it goes, supply chain managers could learn a thing or two by flying in the same direction.
Heard On The Dock
“I was just absolutely paranoid all the time, and I had to keep tweaking everything.”
-- David Neeleman, legendary airline entrepreneur and founder, Morris Air, JetBlue, WestJet, Open Skies, Azul and Breeze
While You Were Shipping…
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Chewy’s experience mirrors the larger US economy, with theUS Census Bureau reportingthe lowest-ever inventory-to-sales ratio of 1.23 in March, compared to a record high of 1.63 almost a year earlier in April, 2020. That volatility underscores the need for supply chain resilience strategies including our ownInventory On Demand™inventory finance solution and multi-party visibility tools such as ourChronosCloudplatform. Jon Gold, the National Retail Federation’s VP of Supply Chain and Customs Policy, stressed to SCD’s editors the need for more investment in such tools, adding “I think lean is still the way to go.”