Yesterday I flew coach on Delta Airlines from Atlanta to Chicago. . . It was almost an hour into the flight when I realized that I had yet to be offered something to drink. In trying to determine where the delay was coming from, I observed the flight attendants offering passengers drinks and I noticed that it was taking an inordinate amount of time when a passenger ordered soda. This was because the flight attendant needed to fill a glass with ice, open the can, pour the soda into the cup of ice (the can needed to be tipped several times so that the liquid could be distributed slowly so as not to spill while filling the glass) and then hand the cup (not the can) to the customer. This process took twice as long (four times as long for diet soda since it “fizzes” more)as someone who simply ordered water (no bubbles to deal with) or beer, wine or other alcohol because the passenger was handed the entire container (bottle or can) to pour themselves.
Being a supply chain geek AND being somewhat obsessed by our recent focus on Value, I decided to apply our Value model. I started with the flight attendant. I asked her opinion of the soda process and was told that she had been instructed to pour the soda into a glass as opposed to offering the can because she can get two drinks out of one can – thereby accomplishing the “Intended Consequence” of cost savings. If I were to guess, I would assume that this decision was made by the Controller (a key stakeholder in this case) – without consulting two other major stakeholders, the flight attendants and the customers. Along with this strategy came a few “Unintended Consequences” such as a significant decrease in productivity, increased waiting time for passengers, decrease in the perception of the brand (Delta looks cheap) and poor customer satisfaction. If I apply the Value model to this business problem I discover that the $.10 cost savings per can must be weighed against the destruction in Value (defined here as productivity, wait time and customer satisfaction). Is it really worth it??? By the way, if I ask the flight attendant for the entire can of soda, he/she will give it to me or if I ask for a second glass of soda later in the flight he/she will give it me. So why not do it right the first time????
If you still don’t believe the Value model works try it on anything you buy – good or service and use the “Intended” and “Unintended Consequences” approach to see where Value is either enhanced or destroyed. It really does works! This is why we are rather vocal in explaining that taking a cost focus (traditional Strategic Sourcing), like my soda example, can actually destroy value. In this case, the most important stakeholders, the flight attendants and the customers were not even considered. Does that sometimes happen in Strategic Sourcing?
Now let’s take this model one step further by taking a closer look at the Airline Industry as a whole. Over the last several years, the Airline’s have had a relentless focus on cost. They have uncovered almost every possible source of cost savings imaginable and as a result have destroyed most of the convenience and/or enjoyment (VALUE) many of us experienced in flying. In a traditional cost focused approach, which is considered “Best Practices”, I suppose next year the Airlines will be looking for at least another two cents to shave off the price of soda – isn’t that how Strategic Sourcing works? Isn’t that how they are measured? Is this model working for them?? Is it sustainable? If not, perhaps it is time to move on to “Next Practices”.
In the spirit of exploring “Next Practices” I tested my theory on Value with a few of the passengers sitting around me on this flight. I asked a number of business travelers (because these are frequent travelers) if they would be willing to pay more for a better experience (VALUE). What I suggested was a nominal fee ($50 – $75) which could buy them early boarding (this costs the airline nothing), free drinks and WIFI (this costs the airline pennies), etc. The response was a resounding YES – even if their company would not pick up the tab. If what I heard was true then here is an untapped opportunity to increase revenue for the airline and VALUE for the customer. This takes the “Best Practice” model of squeezing every last dime out the system (thereby destroying value) and turns it upside down. Is creating VALUE for both sides sustainable? Could it be a competitive advantage? Could this approach be the “Next Practice” for Strategic Sourcing? Should it? Without “Next Practices” we may find the next wave of cost cutting to include a charge for restroom use or a discount for standing as opposed to sitting during a flight!
As a side note, later in the flight, I overheard the flight attendants discussing this value idea. They suggested that I send a note to the CEO of Delta which I intend to do. I will keep you posted.
The debate continues around cost verses Value. We welcome your comments and examples . . . . . . . . .
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