Distribution Strategy: Southwest Airlines
Southwest Airlines (SWA) is a “passenger airline company, principally focused on offering scheduled air transportation in the U.S.” (Logistics Business Review, 2010). SWA also offers a supply chain of travel services to its passengers such as air, car, hotel, cruise and vacation packages and other services including selling credits to various business partners that include credit card companies, hotels, telecommunication companies and rental car agencies (Logistics Business Review, 2010).
For SWA, a component of providing the highest quality of Customer Service and a stable work environment is low fares which SWA achieves by keeping their costs low (Southwest Airlines Co., 2012). SWA is dedicated to finding ways to lower costs and increase productivity through consistent development and improvements to their logistics, production, and shipping strategies as well as their marketing channels.
The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. (Grawe, 2009, p. 361) Effective logistics operations can provide a competitive advantage for a firm and increase a firm’s market share, while also enhancing customer value and adding value to the firm’s output by reducing costs and providing delivery solutions according to customer needs (Grawe, 2009). Logistics management is one of SWA’s many strengths. In 2007, SWA “won its 13th Quest for Quality award from Logistics Management magazine as it took top honors in on-time performance, value and customer service categories” (Air Cargo World, 2007, p. 62). And from 2008 through 2012 SWA Cargo was rated the top overall scores in Quest for Quality and led the way in on-time performance and customer service (Logistics Management, 2012).
SWA operates under the premise that most customers want direct flights, low costs, reliability and good customer service and do not need any frills. SWA’s logistic goals are to fly more places; serve more customers; and preserve their distinction as the nation’s preferred low-cost airline (Southwest Airlines Co., 2010). According to Teece (2010): To achieve these goals, SWA eschews the hub-and-spoke model associated with alliances, nor does it allow interlining of passengers and baggage, or sell tickets through travel agencies-all sales are direct. Aircraft are standardized on the Boeing 737, allowing greater efficiency and operating flexibility. (p. 177) SWA cannot achieve its goals alone and must rely on suppliers and supply chains to be successful. SWA values suppliers that focus on quality, low fares and low costs; look internally for ways to improve their processes and services; and willing pass on cost savings to SWA (Southwest Airlines Co., 2012). To select suppliers and manage supply chains SWA uses a “proven strategic sourcing methodology that includes cross-functional teams, identification of total cost drivers and detailed requirements, market research, competitive bidding where appropriate, and continuous improvement in quality and processes” (Southwest Airlines Co., 2012, p. 3). SWA “is dependent on Boeing as its sole supplier for aircraft and many of its aircraft parts” (Southwest Airlines, 2011, p. 32). Other suppliers provide resources ranging from fuel to staples.
SWA does not produce a product, they provide a service therefore production cannot be measured in terms of widgets produced; it must be measured in customers served. In addition to typical financial measures of production such as system operating profit vs. loss per originating passenger, system operating expenses per originating passenger, system operating expenses per aircraft, and passenger revenue per originating...
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