Wednesday, March 22, 2006

Six Sigma Opportunity for Lost Baggage

In yesterday's issue of USA Today, there was an interesting article by Dan Reed on Airlines losing a record number of bags last year. As a air traveler for many years, I have experienced the pain of losing my bags after a flight. It is not a pleasant customer experience. After quickly reading the article, I thought that of all problems that could be considered for a Six Sigma project, this would be one wickedly cool project!

Based on the numbers contained in the article, a major quality improvement by any airline in their lost bags metric would greatly improve customer satisfaction and boost the bottom line. What was the cost of this poor quality performance? The article estimated the cost to the airlines for loss bags to be $2.5 billion. With the current financial situation of the airlines, this would be a huge improvement opportunity.

According to the article, 30 million bags were lost out of 3.7 billion bags checked in last year. With less than 1% error rate, it was stated this 99% success rate would be considered good in many industries but basically is unacceptable for the airlines. OUTSTANDING quality viewpoint! Do not accept the 99% success rate as good enough.

Using these numbers, the airline lost baggage rate is 8,108 Parts Per Million opportunities defective(PPM rate). In the six sigma world, that would be under a 4 sigma performance level. Remember a six sigma level would be only 3.4 parts per million (PPM) defective.

Without many of the details, it would be difficult to analysis the problem. However, the article did help point out some focus areas. With about 61% mishandled bags occurring on baggage transferred from one flight to another (versus direct flights), I would obviously focus investigative efforts on this process. In addition, 15% of the errors were due to the airlines failing to load them on the proper fights. Sounds like there is some level of data to start a formalized problem solving investigation.

By asking the 5 why's, along with Pareto charts and cause/effect analysis, the airlines could begin to see the root causes for lost bags and start countermeasures to poka-yoke (mistake-proof) the process. With all due respect to the airlines, this improvement process sounds easy, when in fact, it is difficult to isolate these common cause variations and prevent them from occurring. Difficult but certainly not impossible!

My advice to the airlines, don't focus on layoffs and pay cuts that further erode your employee relations. That short term thinking to cut costs will not build your team that you need to be more competitive for the future. The negative price you pay is too high. Instead, work together with your employees and try a focused six sigma program. As a team, go after the $2.5 billion along with other process improvements. You need the money, but more importantly, a large number customers will be transformed into extremely happy passengers!


Bill Waddell said...

Good point about the quality opportunity, Mike, but also about how 99% is better than most. It seems to me that it is a typical inventory control situation. Take something into the system, put it away, then retrieve it when it is needed. Before too many manufacturing folks bad mouth the airlines - or even complain when their luggae is lost - they should pause and be sure their inventory accuracy is better than 99%. Few manufacturers meet that standard.

Andy Wagner said...

61% of losses due to mishandling during transfer: this supports the lean idea of direct flights. The airline industry has to be the most glaring example of a place where customers pay LESS money for MORE of a service that they DON'T want! Any we wonder why Southwest, with an emphasis on direct flights, is more profitable than all the rest.

Mark Graban said...

The baggage process seems so broken with the airlines, I don't know if you neede sophisticated six sigma tools. I'd focus on the lean tools of error proofing and standard work, maybe some fishbone diagrams and 5 Why analysis. Seems like there's still much low-hanging fruit with defect rates that high.

Then again, experts think pharmacies mess up 3% of all prescriptions, so airlines aren't so bad in comparison, considering the stakes.