Many people talk about the need for US to cut costs. Some profess that the only way to accomplish this is through lower wages. However, that is clearly an oversimplification of the situation.
A company's value chain involves several factors, but they can be boiled down to two in the simplest form:
1) Dollars going in
2) Dollars of value coming out
When looking at moving an airplane from Point A to Point B, the dollars going in come from a variety of sources:
- Reservations agents
- Amortized cost of reservations systems/web site/etc.
- Ticketing/baggage agents
- Amortized cost of electronic checkin kiosks
- Gate agents
- Amortized cost of gate lease/gate equipment (includes ground equipment)
- Fuel
- Rampers
- Pilots
- Flight Attendants
- Cleaning Crew
- Catering
- Amortized cost of mechanics/maintenance
- Amortized cost of schedulers/yield management/station managers/etc./etc.
- Landing and other miscellaneous fees
Dollars of value coming out can be boiled down to revenue generated for the flight.
But when looking at dollars going in, there are typically two different fundamental levers that can be moved. One is the obvious...pay the people less and negotiate lower costs for non-labor costs. The other is more subtle and often overlooked.
Every single minute that a person is being paid and not adding dollars of value is an opportunity to maintain wages and still cut costs. Every single minute that a piece of equipment is sitting around and not adding dollars of value is an opportunity to maintain wages and still cut costs.
All of those wasted minutes should be examined, and turned into value-add minutes.
A company's value chain involves several factors, but they can be boiled down to two in the simplest form:
1) Dollars going in
2) Dollars of value coming out
When looking at moving an airplane from Point A to Point B, the dollars going in come from a variety of sources:
- Reservations agents
- Amortized cost of reservations systems/web site/etc.
- Ticketing/baggage agents
- Amortized cost of electronic checkin kiosks
- Gate agents
- Amortized cost of gate lease/gate equipment (includes ground equipment)
- Fuel
- Rampers
- Pilots
- Flight Attendants
- Cleaning Crew
- Catering
- Amortized cost of mechanics/maintenance
- Amortized cost of schedulers/yield management/station managers/etc./etc.
- Landing and other miscellaneous fees
Dollars of value coming out can be boiled down to revenue generated for the flight.
But when looking at dollars going in, there are typically two different fundamental levers that can be moved. One is the obvious...pay the people less and negotiate lower costs for non-labor costs. The other is more subtle and often overlooked.
Every single minute that a person is being paid and not adding dollars of value is an opportunity to maintain wages and still cut costs. Every single minute that a piece of equipment is sitting around and not adding dollars of value is an opportunity to maintain wages and still cut costs.
All of those wasted minutes should be examined, and turned into value-add minutes.