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 been exactly ironic, but we were inspired listening to a podcast interview with JetBlue founder 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 but five successful 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 behind ChronosCloud, 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 our transportation transformations or our first-of-its-kind Inventory 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, called Breeze. 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…

More Recent Stories You May Have Missed That Caught Our Eye

 

Supply Chain’s Greatest Fear (Supply & Demand Chain Executive) Quick: What’s the most important vulnerability for supply chain leaders to worry about? Lack of inventory or transit resources? Supplier reliability? Other disruptions, such as pandemics, weather events or wars?

According to SDCE’s editors, it’s none of the above. They suggest that cyberattacks pose a much more serious risk. The story cites a recent Economist whitepaper survey of 400 supply chain executives in which more than a third of respondents indicated they had been hit hit with significant cyberattacks in the preceding three years. The average damage associated with an attack amounted to $3.9 million from lost business and downtime. Click through to the story for mitigation strategies and best practices.

 

On Cruise Control (DC Velocity) HP Inc. and Embark began autonomous trucking operations last week, moving loads of printers between Los Angeles and Phoenix. The trucks use Level 2 autonomy, which means a human driver is behind the wheel to monitor performance and intervene if necessary, although the trucks will be driving route on their own.

 

The Real Cost of Delays (Commercial Carrier Journal) Next time you’re tempted to accept delays as an unavoidable cost of transportation logistics, consider this new study that claims bottlenecks cost the equivalent of 75,000 years in transit in 2019. That’s about 660 million hours of lost productivity according to The American Road & Transportation Builders Association. The biggest chokepoints include New York, Chicago, Los Angeles, Austin, Houston, San Francisco, Nashville, Seattle, Philadelphia and Atlanta.

The group says congestion is up 25 percent in just two years. With the equivalent of 425,523 trucks sitting idle for a whole year, the environment is ripe for consolidation strategies that reduce the amount of empty or under-utilized truck miles being driven.

 

(Not) Eating Their Own Dog Food (Supply Chain Dive). Inventory management at online pet retailer Chewy has become a bit ruff. Stock-outs cost the company about $40 million in lost sales, CEO Sumit Singh estimated on an earnings call. It’s the latest example of the bullwhip effect in post-pandemic supply chains. Chewy had a large surplus of canned pet food just a year ago. Now, that has shifted to an extreme backlog.

Chewy’s experience mirrors the larger US economy, with the US Census Bureau reporting the 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 own Inventory On Demand™ inventory finance solution and multi-party visibility tools such as our ChronosCloud platform. 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.”