Eric Joiner's Freightdawg.com - The Logistics and Supply Chain Blog!

Happy Halloween 2007

Charlie Brown: "I got a rock..."

Halloween is one of my favorite holidays.  My kids love it and my wife loves it.  Charlie Brown holiday cartoons also remind me of my childhood in the 1960's and 70's. "The Great Pumpkin" was my very favorite. Check it out. It's not logistics related, but then again, procurement and sourcing are close.

Listen carefully to what the cartoon kids get for treats...popcorn balls, cookies, fruit...stuff we'd make a point of throwing away today. This was a simpler and better time.

Congrats to my brother Harry and his bride for their 15th Anniversary today.  I recall specifically that he said they got married on Halloween because marriage was "scary enough". All I could think about was that for the rest of their lives when they wanted to go out to dinner on their anniversary, they'd be taking kids door to door.   They also had the temerity to get married during the Georgia/Florida football game that year.  How they managed that I don't know.  If it had been the Auburn/Georgia game, I'd have missed the wedding.

Eric

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Recall: CIO's Loom Large in Reclaiming Damaged Product

Good Data Management Impacts Branding

Kim Nash is a senior editor at CIO Magazine. Kim wrote me the other day and included a copy of a great in depth article on product recalls.  CIO Magazine writes about systems, data and business processes. Let me tell you...when your product goes bad...and you need to get it back before somebody gets hurt, processes and data matter.

The attached article talks about ConAgra Foods and how it is managing not only the recall and eventual rebranding of Peter Pan Peanut Butter, but other food products as well.   When your product goes bad, the first thing you need to know is where it is.   That means your supply chain needs to keep visible records of where product is, both in storage and in transit. If the product was delivered to an end customer, what lot went to what store, in what quantity and when?

Was this a problem with the crop, shipping inbound to manufacturing, storage, manufacturing processes, packaging?   This gets to be a forensic engagement worthy of CSI:Las Vegas. Questionable safety is a killer of branding.

Peanut butter is one of those items that gets branded on you by your Mom.   What she served, is likely what you buy. Mayonnaise and ketchup are a couple of others that receive similar reverence. My wife knows that there better be one kind of Mayo in our house, and its what my mama served. My brother-in-law is the same with peanut butter. For us southern boys, this is like God and country. 

Now assume your peanut butter is no longer trustworthy.   Are you going to feed it to your kids?  NO.  There went 40 years of product indoctrination.  For companies, that means get the bad stuff back...as fast as possible, but do it without killing every cash reserve available.  That means being efficient. That takes systems. 

Get that bad stuff off the shelf in a hurry though, because as soon as my wife decides that mom's preferred brand might hurt her babies... game over.  You ain't never getting another jar of that other stuff in the house again.  This runs deeper than peanut butter folks.  Don't mess with it.

Supply chains have three components.   Product, Money and Data.

In a recall, its the data that matters most.  Where are the goods?   CIO's are called upon to find that out by working with systems and the company logistics and supply chain team.  Their data is used to minimize the hit on the companies money and to recall as much product as necessary, but not more than is required.   If your systems are bad, you have zero chance of doing this.

Visibility and order systems play highly in this puzzle.   Having good visibility systems are critical to handling recalls. Once the goods are identified, they can be reclaimed, tagged and destroyed. Inability to know where your product is, even after you sold it, means that reclamation is messy and costs more than it should.

clipped from www.cio.com Beyond Peter Pan:  How ConAgra's Pot Pie Recall Bakes in Hard Lessons for Supply-Chain Management From peanut butter to bikes, product recalls are breaking records. Will your supply chain be ready when you have to run it backward in order to track, trace and collect a recalled product? October 22, 2007 - CIO - At lunchtime one day last January, Jill Hein, an Iowa mother of eight, took a jar of Peter Pan peanut butter - the kind with Peter, in his feathered cap, on the label - out of her pantry. She opened the lid. Everything seemed fine. No funny odor. No odd color. Hein fed the Peter Pan to one son and one daughter. Within hours, they were cramping and vomiting. Hein’s 3-year-old boy, Bowen, had to be taken to the emergency room the next day. Hein ate some herself two weeks later and was hospitalized for dehydration. And renal failure. Alone or with jelly, peanut butter is as classic as Elvis, who preferred his on white bread, mashed with bananas and     fried. Americans eat 700 million pounds of crunchy and creamy each year—enough, the Peanut Advisory Board says, to coat the floor of the Grand Canyon. Hein never expected a simple peanut butter sandwich to go so wrong.    Neither did ConAgra Foods, the $12 billion conglomerate that makes Peter Pan.    One of ConAgra’s oldest and best-known brands, Peter Pan brought in $109 million in sales last year, says Information Resources, which tracks retail spending. ConAgra  also supplies some of Wal-Mart’s Great Value house brand and sells peanut butter toppings to companies like Carvel and Sonic, bringing total peanut butter sales to $147 million last year. But when an outbreak of a rare salmonella strain was traced to ConAgra peanut butter, the company would have to try to get it all back. The Peter Pan recall eventually involved 326 million pounds of its own and Wal-Mart’s peanut butter, plus 99,953 cases of toppings. So far, ConAgra has spent more than $78 million dealing with an estimated $1 billion worth of potentially infected product. Its peanut butter sales were down 63 percent in fiscal 2007, the company says. No one knows how much ConAgra will need to spend to re-establish trust in its product. Hiring Tinker Bell to ask people to clap if they believe in Peter Pan won’t fix this. Why Recalls Depend on the Supply Chain Peanut butter isn’t ConAgra’s only recall trouble, either. The company has had to call back hundreds of   pounds of ground beef in the past few years, and this month ConAgra’s Banquet pot pies were recalled when at least  211 people in the U.S. got salmonella poisoning, which the Centers for Disease Control and Prevention links to the pot pies. That recall is ongoing. Check out the history of Famous Recalls:  15 years of products gone bad

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Now I know the Railroads are Making Money

I have Yahoo as my "home page" on my various web browsers both at home and at the office.   My Yahoo is a nice tool to gather all my info and my various RSS feeds.  Most of my links and feeds are transportation related.   

I'm used to seeing railroad stories because I look for them. Progressive Railroading magazine also has a nice daily feed.   

What I was not prepared for was seeing a major Class 1 railroad pursuing a  "main stream consumer"  web advertising campaign. The CSX campaign is called "How Tomorrow Moves".

CSX is advertising all over Yahoo and probably other places as well. The message they are looking to send seems twofold. First, is general awareness.  How much does the general public actually know about what any individual railroad does for a living?  Likely not much.   The second message...is "Green".    CSX has an animated banner ad that focuses on the efficiency with which rails can move tonnage vs fuel cost.    When a MAJOR commodity that moves on the rails is coal (read energy)... that's an important message.

The public is aware of tankers because oil is largely moved by ship. The public also knows about the Exxon Valdez fiasco.   Oil is also moved by pipeline.   What the public doesn't really get yet is that COAL also can move by pipeline as slurry.    The railroads compete for coal transportation with pipelines. 

"Warren Buffett is investing heavily in BNSF and other railroad stocks.  The reason?  Berkshire Hathaway clearly sees that energy moves on the rails."   

Ethanol and coal both have major movements on the railroads.   When the price of fuel is rising, and demand for energy, especially domestic energy (Ethanol and Coal) are on the rise, any industry that controls the way the fuel moves (railroads and pipelines) is going to be profitable.  That's simple logic.  Buffett likes simple logic.  He bought into Burger King and Coca Cola because he understood the fundamentals. 

CSX surprised me with this campaign because Class 1 railroads typically don't have a consumer base.  However, consumers are concerned with getting energy.  They are also concerned with the efficiency with which that energy moves.  Ultimately it influences the size of your power bill.   

Pipelines moving both fossil and bio fuels compete with the rails for energy transportation.

"CSX just put a stake in the ground in the "hearts and minds" department that nobody even knew existed."

That's cool.  Some folks in marketing at the railroad are clever.   What is interesting is that they have taken what I call a "purple pill" approach.  They seem to be borrowing from the Pharmaceutical companies in just raising general brand awareness.   Next will come a more targeted message.   We can wait for the shoe to drop.

CSX is communicating that it is a vital transportation resource.  They are also communicating that using CSX is an efficient way to move products, but especially energy.  CSX is working on convincing us that end consumers and investors will care about the green strategy and economic efficiency used by energy buyers such as Southern Company, (who owns Georgia Power, Alabama Power and other utilities.)

I'm really interested in seeing how this works.  If anybody in CSX marketing reads this article I would be especially interested in giving you an opportunity to tell us what message the "How Tomorrow Moves" campaign is truly targeted.   

Eric

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Are Bigger Trucks a Good Idea?

Bigger isn't necessarily Better.

With highway congestion at an all time high, the economy tottering on a recession, pollution up and the dollar down,  shippers are clamoring for any angle to increase efficiency. One of the ways to do that is to consider increasing the amount of freight that can move in a single truck.

Congress is now looking at whether bigger, heavier trucks, capable of heavier loads would be good for the country.  Presently 6 axle trucks have a weight limit of 80,000 lbs.   In Canada however that limit is 97,000 lbs.   Canada has more rural area though. 

While shippers and some trucking companies are for the increase, which could increase revenue per ton mile for the truckers,  some are also against the concept.  Independent truckers would have to get new equipment to handle the heavier loads.   Impact on highway fatalities could also increase.  I know on I-75 near my home in Atlanta,  the size and speed of the current semi-truck fleet is enough to blow a motorist off the road.   Adding another 17,000 lbs to a vehicle moving at 70 miles an hour is scary indeed.

Various Port authorities have had waivers for trucks hauling containers for export for years.    South Carolina used to have a law on the books that any load moving for export through the SC Ports could weigh up to 90,000 lbs.   That did a lot to move lumber and Kaolin clay loads away from Georgia Ports and through the neighboring SC Ports. 

Simply for safety reasons, I'm against bigger trucks.  I'm for fuel efficiency, newer, greener equipment rules and increased intermodalism. The present van sizes fit well onto railroad equipment and our highway network.   If a larger truck comes into the market, I would like to see it restricted to western states, long haul routes  and possibly specific commodities.

Congress will consider this in a 2009 Transportation Bill.  In the meantime, Labor, shippers, safety groups and the government will all wrangle.   

clipped from www.logisticsmgmt.com LAS VEGAS—Shippers could be enjoying as much as $50 billion in savings through greater productivity from their motor carriers if longer and heavier trucks are allowed when Congress crafts the next federal-aid highway bill in 2009. Miles Mittelstadt, associate general counsel of Schneider National, the nation’s second-largest truckload carrier, said at the 21st annual membership meeting of the North American Transportation Employee Relations Association (NATERA) that the long-term trend in logistical savings has reversed. During World War II, logistics was as high as 30 percent of Gross Domestic Product. It is now about 10 percent of GDP, compared with about 18 percent when trucking was deregulated in 1980. “It seems like those improvements have bottomed out,” Mittelstadt said, noting that congestion, environmental concerns and higher fuel costs have hurt trucking productivity. Still, longer and heavier trucks would not come without costs. Larger vehicles would cost the public about $6 billion per year in improvements in bridges, intersections and pavement improvements. That amounts to a “tax” of about 4 cents per mile for carriers. That would be offset somewhat by alleviating congestion. “The people who would really benefit would be the shipper community,” Mittelstadt said. “They would benefit from economies of scale.” Schneider National’s internal estimate is that as much as $50 billion in shipper savings would be gained by greater use of longer, heavier trucks.

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Supply Chain Training - Shippers and Carriers Both Need it.

This week I will be attending one of the great supply chain training courses my employer offers to it's customer facing employees; four days worth of workshops on how to listen to a customer to understand their needs as well as how to match the customers needs to the services we offer.  The problem is that a lot of companies don't actually have a strategy.  In that case, additional training is given on how to do the discovery and needs analysis to figure out where problems (opportunities!) may exist.

On the logistics provider side, some companies are so focused on sales of specific products, that they fail to listen to the customer or even understand how their services fit into a supply chain.   The "integrators" are the worst at this because their product portfolios are so vast.   Some of this is geared to how providers incent their salespeople.   When bonus is based on a percentage increase in sales of next day 10:30 service or how many containers get booked on a specific vessel string, instead of profit margin and product fit, then the carrier ceases to be a strategic partner.  The sales guy is so focused on making quota, that he often does not care about the customers needs outside of what he gets paid for.

The article below is from Supply and Demand Chain Executive.  It is about how the leadership of Kimball International transformed the supply chain team in support of the companies strategy to grow international sourcing and to make sourcing a strategic function of the business.    Key to the process was evaluating the current team's skills and knowledge, then training them to meet the company's other supply chain initiatives.  That investment is extremely exciting and tells me this is a well managed company.  As a supply chain careerist, it also tells me that Kimball is likely a helluva good place to work, at least in the sourcing department.

Companies like Kimball also are fun to work with.   An educated customer matched with suitably educated vendors can do some incredibly creative things that are good for both businesses.  The relationships I have personally valued most were the ones where the conversations were based on performance first, then moved to strategy.  Training investments in people make that happen.

clipped from www.sdcexec.com When Bob Price began leading the transformation of sourcing at the Office Furniture Group of Kimball International two years ago, he quickly drew up plans for four specific initiatives to take sourcing in a more strategic direction at the company. But he also put in place a fifth initiative to help ensure the success of the other four projects by providing vital training and skills development for Kimball's sourcing team. In Price's view, to meet its goals, one of Kimball's most important investments would be in its people. A Strategic Mandate Jasper, Ind.-based Kimball International is a $1.3 billion manufacturer of furniture and electronic assemblies, operating in 14 U.S. states and in seven countries on three continents. The company employed about 6,800 people worldwide as of the end of last year. In 2006, about 56.5 percent of the company's sales came from its Furniture and Cabinets business segment, with the remainder coming from its Electronic Contract Assemblies segment. Back in 2005, as part of a broader realignment within Kimball's Furniture and Cabinets segment, the executive leadership in the segment's Office Furniture Group came up with a vision for transforming the sourcing function into a strategic team that could make additional contributions to Kimball's competitive advantage in the marketplace. At the time, Price headed the sourcing team as director of global sourcing within the Office Furniture Group, and he was charged with leading the transformation of the function. (Price has been named director of global supply chain management for the Kimball Furniture Group since the interview for this article.) A 20-year veteran of the supply management field, Price's plan for achieving transformation in Kimball's sourcing focused on five initiatives, including supplier relationship management, category management planning, commodity councils, strategic sourcing and globalization target setting, and, importantly, training and skills development. All the initiatives involved little or no investment in new technology or staff changes, while offering the possibility of significant short- and long-term gains, according to Price.

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SQ takes Delivery of First A380

On October 15th, 2007, Singapore Airlines became the first commercial operator of the new Airbus A380.   The video below shows final preparation, aircraft painting and flight.   A new day has come to commercial aviation.   Airports will adapt to handling a new beast much like they did in the late 60's with the Boeing 747-100.   

Singapore Airlines also released video of the interior layout of the new bird.   All I can say is I don't want to be in a middle seat in the economy section.  First and Business Class look marvelous however.

The first commercial flight will take place on October 22, 2007 between Singapore and Sydney Australia.  That route was chosen because of the deep involvement of both Sydney and Singaporean airport authorities in making sure their facilities can accommodate the A380.  Qantas Airlines of Australia is also a major buyer of the A380.  Tickets on this maiden flight have been going for thousands of dollars on eBay.

(Note: Some corporate proxy servers ban video from youtube.com.  If you see white space below...you may be on such a network.  Please revisit from home or a connection that does not go through your company VPN.)

Eric

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Environmental Impact: Ocean Carriers in the Cross Fire.

As part of Blog Action Day,  I republish this article which focuses on the efforts of port authorities, ocean shipping carriers and related industries to reduce emissions and pollution.

Because of the high visibility and public profile of passenger airlines, air carriers and aircraft manufacturers have been vocal about the fuel economy and reduced environmental impact of new jets.  With fuel costs being what they are, and airline margins being "beyond tight", the economical operation of modern airplanes gets public and media attention.

Less well known however are the efforts of ocean carriers and port authorities to also streamline vessel design, reduce fuel costs and reduce green house gas emissions. The article below highlights the increase in greenhouse gases brought on by the increasing size of the global container shipping fleet. 
Maersk's new PS Leviathan class ships are 14000 TEU monsters.  Thats 7000 40 foot containers on ONE ship!  M/V Emma Maersk boasts such innovations as biocide-free silicone paint coatings to reduce impact on the marine environment, specially designed fuel cells to protect against fuel spills and computer controlled engines to reduce fuel consumption as much as 10 percent over previous vessels.  While the environmental impact of that ship on its own may seem large, relative to the amount of freight it carries, it is an efficient ship.  Carrying the same freight on 3 or 4 4000 TEU ships would be much higher in pollution impact.

Nevertheless, vessel operators and port authorities are working to eliminate pollution. Examples include efforts by the Port of Los Angeles to eliminate cruise and container ships from operating generators and engines while in port by providing clean electrical hook ups shore side. Also LA has efforts to have vessels arrive unpowered in the harbor by use of tugs to take them all the way to the quay.

New designs are aerodynamic and hydrodynamically sound. Fuel is used not only to propel the ship, but as BALLAST to steady it in the water. When bunker fuel is expensive because of a weak dollar, carriers work extremely hard to conserve. These new ships are more economical than previous vessels because they transport more freight for relatively fewer dollars per TEU mile.  (thats the cost to move 1x20 ft container of freight for one mile.) 

What the article really does not capture however are the increases in fuel economy and pollution control that the engines in the new vessels also carry.   The fuel and pollution savings from this are huge. Additionally,  Tug companies are developing hybrid fuel tug boats to reduce the environmental cost of harbor operations.  Los Angeles has an initiative now to increase tug use in maneuvering container vessels into the berth so that the big ships don't need to operate their engines while in port.

Much is being done in the maritime industry to control pollution, but I'm afraid it does not get the proper research nor airplay, despite the general accuracy of articles like the one below in the Guardian. Part of that problem is that merchant vessels have a lifespan that can extend to 30 years or more.  Maersk's native built fleet is fairly new with most built in the 1990's or later, however their inherited P&O Nedlloyd fleet has some ships that date to the early 1980's.  Guaranteed these ships are not as efficient as their new big sisters.

"Just because Maersk or Evergreen has a sexy new big ship, does not mean they broke up an older, less efficient vessel."

Smaller, less efficient ships tend to "cascade" down to smaller trade lanes or to smaller shipping lines as second or third hand vessels. That 3000 TEU ship that was a transpacific front line vessel in the mid 90's is now likely deployed on an Asia-Latin American trade.  It's these older ships that need to be brought into control.  The cost to refit them is beyond their remaining useful life, but as long as global trade will support the economic use of the ships in the trade lanes, this problem is going to continue.

Eric

clipped from environment.guardian.co.uk CO2 output from shipping twice as much as airlines Maritime emissions not covered by Kyoto accord Studies suggest 75% rise in 15 years as trade grows. John Vidal, environment editor Saturday  March 3, 2007 The Guardian  90% of the world’s goods are carried by sea and world trade is increasing all the time. Carbon dioxide emissions from shipping are double those of aviation and increasing at an alarming rate which will have a serious impact on global warming, according to research by the industry and European academics. Separate studies suggest that maritime carbon dioxide emissions are not only higher than previously thought, but could rise by as much as 75% in the next 15 to 20 years if world trade continues to grow and no action is taken. The figures from the oil giant BP, which owns 50 tankers, and researchers at the Institute for Physics and Atmosphere in Wessling, Germany reveal that annual emissions from shipping range between 600 and 800m tonnes of carbon dioxide, or up to 5% of the global total. This is nearly double Britain's total emissions and more than all African countries combined. Carbon dioxide emissions from ships do not come under the Kyoto agreement or any proposed European legislation and few studies have been made of them, even though they are set to increase. Aviation carbon dioxide emissions, estimated to be about 2% of the global total, have been at the forefront of the climate change debate because of the sharp increase in cheap flights, whereas shipping emissions have risen nearly as fast in the past 20 years but have been ignored by governments and environmental groups. Shipping is responsible for transporting 90% of world trade which has doubled in 25 years.

Ports of LA/Long Beach: Clean Air Creates a Major Stink

Monday, October 15th, 2007  is "Blog Action Day".   A day when thousands of bloggers will write about the need to clean up our planet and preserve natural resources.   Everybody loves these ideas.  "Green" is the political color of choice.   How can it not be?   We borrow this planet from our children.  With those kinds of ideas in mind,  it would seem logical to think that recent efforts by the California Ports of Long Beach and Los Angeles to improve air quality would be universally cheered.    Not so!

In the spring of this year the Ports proposed the San Pedro Bay Ports Clean Air Action Plan.  This plan called for drastic action to clean up air pollution largely created by the 16,000 trucks that service the ports complex every day.   Many of these trucks are older and produce exhaust emissions that damage the atmosphere.  The plan is to force the trucks to be upgraded or even better, replaced, with newer, greener vehicles.    The idea is to eventually force the older smoky trucks off the port entirely.  To fund this plan, the ports proposed a fund of 1.8 billion dollars to provide subsidies to truck operators to make the necessary modifications or replacements.   To create the fund, a Port imposed "truck impact fee" would be charged to trucks that are non-compliant.  That fee amounts to $34.00 per gate move.   The plan is to have only port licensed truckers operating "green trucks" accessing the ports.

While the goal of the plan sounds great,  the opposition to the way its being implemented is almost a perfect storm of logistics groups ranging from the NIT League, to the Pacific Merchant Shipping Association, to the Intermodal Motors Carrier Conference, The Toy Industry Association and even the National Customs Brokers and Forwarders Association.   The groups claim the plan damages independent operators in favor of larger, unionized trucking companies.  Further they claim that the plan will force an increase in port drayage rates by more than 80%.    The opposition groups think that elimination of pollution is a good idea, but oppose the truck centric way it is being implemented.

"As currently envisioned, the ports’ trucking plan is dressed-up as an air quality initiative but its result is an anti-competitive reorganization of the logistics industry."    

- John Ficker, President , National Industrial Transportation League.

Changes to the plan are being suggested by groups such as the Intermodal Logistics Association,who worry that the fees will disrupt intermodal freight movement as well as port activity.  Shippers are also asking that pollution related impact fees be used for port projects only – not projects such as the Alameda Corridor. Finally, shippers are demanding that “user fees” not penalize intermodal rail by charging both a fee and a separate toll on the Alameda Corridor.

The Federal Government hasn't gotten involved in this issue yet, but its coming.   The Intermodal Motor Carrier Conference has complained to the Federal Maritime Commission that the port plan will cause economic hardship to shippers by forcing an increase in drayage rates and a reduction in available service.   That is a violation of The Shipping Act.   

The Clean Air Action Plan is an effort by the City Councils in Los Angeles and Long Beach to appease environmental and labor interests in Southern California.   The problem is that the "solution" puts all of the burden on industry without their necessary involvement to solve the issue in a way that keeps the economy moving.

Any way you look at this issue, the idea is good but the solution stinks.  It's bad for truckers, it's bad for shippers and it's bad for affiliated businesses like 3PL's, Forwarders, Brokers and the economy.

Eric

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Dreamliner Delays - 787 slips in Production

Boeing unveiled the 787 Dreamliner on July 8th, 2007.  7/8/07 seemed like a lucky day for the aircraft manufacturer and it's enthusiastic airline customers.  Unfortunately the aircraft that rolled out that day was not ready to fly.

Delays in fastener production and glitches in flight software pushed the first flight back to late 2007. Deliveries to first airline customer, ANA of Japan were said to remain on target however for May, 2008.

Not so now.   Boeing today issued a press release indicating that the delays continue and the impact to development of the first production aircraft necessitated a push in flight schedule as well as first delivery.   All Nippon Airways regrettably wont get its first Dreamliner until the Fall of 08.

It is ironic to me that an airplane as well designed and as complex as the 787 will be delayed by availability of screws and rivets, the most basic part of any airplane.   Demand for the Dreamliner is at an all time high because it's predecessor, the B767, is reaching the end of its passenger service life within the next few years.   Major airlines are ordering the 787 as a high tech replacement in record numbers with large orders from airlines like Delta still outstanding.   Delta will decide between the Dreamliner and an Airbus product during the fourth quarter this year.

clipped from www.businessweek.com Boeing (BA) on Oct. 10 issued the following press release: The Boeing Co. today announced a six-month delay in its planned initial deliveries of the 787 Dreamliner due to continued challenges completing assembly of the first airplanes. Deliveries of the strong-selling Dreamliner are now slated to begin in late November or December, 2008, vs. an original target of May, 2008. First flight is now anticipated around the end of first quarter 2008. The company said the financial impact of the delay would not be material to earnings and that its earnings guidance for 2007 and 2008 remained unchanged. "We are disappointed over the schedule changes that we are announcing today," said Boeing Chairman, President, and Chief Executive Officer Jim McNerney. "Notwithstanding the challenges that we are experiencing in bringing forward this game-changing product, we remain confident in the design of the 787, and in the fundamental innovation and technologies that underpin it." Early last month Boeing announced a delay in the planned first flight of the 787, citing ongoing challenges with out-of-sequence production work, including parts shortages, and remaining software and systems integration activities. The company also acknowledged increasing risk to the delivery schedule, indicating that the margin to accommodate unexpected issues had been eliminated. The newly revised schedule for first flight and first delivery addresses the production challenges and restores margin for the program to deal with issues that may be uncovered in final ground or flight testing. Boeing also said today that flight control software and systems integration activities are not keeping pace with items in the revised schedule for first flight.

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Airline Overbooking - A Planners Perspective

Southwest Airlines hosts one of my favorite blogs. Their online presence details aspects of the airline that passengers normally don't see.   Such is the case with an article I read today on overbooking.  Passengers like me HATE it.    It is abusive to customers.

Enter Bill Owen, a Schedule Planning Lead Planner for SWA.   Bills article below discusses the "why and how" of airline capacity planning. Its a mathematical issue involving probabilities and percentages...which almost automatically means I won't get it.

Revenue and yield management impact most modes of transportation, but when your cargo has a mind of its own...aka passengers, it gets particularly interesting. The point Bill makes below regarding space perishability affects container shipping the same way. The main difference is that booked ocean freight rarely changes vessels because of convenience.

Eric

clipped from www.blogsouthwest.com OVERBOOKING By: Bill Owen - Schedule Planning Lead Planner Airline overbooking. It’s misjudged, misinterpreted, and mischaracterized. Most people don’t understand it—if it were a person, it’d be an odd cross between Donald Trump and Truman Capote. You’re not sure you get it, you don’t think you like it, but it usually makes for an interesting story and is the butt of jokes by comedians on late-night talk shows. However, overbooking is actually easily explained and understood;  is the subject of a huge amount of statistical analysis; and is a bona-fide science in its own right! Overbooking is the practice of accepting more reservations on a flight than there are seats. Most folks have two questions about overbooking: “why?” and “how?” The “why” is easy to explain—it’s an airline’s way of counteracting “no-shows,” which are Customers who make confirmed reservations for flights and then, for whatever reason, fail to show up. Without overbooking, no-shows would cause almost all fully-booked flights to leave with empty seats. And an airline seat is a completely perishable commodity—when a seat on a flight departs the gate empty, it is lost and can’t ever be used. Put another way, the potential for revenue lost due to no-shows could easily undermine Southwest’s Low-Fare Leadership…and the art of overbooking helps prevents that. That’s the “why.” The “how” is harder to explain, but it is way more interesting. The science surrounding overbooking combines the mathematics of probability and of detailed, historical analysis, mixes in a healthy measure of behavioralistic research, then uses all of that to predict what percentage of bookings for a given flight leg, on a given day, will fail to show up. The numbers of people that book but don’t show have very definite trends that, absent a few “except for when this happens…” things thrown in just to keep things exciting, make predicting no-show rates a surprisingly exact and successful (if occasionally stressful) science.

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