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Lean routine: cutting costs

Applying "lean" techniques to the airline industry can significantly improve operations and give carriers a competitive advantage.

Since its genesis in the 1950s, lean manufacturing has proven incredibly powerful not only for Toyota, which pioneered this way of working on its way to becoming one of the world's largest and highest quality car-makers, but also for the likes of hospitals, retailers, banks and insurers. All have benefited from lean techniques that drive out waste and variability, improve flexibility and create a culture of continuous improvement.

But many airline executives question the applicability of lean to their industry. After all, they ask, how can a system that thrives in controlled manufacturing environments survive in the real world of adverse weather, mechanical breakdowns and uncertainties?

Certainly, airline operations often appear highly chaotic - a glance at the arrivals and departures screen on a stormy day will confirm that. Airlines have complex networks, broadly dispersed workforces and are often highly dependent on their operational processes. These complexities leave a carrier's operations enormously exposed to variability - a problem or delay in one station can affect the entire network.

But appearances can be deceiving. Many processes in the airline business are in fact highly regular. Airlines that recognise this have applied lean with outstanding success. Many of the improvements are small, for example, changing the way boarding cards are designed or gate checking bags in a new way. When added up the impact is substantial.

By driving out excess capacity, standardising processes and, most importantly, by persuading frontline workers their ideas matter, these carriers have achieved productivity improvements in the order of 15-30% (see Graphic 1). Similarly, they have seen improvements in service levels of up to 40%. In a world of look-alike carriers with similar cost structures, those differences can amount to a significant competitive advantage.

That is not to say applying lean management techniques is easy. Changing the way an airline conducts its operations, and the way it thinks and behaves, is not a trivial challenge. But it can be done. Many companies in other industries have faced identical problems, becoming nimble and consistently profitable.

Important lessons can be learned from their success. While effective lean programmes often begin with mini-transformations or pilot projects, ultimately a full, corporate transformation using lean methods must be comprehensive and holistic. It must touch every part of the company, every step in every process and every worker. To achieve this requires a commitment to three elements: the operating system, the management infrastructure, and, particularly, employee mindsets and capabilities (see Graphic 2).

Underinvestment in any of these elements can derail the whole programme. If the operating system is not correct, then the desired productivity will not be achieved. If the management system is not attended to, then the new-found productivity will slip away over time. If employees are not engaged in the effort, they will simply wait for management to get tired of preaching before they return to comfortable ways of working.

To understand how a comprehensive transformation is accomplished, consider some of the work done in each of the three elements by carriers that have successfully applied lean. An airline's operating system is simply the bundle of business processes and practices that moves passengers and cargo from origin to destination. At any big carrier, there are thousands of small steps in hundreds of daily processes, all of which must be thought through and carefully redesigned. To knit these changes into a whole, a carrier needs to develop its own, distinctive approach, which has one set of terms, one way of speaking, one way of problem-solving and one best way of doing things.

Operating system changes can be powerful, and often easy to deploy. Examples include:

  •  In the airport lobby, passenger flows can be better managed using simple techniques such as pre-screeners and specialised queues and processes for various passenger types (such as no bag, with bag, groups and special ticketing). At one carrier, check-in times were reduced by 20-40% using this approach.
  •  In the bag room, the work environment can be improved by keeping the aisles clear, having a place for every piece of equipment, and parking carts in designated areas. Supervisors can then see at a glance how things are going. Breaks and meals should be structured to ensure consistent and adequate staffing. Processes for handling bags, tubs, and carts should be standardised. At one carrier, these changes resulted in a 41% improvement in labour cost.
  •  At the gate, new processes can be developed. For example, one carrier designed a process for gate check bags, which it uses whenever an aircraft is 90% full. The airbridge team prepares 20 bag tags before boarding. It airs its full-flight-and-bag policy repeatedly during pre-boarding, it starts tagging remaining bags when there are 40 passengers left to board, and counts bags before they go into the hold (rather than loading them and finding out there isn't enough room). All simple steps, but they add up. On average, the carrier now closes its airbridges three minutes earlier than it used to, and passenger complaints about gate-checked bags have dropped to less than 0.5%.
  •  Below the wing, aircraft turnaround processes can be streamlined. One carrier found enough efficiencies that it now services three aircraft with two crews. Even with the additional transit times the crews need to move from gate to gate, the savings add up, increasing productivity by a third.
  •  In the back office, outdated processes can be improved. In its accounts payable group, one carrier used to receive invoices in numerous different ways (such as via post, e-mail and fax). From there, bills were processed in any number of poorly organised ways. The carrier "leaned" these processes and arrived at a single set of standard procedures. Errors were reduced and workflows are faster. The carrier now pays things just on time, earning interest and improving its cash flow. With the certainty of knowing exactly how long each process should take, it rationalised its staffing, redeploying 20% of workers.

As old engineers know, if it isn't measured, it doesn't happen. At one airline, the boardroom is now given over to a set of charts that detail the company's performance on key metrics. The charts start with indicators that measure how well the company is doing against corporate goals. As you walk around the boardroom, you get a picture of the company's performance, and a strong sense of the way every worker's contributions affect the top-line outcome. Then for each successive layer of management, the activities that most affect those goals are measured.

The same discipline must be driven down the line, through visual aids such as performance boards, which can introduce the fun of internal competition and create constructive peer pressure. Performance dialogues are another critical element. These daily meetings of workers and supervisors help performance cells unite around an agreed plan of action. Performance dialogues help every team keep things in proportion: 20% of attention should go on understanding what happened yesterday and learning from it, and 80% on making things right today.

Finally, organisational structures and roles must support the operating system. At one airline, line supervisors supporting flight attendants were deployed in key areas, including pre-flight briefings, gate support, and on-board performance monitoring. All non-flight-related support processes were centralised and streamlined to produce a much higher level of support for the employee.

In our experience, the most important difference between successful lean programmes and failures is the creation of an environment in which people want to improve. In a successful lean programme, everyone - from baggage handlers and in-flight crews to call-centre representatives and board directors - comes to work looking for ways to do things better. Many approaches to industrial efficiency are good at identifying bottlenecks and improving the way things are done. Taking out inefficiency is sometimes just a matter of using common sense. But keeping it out, and taking more out tomorrow, is something that can only be accomplished by a change of mindsets and capabilities at every level of the organisation. Of all the approaches, lean is the only one that explicitly addresses the problem of changing behaviours.

Companies can take many steps to help workers make the leap of faith. Top executives will need to make their commitment highly visible, not only through communications but also via concrete actions. This means making investments in training - not just classroom lectures, but learning in the field. It also means giving the frontline workers the right tools to do their jobs. Equipment readiness is a big problem at many airports an easy win for carriers is to invest in maintenance to make sure the tools are as ready to perform as employees are expected to be.

Frontline investment
Role models are essential in changing the way people think, and no position is more important in this regard than the frontline supervisor. This is a difficult job to fill, as high-potential people often don't want to leave the comforts of a rank-and-file position. Once promoted, these workers often have trouble managing their former colleagues. To complicate matters, carriers often expect too much of these supervisors, asking them to look after 30, 40, or even 50 people.

Carriers that really want lean transformation to succeed must invest in this role, finding high-quality people, giving them a reasonable span of control (12-15 workers, say), and helping them become agents of change. If frontline workers see their supervisor modelling new behaviours, they will be more inclined to follow. If supervisors are open to their ideas, and help them have a say in how things can be done better, then the chances of success are dramatically improved.

To make the connection, supervisors must spend significant time on the line. At one carrier, the turnaround process did not materially improve until frontline supervisors moved their desks out of the bag room and on to the ramp. Change did not come easy, but when ramp workers saw that supervisors were willing to give up their place of privilege and get involved in the work on the ground, attitudes softened and they gave the new processes the benefit of a full hearing today, these ramp crews routinely record the best turn-around times of any of the carrier's stations.

No matter how strong its level of operational competence, any carrier can benefit from lean. Companies with pre-existing strong cultures have an advantage when they begin a lean programme, as they have a head-start on the significant challenges of changing the way people approach their jobs. Even carriers with best-in-class operations can find ways to improve with lean. Carriers whose operations are only near the industry average can use this approach to vault into the upper echelon of performance.

About the authors
Kevin Speicher is a director in the Chicago office of management consultancy McKinsey. Michael Zea is a principal in its Stamford, Connecticut office.