“Weather at our destination is 50 d

“Weather at our destination is 50 degrees with some
broken clouds, but they’ll try to have them fixed
before we arrive. Thank you, and remember, nobody
loves you or your money more than Southwest
Airlines.”
Crew humor at 30,000 feet? Must be Southwest
Airlines. The company is the largest low-fare, highfrequency,
point-to-point airline in the world, and
largest overall measured by number of passengers
per year. Founded in 1971 with four planes serving
three cities, the company now operates over 500 aircraft
in 68 cities, and has revenues of $10.1 billion.
Southwest has the best customer service record
among major airlines, the lowest cost structure, and
the lowest and simplest fares. The stock symbol is
LUV (for Dallas’s Love Field where the company is
headquartered), but love is the major theme of
Southwest’s employee and customer relationships.
The company has made a profit every year since
1973, one of the few airlines that can make that
claim.
Despite a freewheeling, innovative corporate
culture, even Southwest needs to get serious about
its information systems to maintain profitability.
Southwest is just like any other company that needs
to manage its supply chain and inventory efficiently.
The airline’s success has led to continued expansion,
and as the company has grown, its legacy information
systems have been unable to keep up with the
increasingly large amount of data being generated.
One of the biggest problems with Southwest’s
legacy systems was lack of information visibility.
Often, the data that Southwest’s managers needed
were safely stored on their systems but weren’t
”visible”, or readily available for viewing or use in
other systems. Information about what replacement
parts were available at a given time was difficult or
impossible to acquire, and that affected response
times for everything from mechanical problems to
part fulfillment.
For Southwest, which prides itself on its excellent
customer service, getting passengers from one
location to another with minimal delay is critically
important. Repairing aircraft quickly is an important
part of accomplishing that goal. The company had
$325 million in service parts inventory, so any
solution that more efficiently handled that inventory
SOUTHWEST AIRLINES TAKES OFF WITH BETTER SUPPLY CHAIN
MANAGEMENT
and reduced aircraft groundings would have a strong
impact on the airline’s bottom line. Richard
Zimmerman, Southwest’s manager of inventory
management, stated that “there’s a significant cost
when we have to ground aircraft because we ran out
of a part. The long-term, cost-effective way to solve
that problem was to increase productivity and to
ensure that our maintenance crews were supported
with the right spare parts, through the right software
application.”
Southwest’s management started looking for a
better inventory management solution, and a vendor
that was capable of working within the airline’s
unique corporate culture. After an extensive search,
Southwest eventually chose i2 Technologies, a
leading supply chain management software and
services company that was recently purchased by
JDA Software. Southwest implemented the i2
Demand Planner, i2 Service Parts Planner, and i2
Service Budget Optimizer to overhaul its supply
chain management and improve data visibility.
I2 Demand Planner improves Southwest’s
forecasts for all of the part location combinations in
its system, and provides better visibility into
demand for each part. Planners are able to differentiate
among individual parts based on criticality and
other dimensions such as demand volume, demand
variability, and dollar usage. I2 Service Parts Planner
helps Southwest replenish its store of parts and
ensures that “the right parts are in the right location
at the right time.“ The software can recommend the
best mix of parts for each location that will satisfy
the customer service requirements of that location
at the lowest cost. If excess inventory builds up in
certain service locations, the software will recommend
the most cost-efficient way to transfer that
excess inventory to locations with parts deficits. I2
Service Budget Optimizer helps Southwest use its
historical data of parts usage to generate forecasts of
future parts usage.
Together, these solutions gather data from
Southwest’s legacy systems and provide useful
information to Southwest’s managers. Most importantly,
Southwest can recognize demand shortages
before they become problems, thanks to the visibility
provided by i2’s solutions.