Chapter 1, Problem 3CS

National Air Express

National Air is a competitive air-express firm with offices around the country. Frank Smith, the Chattanooga, Tennessee, station manager, is preparing his quarterly budget report, which will be presented at the Southeast regional meeting next week. He is very concerned about adding capital expense to the operation when business has not increased appreciably. This has been the worst first quarter he can remember: snowstorms, earthquakes, and bitter cold. He has asked Martha Lewis, field services supervisor, to help him review the available data and offer possible solutions.

Service Methods

National Air offers door-to-door overnight air-express delivery within the U.S. Smith and Lewis manage a fleet of 24 trucks to handle freight in the Chattanooga area. Routes are assigned by area, usually delineated by zip code boundaries, major streets, or key geographical features, such as the Tennessee River. Pickups are generally handled between 3:00 P.M. and 6:00 P.M., Monday through Friday. Driver routes are a combination of regularly scheduled daily stops and pickups that the customer calls in as needed. These call-in pickups are dispatched by radio to the driver. Most call-in customers want as late a pickup as possible, just before closing (usually at 5:00 P.M.).

When the driver arrives at each pickup location, he or she provides supplies as necessary (an envelope or box if requested) and must receive a completed air waybill for each package. Because the industry is extremely competitive, a professional, courteous driver is essential to retaining customers. Therefore, Smith has always been concerned that drivers not rush a customer to complete his or her package and paperwork.

Budget Considerations

Smith and Lewis have found that they have been unable to meet their customers' requests for a scheduled pickup on many occasions in the past quarter. Although, on average, drivers are not handling any more business, they are unable on some days to arrive at each location on time. Smith does not think he can justify increasing costs by $1, 200 per week for additional trucks and drivers while productivity (measured in shipments per truck/day) has remained flat. The company has established itself as the low-cost operator in the industry but has at the same time committed itself to offering quality service and value for its customers.

3. How should package pickup performance be measured? Are standards useful in an environment that is affected by the weather, traffic, and other random variables? Are other companies having similar problems?