Southwest Airline Company – Common Assessment Accounting

free essayThe lean philosophy is a contemporary approach that many companies use to minimize their costs while increasing their revenues. The essay highlights the view that lean philosophy is aimed at reducing the wastage of valuable resources such as time and space within companies. Some of the key findings include the view that the lean philosophy will always have lesser inventory balances compared to the traditional philosophy. Again, costs in the lean philosophy are minimal compared to the traditional approach that involves more costs incurred in mass production. Another vital finding is that Southwest Airlines is applying the lean philosophy using the Six Sigma approach hence attracting and retaining different customers. The paper recommends that companies should prioritize the use of lean philosophy in their entire operations.

Background of the Southwest Airline Company

The company chosen for this assignment is Southwest Airlines. It is a major U.S. airline company and is the largest low-cost carrier around the whole world. Southwest Airlines is headquartered in Dallas, Texas. It is crucial to understand that the company was founded in 1967 and started growing from the early stages until it acquired its current name in 1971. The company has witnessed massive expansion over the years, and it had an estimated 44,831 employees in December 2013. The high level of activity in the Southwest Airlines is also highlighted by the number of flights it has in any given day. For instance, it has an estimated number of 3,400 flights per day mostly concentrating on domestic passengers.

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Southwest Airlines has relied on the use of Boeing 737 since its founding. In fact, the company was the largest operator of the Boeing 737 across the world with over 550 of them in service. All these planes have more than five flights per day hence maximizing efficiency at the company. In 2014, the company has received a significant boost in its operations because it has scheduled to fly to 89 different destinations in 41 states including Puerto Rico and abroad. The problem facing many airline companies is the wastage of key resources such as time. This is usually seen in terms of customer delays. However, Southwest Airline is determined to deal with the problem of time wastage by introducing many flights each day and keeping its employees motivated all the time. This is reflective of the lean production philosophy at the company. Its low cost approach has also continued making it the airline of choice for many consumers travelling locally and abroad.

Lean Production Philosophy

The lean production philosophy entails the reduction of the quantity of resources utilized in the delivery of goods and services to consumers. Charron, Harrington, Voehl and Wiggin (2014) affirm that the lean philosophy is always focused on achieving efficiency within the company and ensuring that it uses less labor, space, materials, and time. This leads to the reduction of production costs and the promotion of profitability within the company. However, it should be noted that lean production is focused on not only the reduction of costs but also the assurance of value for money on the customer’s part. The lean production philosophy considers the interests of customers and aims at satisfying them in their course of consumption.

Accordingly, lean production is guided by four vital efficiency concepts. The first concept enshrined in the philosophy is continuous improvement. Continuous improvement looks at the involvement of employees in improving the quality at a company. Every employee has the responsibility to take part in the enhancement of quality through professional practices. The second philosophy is just-in-time product. This concept implies that a company is able to receive materials at the required time hence eliminating the need to maintain excessive levels of stock. Time based management is the fourth concept associated with the lean production philosophy. The approach aims at reducing the amount of time involved in the production process. Time is supposed to be managed in the best manner possible to ensure the company’s targets are achieved. According to Ries (2011), the fourth philosophy is total quality management (TQM). Total quality management is a quality assurance ideal that emphasizes the need for employee to do everything in the right manner every time. The accuracy of workers assists a company in succeeding in its activities as resources are not wasted.

Companies are supposed to continue training their employees on the need to adhere to efficiency and cost minimization. Sufficient training would play an instrumental role in ensuring employees stick to the policy and produce efficiently for the success of the entire company. As they continue training employees, managers must emphasize three core values. One of the most significant ones to boost success in the organization’s desire to reduce costs is simplicity. Everything should be kept as simple as possible to facilitate understanding. The second core value that should be taught to employee is consistency. Consistency is the best way to maintain the required quality and production levels. Employees should not comprise quality through inconsistencies. This ensures that success is accomplished through the belief attained from customers. The last core value that underlines the significance of the lean production philosophy is responsibility. Employees and management must take responsibility for their actions and production processes.

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Lean Production Philosophy versus Typical Production

The lean production philosophy and the typical/traditional production philosophy share different characteristics and differ in other aspects. Ries (2011) reiterates their similarity because they are subject to related accounting principle and concepts when being entered in the ledger. Accountants are supposed to debit and credit these transactions in the similar manner without considering whether it is traditional or typical. The application of similar accounting concepts eliminates any form of differences in the treatment of transactions from these methods.

Nevertheless, it is usual to find smaller balances in terms of inventory compared to the typical accounting production philosophy that bears large inventory balances. Lean production is always focused on the production of goods only in situations when consumer demand is initiated. The just-in-time approach ensures that inventory costs are kept at a minimum at all times. This is unlike traditional production that aims at keeping higher inventory balances through mass production. Consumers are able to meet their supply as products are always available for them. Most raw materials in lean production are only ordered in cases when they are supposed to be used in the production of demanded products. This eliminates the need for a company to hold more raw materials in the normal course of its business.

Additionally, costs incurred by in the lean production philosophy are minimal compared to the traditional manufacturing philosophy. Niehues et al. (2013) opine that the lean production philosophy comes with reduced costs because of shortened production time, cut in the space utilized, and the number of employees in the company. Increase in costs in the lean production philosophy is always perceived as poor management and the lack of resource monitoring. Overall costs involved in lean production are minimal compared to those incurred in traditional production. As it was mentioned above, traditional production believes in the use of many employees in the production process hence needing the dedication of more cash as labor costs.

Company’s Application of Lean Philosophy

Southwest Airlines is one of the leading airlines that has remained steadfast in meeting all the needs of customers as they arise. The key application of lean philosophy at the company is achieved through the Six Sigma approach. Niehues et al. (2013) agree that the company depends on this to maximize customer satisfaction and attain their loyalty as they continue consuming its products. In tandem with applying the lean philosophy production system, Southern Airlines focuses on quality function deployment while restricting layoffs to retain competitive employees that are capable of boosting customer satisfaction. Quality Function Deployment has been instrumental in assisting the company in understanding the needs of its customers in terms of the quality of service required within the business environment. Southwest Airlines continues to retain a competitive staff that is able to listen to customers and address all their needs in the most professional way.

The first step that the company has been able to identify in its application of the lean philosophy through the Six Sigma approach is what creates value for customers. Southwest Airlines has moved ahead of its competitors in the industry by identifying factors that create customer value. For instance, the checking of two bags free of charge has been a vital aspect in creating value for most consumers at the company. Lauer (2010) reiterates that the second step in the application of lean philosophy at the company involves the removal of wastes in the value stream. Most airline companies find themselves wasting time because of lack of morale among employees. However, Southern Airlines has taken the next step and it keeps planes in the air all the time hence eliminating time wastage by delaying customer flights. By keeping employees happy, the company ensures that no time is wasted on flights and other customer needs hence leading to efficiency. The third aspect of the Six Sigma that explains the application of the lean philosophy at the Southwest Airlines is making the lean process responsive to the needs of consumers. The company understands that the airline industry is challenging because of the changing consumer needs. For instance, it realizes that many customers prefer affordable and swift service. In tandem with this, the company continues to provide low-fare tickets to ensure it stays ahead of its competitors. The lean philosophy has made it easier for the company to understand its customers and respond to their needs swiftly. Lauer (2010) asserts that the last stage indicating the application of the lean philosophy is the presence of improvement steps that end with efforts to remove wastes. For instance, the company has updated its fleet with a 737-800 Boeing aircraft commonly referred to as Warrior One. This provides an updated revenue stream while eliminating wastes.

The application of the lean philosophy at Southwest Airlines has obviously come with benefits. It has improved its strategy in the airline industry being able to focus on the needs of customers as they arise. More so, its competitiveness has improved significantly because of the reduction in time wastage and rampant flight delays. More consumers have been able to prefer it. Costs have reduced as revenues increase because of the improved level of customer loyalty emanating from the application of the lean philosophy at Southwest Airlines. This has boosted its position as one of the best airline companies around the globe.

The essay is focused on the explication of lean philosophy, its comparison to the typical production system, and its application within the company. Lean philosophy aims at alleviating wastage relating to labor, time, machines, and space within the company. Southwest Airlines is a key practical example of the application of lean technology and its effectiveness in attracting more customers, reducing costs, boosting revenues, and increasing competitiveness. The paper highlights the Six Sigma approach that Southwest Airlines utilizes to promote effective customer satisfaction through satisfactory and effective systems of operation. Many customers have still preferred Southwest Airlines to its competitors because of the low-cost nature and the time discipline. The essay also talks about the need for companies to continue winning customers using the lean philosophy that ensures wastage elimination. The world will be a better place if all companies understand the significance of this philosophy and the appropriate ways of applying it for industrial success.