On any given day, Delta services “2,100 flights, carries about 300,000 passenger

Question

On any given day, Delta services “2,100 flights, carries about 300,000 passengers, uses 7.3 million gallons of fuel, serves 87,000 cans of soda, and, to keep the soda cold, boards 219,000 pounds of ice.” (Gage, McCormick) With this volume of activity occurring in airports across the country, there is bound to be inefficiencies. Thus, in late 1997, Delta Technology was formed as a subsidiary of Delta Airlines to address technology concerns. Its mission was to use technology to improve customer service, eliminate inefficiencies, decrease costs, and, ultimately create the best travel experience for their passengers. Delta technology initiated their first system development project; a project that would forever change air travel for Delta. Before its end, this project would involve replacing all the hardware and software in all airports worldwide including gate podiums, phones, printers, networks, servers, applications, databases, and many peripherals; and, with no disruption in service.

As a result of technology, Delta Airlines trimmed their operating expenses $700 million and generated $150 million in new revenue 2002. These successes are attributed to the Delta’s Nervous System; a five year project to build a communication infrastructure that would link more than 100,00 pieces of equipment, over 30 databases, and more than 300 physical locations. The cost of the project was $1.5 billion.

Background

Delta Technology inherited a legacy of many disparate systems that had been slowly developed over time including third-party and custom-developed software. There were “about 17 different technology architectures and 30 different platform environments” (Mc Cooey) each managed separately at different locations. Sometimes, there were even multiple versions of the same software used in different locations of the company. Basically, each location was independently managing their destiny.

In addition to the state of technology within Delta, the U.S. Department of Transportation had imposed regulations requiring all airlines to computerize reservations systems and use the system to effectively manage pricing of seats. This was based on the success of Sabre, American Airline’s reservation system. Sabre, the first system in the industry to give the ability mine buying patterns and determined optimal pricing. The system led to the first frequent flyer program and cheap nonrefundable tickets. For American, this system was considered the “first strategic system – an information system that altered the business strategy of the company.” (Gage, McCormick)

If the government’s pressure to adhere to standards wasn’t enough, at the turn of the century, a proliferation of web travel services posed challenges for Delta. Delta estimated that by investing and promoting online purchasing through the web, the company could save more than $14 a ticket in distribution costs. With many airlines selling 10 to 20% of tickets through this medium, this could amount to more than $75 million annually. However, reservation and pricing data would need to be available and accurate through multiple channels, including the company’s website.

With the basic infrastructure in place, the next area to improve was Gate and Boarding. Delta Technology set out to stream line the boarding process, eliminate long lines, and effectively manage the inevitable delays of travel (such as weather). Focused on the common goal of the project, the objective of this phase was to keep the customer service the priority.

Building the Nervous System

To meet the challenges of creating Delta’s Nervous System, the first part of the development effort was standardization. “Delta technology replaced a mix of brands with Hewlett-Packard (HP) workstations and servers. It also standardized its desktop software, using Microsoft Office and Microsoft Exchange e-mail. “ (McCooey) To manage globally the installation of all software and hardware resources, Tivioli Enterprise Systems was deployed over a three year period. The enterprise systems management (ESM) would enable integration and management of all systems from one location. Previously, each airport functions as a separate business unit, making decisions and purchases of office systems on their own. “Today, 44 applications suites for major business processes (such as reservations, baggage, crew, cargo, gates and ticketing) are being identified, customized and deployed by Delta Technology consistently to all airport and shuttle locations.” (McCooey)

Gate readers were installed to read the bar code on the boarding pass automatically at boarding. These readers fed into the software that provided flight summaries, passenger information, seating availability, standby lists and more. Through a graphical user interface, Delta Agents could easily navigate through the application to service the flight and passenger. Kiosks were added for easy checking in. A passenger using the kiosks could save an average of 20 minutes from arrival at the airport to boarding gate.

The Delta Nervous System along with many procedural changes at boarding reduced staff at the gate by two to four agents. Turn around time was kept under 30 minutes keeping planes in the air an average of 13.2 hours a day instead of 10.7. In addition, the connectivity of the systems and locations reduced the occurrences of lost luggage. Delta’s cost to get a lost bag back to its owner is $150 per bag. In one year, reduction in the cost of mishandled baggage resulted in $8.7 million savings, thanks to the Nervous System.

Can Delta survive? Kevin Strange, a Garner Inc. Vice President and data warehouse expert believes they can. Armed with Teradata data warehouse platform and analytical tools from Brio and SAS Institute, Delta Technology stores “almost every transaction” (Gage, McCormick) they have. Most airlines achieve about 20% of their transactions. With this information, Delta makes the company’s most-valued customers feel special. At the gate, agents can review a passenger’s flight history and see the passenger’s “score” of value to the company. With this information, the agent can give the attention to the customer’s needs. For example, frequent flier customers receive preference on connecting flights.

Delta can also mine the data to save money, by identifying trends in the company’s performance as well as target markets for advertising. Delta cut costs and increased revenue utilizing its data warehouse. The airline “matched broken parts to warranties, saving $10 million, eliminated wasteful fuel practices saving an estimated 8.4 million,” and was able to “better audit ticket sales and transfers to other airlines, saving $27 million.” Delta attributes $100 million in savings last year from the successful use of the data warehouse. Implementing the data warehouse, populated with over 10 trillion bytes of information, took 18 months and approximately $35 million to complete.

Delivering the Nervous System

Getting the Delta Nervous System up and running required a phased approach. The first phase in early 2000 “targeted Delta’s 20 busiest airports in the United States.” The second phase, in the summer of 2000, completed 28 US cities. The remainder of global locations was handled in the last phase. By end of 2001, 81 airports were fully implemented. Keeping in mind the goal to provide no disruption of service, gradual roll-out enabled Delta Technology to monitor the progress and meet the needs of each physical location. Additionally, ESM saved 60,000 work hours in the installation of software to each PC during the first phase alone. Delta Technology staff was able to do in a few days what took previously a couple of weeks.   The phased roll-out and automated software distribution not only saved time and money, but “reduced human error and improved consistency” (Mc Cooey) which gives more stability to the environment.

Delta’s survival did require the organization to harness technology not only to achieve what their competitors did, but surpass their competitors’ achievements. Cutting costs was paramount, but winning customer loyalty will propel the company forward. Did Delta meet the goals of their project? Will that be enough going into 2003, given our country’s economy and focus on homeland security?

Case Questions

1- What was the problems and/or opportunities facing Delta in late 1997? What is the difference between a problem and an opportunity?

2- Who were the stakeholders in this new system?

3- Given the traditional options in software development (i.e. Buy, Build, Re-Engineer, Enhance, or leave alone), what did Delta choose? In your opinion was the decision a correct one?

4- What were the requirements for the new system?

5- Did the new system meet the needs of the user and satisfy the objectives of the business? Explain your views completely.

6- How did Delta know that the Nervous System was a success? Give measurements of success (Critical Success Factors) of the new system.

7- As a project manager, what would by your biggest concern during implementation?

Explanation / Answer

1. 100 flights, carries about 300,000 passengers, uses 7.3 million gallons of fuel, serves 87,000 cans of soda, and, to keep the soda cold, boards 219,000 pounds of ice

The above given volumes were bound to be inefficiencies.

A problem is considered to be the above situation where we have inefficiencies. An opportunity is a path that may provide solution to our problem. The new nervous System is an opportunity.

2. Stakeholders: stakeholder A person, group, or organization that is actively involved in a project, is affected by its outcome, or can influence its outcome. Delta Technology, and Delta Services were the stakeholders for the new project. Later on Delta technology replaces HP for the development of the project. Microsoft office and Tivioli Enterprices Systems were also got to be stakeholders in the new project.

3. The new Delta nervous system focused on the coustemer services. This system has approached Build and Re-Engineer options to achieve their phases of goals and challenges for the project they have mixed with other brands such as HP, Microsoft etc to build and re-construct them with new workstation is the key.

4. To meet the challenges of creating Delta’s Nervous System, the first part of the development effort was standardization.

“Delta technology replaced a mix of brands with Hewlett-Packard (HP) workstations and servers.

It also standardized its desktop software, using Microsoft Office and Microsoft Exchange e-mail.Tivioli Enterprise Systems was deployed over a three year period.

The enterprise systems management (ESM) would enable integration and management of all systems from one location.

44 applications suites for major business processes were deployed.

Gate readers were installed to read the bar code on the boarding pass automatically at boarding

5. I must say that with the new Delta nervous system the company has reduced time and human efforts.

Delta Technology staff was able to do in a few days what took previously a couple of weeks.   The phased roll-out and automated software distribution not only saved time and money, but “reduced human error and improved consistency” (Mc Cooey) which gives more stability to the environment.

Despite the company's success,I don't think the company reaches up to the coustemer satisfaction. Cutting costs was paramount, but winning customer loyalty will propel the company forward

6. One of the Critical success factor of Delta nervous system is that it has reduced time and human efforts. "Delta Technology stores “almost every transaction" this has been a success that makes customer feel special. however other companies just store 20% of transactions.

7. Wonderfull Customer servies, Achieving each and every goal of project would be major concerns.

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