Southwest Airlines Supply Chain & Operations Strategy Analysis

Introduction and Organizational Setting

Southwest Airlines provides flight service primarily across the regional Southwest of the United States. It was envisioned as a faith-based company by founder Herb Kelleher, dedicated to servant leadership (Baqai, 2020). It is a low-cost provider, which is what has allowed it to penetrate a highly competitive market dominated by major airlines such as Delta and United. Southwest's blend of friendly service and no-frills flying helped it become a major regional player. This paper describes Southwest Airlines' organizational setting and integrates chapter concepts from Meredith and Shafer (2016) to explain how Southwest approaches supply chain management in its own unique way. It concludes with recommendations for the organization.

The mission statement of Southwest Airlines is that the organization focuses on providing "dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit" (Southwest, 2018). As an airline, Southwest provides flight services. As a regional carrier, it focuses only on the Southwest portion of the United States. Southwest has its own unique American culture and values, where faith-based services can thrive (Talmage, Figueroa, & Wolfersteig, 2018). The customers in this region tend to value quality service, friendliness, and honesty; they also value the no-frills services that Southwest provides in order to keep airline costs as low as possible (Roberts & Griffith, 2019).

Southwest values internal and external customers equally and sees them both as equivalent: internal customers want to be treated well just as much as external customers do — and that has been at the heart of Herb Kelleher's vision for Southwest from day one (Cote, 2018). Internal customers are the front-line workers — staff handling customers at gates, handling luggage, and tending to passengers on aircraft — as well as those behind the scenes managing activities and supplies. External customers are the clients using Southwest's flight services.

The aim of Southwest Airlines is to treat its employees the same way it wants its customers to be treated. This represents a type of "pay it forward" mission, where the organization aims to make workers feel great about being part of the Southwest family, in hopes that those workers will in turn make customers feel great about flying Southwest. This mission is reflected in the statement: "Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer" (Srinivasan, 2014).

Southwest has a triple bottom line of Performance, Planet, and People — and ensuring that all three are met through supply chain management is vital. As Southwest (2020) states: "Working with our suppliers is an important part of being a good corporate citizen. We partner with our suppliers not only because of the impact they have on the products and equipment we use in the skies, on the ground, and in our offices." Ethical conduct is central to Southwest's management of its supply chain.

The role Christianity plays in this organization is significant: Christian values are built into the organization's structure through its "pay it forward" culture and the servant leadership style that the organization fosters (Kgatle, 2018). Ultimately, Southwest aims to promote love and peace — its ticker symbol, LUV, reflects this aim. To achieve it, the organization fosters respect for all people. That is why its Supplier Diversity Program seeks to develop sustainable relationships with diverse suppliers that are: Small, Small Disadvantaged, Women-owned, HUBZone, Veteran-owned, Service-Disabled Veteran-owned, Minority-owned, Disabled-owned, and LGBT-owned (Southwest, 2020). By being inclusive and open to disadvantaged suppliers, Southwest aims to bring everyone together into one large family of operations, where love, peace, and friendship characterize the environment.

Controlling Service Quality and Customer Value

Controlling service quality is important for any organization looking to maintain brand value and equity among consumers. As Chen, Li, and Liu (2019) point out, airline service quality directly impacts the extent to which customers return to repurchase tickets from the airline the next time they need to fly. For that reason, it is important for Southwest to control for service quality in order to meet its Triple Bottom Line. One effective way to control for service quality is to use customer feedback surveys (Meredith & Shafer, 2016).

What needs to be done to successfully implement service quality controls at Southwest is a system to monitor and evaluate service. The benefits are that Southwest can ensure its performance is commensurate with its customer service standards. Since Southwest places customer service first and foremost in its mission, it follows that the organization should evaluate customer feedback to ensure service is where it needs to be. As Meredith and Shafer (2016) note, training employees in standardized services is also important to succeeding at controlling for service quality. The best source for information about service quality is the customer.

Biblical Justification: The biblical motivation for this approach is found in Ephesians 6:7–8: "Serve wholeheartedly, as if you were serving the Lord, not people, because you know that the Lord will reward each one for whatever good they do, whether they are slave or free." Good works are a reward in and of themselves — and that is the culture Southwest seeks to promote.

Customer value is very important in business, as customers are most likely to purchase what they perceive to offer them the most value (Payne, Frow, & Eggert, 2019). The key to enhancing the perception of beneficial value is to focus on innovativeness, functionality, quality, customization, and responsiveness (Meredith & Shafer, 2016). The benefit of emphasizing customer value is that it helps the organization build brand equity and loyalty.

This applies to Southwest in a significant way because Southwest started out as a low-cost provider — an alternative to the major airlines that charged higher prices. The major airlines could justify their prices because they provided passengers with extra perks and services, such as in-flight snacks and premium aircraft interiors. However, Southwest realized it could corner a regional market by targeting a specific type of flier: one who takes short flights and does not need all the extra frills. Such a flier would be willing to fly Southwest at a lower cost. The value that Southwest offered was functionality, and it compensated for the lack of on-board perks by providing outstanding customer service. Every Southwest employee had the goal of making every customer feel valued. Thus, quality and customization became the new perks that Southwest offered in place of the standard industry amenities provided by the major airlines.

Today, other low-cost providers such as Frontier are entering the market. Southwest therefore needs to find a way to differentiate itself to continue delivering customer value. Innovativeness is where Southwest could shine in this respect, so long as it continues to put its customers first.

Biblical Justification: The biblical justification for this is found in 1 Peter 4:10: "Each of you should use whatever gift you have received to serve others, as faithful stewards of God's grace in its various forms." There are many talented people at Southwest. The key to the company's success is to tap that potential through innovative leadership and allow new ideas about how best to serve the public to come to the fore.

Lean Management and Supplier Management

Lean management is an approach that focuses on optimizing resources to enhance customer value by eliminating waste in the production process, emphasizing continuous improvement, and demonstrating respect for people so that teamwork and growth are natural outcomes in the workplace (Miao, Qian, & Humphrey, 2019). Lean management focuses on teamwork with the goal of serving the customer, but it also focuses on respect for people — which is what allows it to support the core idea of Maslow's hierarchy of needs (Allen, Muñoz, & de Dios Ortúzar, 2019). One of the core aspects of Maslow's theory is that people need to feel valued. In lean management, there is therefore the underlying recognition that an organization must know how to properly value its stakeholders and demonstrate appreciation for them. This combination of respect for people and continuous improvement in service of the customer — achieved through the eradication of wasteful practices — serves as the foundation of lean management theory (Miao et al., 2019). Entrepreneurs turn to this approach because of its hybrid nature, which satisfies both workers and customers (Miao et al., 2019).

There are numerous benefits to lean management, such as the elimination of waste and the focus of time and energy on efficiency (Ruiz-Benitez, López, & Real, 2019). However, because of supply chain disruptions caused by COVID-19 lockdowns in 2020, many organizations are rethinking how they approach lean management. For Southwest, the task is to eliminate waste in the value system and provide low-cost service without compromising the great quality of customer service for which it has become known. One way to do this is to cut costs in areas that target customers do not value, allowing Southwest to tighten its supply chain further while sacrificing nothing that matters to its core customer base. Southwest knows its target customer well and can afford to tighten the belt when the global supply chain is disrupted.

Biblical Justification: The biblical verse that best supports this approach is Hebrews 13:5–6: "Keep your lives free from the love of money and be content with what you have, because God has said, 'Never will I leave you; never will I forsake you.' So we say with confidence, 'The Lord is my helper; I will not be afraid. What can mere mortals do to me?'" When an organization trusts in its foundational values, it will not fall to the various temptations and dangers that afflict those who lose their bearings.

Southwest also needs to address supplier issues — and that is where the concept of supplier management comes into play. Supplier management is the idea that an organization needs to select good suppliers, develop relationships with them, and certify and audit suppliers it is currently working with (Meredith & Shafer, 2016). One way in which supplier management is evolving is through the introduction of blockchain technology (Saberi, Kouhizadeh, Sarkis, & Shen, 2019). As Saberi et al. (2019) point out, "blockchain technology, as a distributed digital ledger technology which ensures transparency, traceability, and security, is showing promise for easing some global supply" constraints (p. 2118). Southwest could benefit from using blockchain technology when managing its supply chain because of the improvements it brings to the management process.

Security, transparency, and traceability could all enhance Southwest's supply chain, especially as it seeks to form relationships with small suppliers to be inclusive and meet its supply chain mission objectives. One of the challenges of working with small suppliers is ensuring transparency and building trust. That is where blockchain technology can play a role. Because Southwest wants to develop sustainable relationships with suppliers that other major organizations do not typically work with, Southwest needs a dependable technological solution to monitor and trace all supply chain activity. Incorporating blockchain technology into its supply chain management process is a logical solution.

Biblical Justification: The biblical support for this idea is found in Galatians 6:2, which states: "Carry each other's burdens, and in this way you will fulfill the law of Christ." Blockchain is the technology that facilitates openness, allowing everyone to see what is happening. To support one another, openness is essential. A supply chain relationship cannot exist without it, and blockchain can definitively enhance Southwest's approach.