OR/MS Today - June 2000

June 2000

INFORMS News

Jeppesen Sanderson Soars With OR

Manufacturer of flight manuals meets deadlines, earns Edelman honors with remarkable production turnaround

Jeppesen Sanderson nearly choked to death on its own success.

The world leader in the production and distribution of flight manuals, Jeppesen Sanderson couldn't keep up with rapidly growing customer demand and an ever-expanding product line. The company, which provides critical information for more than 300,000 pilots, saw its customer service begin to deteriorate in 1997 when its work volume grew to the point that it overwhelmed its production system. By the summer of 1998, the number of late orders had soared to such alarmingly high levels that Jeppesen drew an ominous warning from the Air Transport Association. The ATA told Jeppesen that the timeliness of its service "needed improvement" and was "not meeting expectations." The association demanded an "immediate, dramatic decrease in late weekly revision material and new manual orders."

The deterioration in customer service could be attributed to an outdated production system that was unable to cope with an increasingly complex environment. Growing customer demand for customized charts transformed Jeppesen's product line from one with a relatively small number of standardized products using large production runs into one with a large number of low-quantity customized products. Meanwhile, the production process, involving a combination of heavy machinery and manual labor, remained virtually unchanged. The new environment combined with the pressure from the ATA made it clear to Jeppesen management that the company was in danger of losing its competitive edge.

Jeppesen responded by establishing a small operations research department to analyze the production problems and come up with solutions. The department developed a suite of optimization-based decision support tools aimed at increasing efficiency and reducing costs in every production area. By the end of 1999, Jeppesen's percentage of late orders had gone from 35 percent to 0 percent. Simultaneously, the company realized an annual cost reduction of $3 million. Jeppesen officials now project future annual savings of $7 million attributable to the improved production scheduling devised by the 14-person OR department.

Jeppesen's remarkable turnaround, which included another quarter of zero late deliveries to start the new millennium, earned the Englewood, Colo.-based company the coveted Franz Edelman Award for Achievement in Operations Research and Management Sciences. Co-sponsored by the Institute for Operations Research and Management Sciences and CPMS, the Practice Section of INFORMS, the Edelman represents the "best of the best" in operations research practice and is widely regarded as the profession's most prestigious award.

The award, presented during INFORMS' national meeting in Salt Lake City in May, capped a yearlong competition that began with a call for nominations. Following a comprehensive review of more than 20 entries, the prize committee selected six finalists who made formal presentations of their work before a panel of judges in Salt Lake City.

"This is a great honor for all of us," Jeppesen President and CEO Horst A. Bergmann said in accepting the award, "especially for the OR department where all of this analysis came from. In 1997, we had zero operations researchers at Jeppesen. Now we have 14. We have learned our lesson. And boy it feels good as the CEO to no longer receive all of those e-mails and phone calls from customers asking why their order was late."

Noting that his company, with 1,400 employees worldwide, was perhaps the smallest of the six finalists, Bergmann said Jeppesen's victory in the Edelman competition sends a message to all of industry. "You don't have to be a big company to apply operations research," he said. "It is very well suited for small- and medium-size companies. It can really, really make a difference and significantly enhance your bottom line."

Edelman Prize Committee Chairman Russ Labe of Merrill Lynch said the suite of optimization-based decision support tools developed and implemented at Jeppesen not only eliminated late orders, but also increased customer satisfaction and reduced production costs by 10 percent.

"More importantly," Labe added, "the operations research and management science models reversed the deteriorating production situation and allowed the company to strengthen its competitive position and increase operating profits by 24 percent."

Developing a more efficient system is one thing. Implementing it and then making it work is something else again, a fact that didn't escape the attention of Bergmann. After thanking the OR team, Bergmann also acknowledged the rest of Jeppesen's employees for their willingness to go along with the changes.

"We had done things one way for 40 years, and it worked," Bergmann said. "One day we woke up and found we had run smack into a brick wall. We had to start all over again. We had to have the right people to do that. You have to have people who believe there is something wrong, who will not give excuses, but will come in and say, 'OK, let's start over.' That's what our people did."

Now that they've turned things around at Jeppesen's Colorado headquarters, Bergmann says the next challenge is to spread the benefits of operations research throughout the company, including a major operation in Germany. "We have found many new believers in operations research," Bergmann added.

The prize-winning team received $10,000. The team included Elena Katok, William Tarantino and Ralph Tiedeman. Their presentation was entitled, "Flexible Planning and Technology Management at Jeppesen Sanderson, Inc." Richard Rosenthal of the Naval Postgraduate School in Monterey, Calif., served as coach.

This year marked the 29th Edelman competition, held annually to recognize outstanding accomplishments in the practice of operations research and the management sciences. In his remarks, Labe noted that the competition focuses on verifiable results that have had a major impact on the client organization. Labe was joined on the panel of judges by Joseph Discenza of Wagner & Associates, Howard Finkelberg of BBDO, H. Newton Garber of Garber Associates, Stephen C. Graves of the Massachusetts Institute of Technology, Yoshiro Ikura of Saitech, Peter C. Bell of the University of Western Ontario and Donald Smith of Lucent Technologies.

The list of finalists and their presentations included: Air New Zealand ("Optimized Crew Scheduling at Air New Zealand"), the Federal Aviation Administration ("Ground Delay Program Enhancements under Collaborate Decision Making"), Fingerhut Companies, Inc. ("Mail Stream Optimization"), Ford Motor Company ("Rightsizing and Management of Prototype Vehicle Testing at Ford Motor Company") and IBM ("Matching Assets with Demand in Supply Chain Management at IBM Microelectronics"). Videos of the Edelman presentations will be available from INFORMS, while formal papers describing the work of the six finalists will appear in an upcoming issue of the INFORMS journal, Interfaces.

The competition is named for Franz Edelman, a pioneer in the use of applying computer analysis to business problems throughout industry. Edelman, who established one of the first industrial OR groups at RCA half a century ago, is often referred to as the "quintessential practitioner" of operations research and the management sciences.

Table of Contents

OR/MS Today Home Page

Lionheart Publishing, Inc.
506 Roswell Street, Suite 220, Marietta, GA 30060, USA
Phone: 770-431-0867 | Fax: 770-432-6969
E-mail: lpi@lionhrtpub.com
URL: http://www.lionhrtpub.com