How Much Do Defects Truly Cost?

by Jerome A. Blakeslee, Jr.

The following examination of an airline's difficulties with baggage handling provides a compelling illustration of the escalating costs of seemingly simple defects.

The Defect Identified ?/B>

On a recently completed round-trip flight from Philadelphia to Vienna on “My Favourite Airline (MFA),?I passed twice through London’s Heathrow airport. Arriving in Vienna, after a long wait at the baggage claim area, it became clear that my bag had not arrived quite as efficiently as I had.

I was informed by a very courteous baggage services person, “Frequently MFA baggage does not make the transfer at Heathrow, especially on weekends.?

My bag did arrive on the next flight and was efficiently delivered to the hotel in Vienna about eight hours after my arrival.

?And Repeated

I returned to Philadelphia the following Saturday, again through Heathrow, and was surprised to hear my name being paged when I entered the baggage claim area. Again, a very polite and concerned MFA agent informed me that my bag had, unfortunately, not made the transfer at Heathrow and would arrive on the next flight. “Heathrow is like a giant tornado,?she said. “The bags get sucked in, they fly around, and sometime later they come out . . . maybe.?/P>

My bag had still not arrived on Sunday evening. While on the phone with the customer service agent, I received a call from the baggage delivery service: “We have your bag and can deliver it by 2 A.M. on Monday morning.?

Now I was curious. “How many bags do you deliver a day for MFA in Philadelphia??I asked the delivery service agent.

“At least 50 a day, many times 100 to 200,?was the answer.

Further questioning revealed the service charges were $0.75 per mile for delivery. The delivery to my home cost $65 and was typical.

A conservative estimate of costs to MFA of the baggage handling process:

• Special Baggage Services: 50 deliveries/day x $65/delivery = $3250/day per city.
• Extra MFA employee wages: 5 people x 8 hours x $20/hour = $800/day per city = $1.4 million/year at Philadelphia.

If this occurred at 10 destinations:

• $4050/day x 365 days/year x 10 destination cities = $14 million/year
• 20 destinations would result in potential savings = $28 million/year
• And 30 cities experiencing the same problem = $42 million/year

The calculation does not include other costs such as the extra baggage handling costs at Heathrow, the extra customer service time necessary to handle the complaints, or lost revenues. Still, as you can see, the cost of this level of defects (estimated at 3.0 sigma) is staggering.