Dominion Travel and Corporate Services: Air Ticket Procurement Practices

Abstract

This case is designed to be used in service operations and process improvement courses. Wasted costs associated with nonrefundable ticket exchanges is the next continuous improvement target at Dominion Resources. The director of the travel and corporate services unit asks her staff to recommend data requirements and analyses to consider for a follow-up project focused on the cost-effectiveness of the advance booking of air travel. Students' preparation and discussions will address the design of the measurement and analysis phases of DMAIC. Excerpt UVA-OM-1417 August 20, 2010 Dominion Resources, Inc., Travel and Corporate Services: Air Ticket Procurement Practices Donna Kelliher, director of Travel and Corporate Services (TC five had reached advanced Blue Belt certification, and her team had worked on 14 projects. Six Sigma had become a way of life for Dominion's business units, and now the wasted costs associated with nonrefundable ticket exchange activity was another continuous improvement target. This latest project had arisen from Kelliher's skepticism about the cost-effectiveness of the advance booking of air travel, considering the preference of corporate travelers for nonrefundable, highly restricted fares. She questioned whether this practice always saved money for Dominion travelers. The cost of Dominion's annual airline ticket expenditure exceeded $ 6 million. Since extensive data covering all ticket life-cycle details were readily available, Kelliher thought Six Sigma methodology was the best way to test her hypothesis that nonrefundable airfares with their associated ticket-exchange expenses could be costing Dominion more than refundable fares for the same tickets. Her unit's initial analysis had found that 20% of ticket exchanges occurred multiple times, and 40% of exchanges involved tickets exchanged after the advance purchase guideline of 7 to 14 days. . . .