American Express Business Travel Department
11 Pages Posted: 21 Oct 2008
Abstract
The business-travel department of American Express is facing rapid growth in demand but is plagued with overstaffing in some offices because of the broad distribution of client demand. Management's challenge is to reduce costs in local offices while maintaining a high level of service. One alternative under consideration is a centralized regional business-travel center to handle reservation functions for up to 20 other Amexco offices. This case gives students the opportunity to apply queuing theory to a practical situation. Normally, in order to facilitate the numerous calculations required, it is used with the UVA "QUEUE" program.
Excerpt
UVA-OM-0531
AMERICAN EXPRESS BUSINESS TRAVEL DEPARTMENT
In January 1984, Bill Sullivan, vice president of American Express Business Travel, was reviewing his department's 1983 results, which were generally encouraging. Although several long-established Business Travel Centers had not yet made a profit, new ones had opened and were doing well.
The Business Travel Department's sales grew by 30% in 1983 and had recently been forecast to double by the end of 1985. Sullivan was wondering how American Express could effectively manage all the business at the door. He was sure the parent company would advance funds for growth, but he was bothered by the broad distribution of client demand. Some of it came from regions beyond the reach of his established Business Travel Centers (BTCs)—the thriving centers as well as the flagging ones.
Sullivan did not want to build and hire when he faced chronic overstaffing at some BTCs and periodic seasonal overstaffing at all of them. A strong sense of paradox plagued him: He needed more people to expand operations, but he already had too many people maintaining them. As he considered possible corrective strategies, he tried to foresee the effects they would have on the quality of service. Quality was the life of his department; he had no intention of sacrificing it or of even experimenting with it.
The Business-Travel Industry
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Keywords: operations management, planning, productivity, queuing, service industries, management of
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