1. Greg Melroy Manager, West Monroe Partners

2. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Agenda I. The System, the Process, the Problem II. The Engineered Labor Standard Process III. Engineering a Labor Standard IV. Managing with a Labor Standard V. Faster, Safer, More Accurate VI. Questions and Comments 2

3. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Labor Standards Engineers see more than the bags and the handler The System, the Process, the Problem 3

4. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited  Labor Standards Engineers see the process and tasks Walk 23 steps around a fuel hose from the tug to the baggage cart, open the luggage cart curtain (A 42 B 6 G 3 A 1 B 0 P 3 A 0 ) Walk 5 steps to obtain the scan gun, return to baggage cart ( A 10 B 0 G 1 A 0 B 0 P 0 A 10 ) Reach and grab for the luggage, (A 1 B 6 G 3 M 3 X 0 I 0 A 0 ), scan the tag (A 1 B 0 G 1 A 1 B 0 P 3 A 0 ), turn the bag (A 1 B 6 G 3 M 3 X 0 I 0 A 0 ), and finally place the bag (A 3 B 0 G 0 A 0 B 0 P 1 A 0 ) The System, the Process, the Problem 4

5. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited We want faster, safer, more accurate, more dependable  What happens if we simply build a standard on this process?  Will we achieve the desired results?  Would the process we’re watching get better? The System, the Process, the Problem 5

6. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited  We can easily build a standard on this process, and the employees may do well  But there will be no improvement in the system or the throughput, despite their achievements The System, the Process, the Problem 6

7. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited So, how do we do it?  How do we build and use an Engineered Labor Standard to get the most out of the system?  How do we get safe, efficient, productive employees to support the overall needs of our systems and processes if an ELS alone is not the answer? The System, the Process, the Problem 7

8. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited The Engineered Labor Standard Process 8

9. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited An Engineered Labor Standard (or “ELS”) is only as good as the process for which it is built  The system must first be properly dissected and optimized for efficiency  Methods development and documentation followed by workforce training ensure operational success and accountability The Engineered Labor Standard Process 9

10. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited The Engineered Labor Standard Process 10

11. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited The Engineered Labor Standard Process 11

12. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Define the Processes of the System The Engineered Labor Standard Process 12

13. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Define the Sub Processes Process = Baggage Handling Unload Aircraft Load Baggage Cart Drive to/from Aircraft Load Aircraft The Engineered Labor Standard Process 13

14. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Define the Tasks of a Sub Process Sub Process = Unload Baggage Cart Walk from Tug to Baggage Cart 1 Open Baggage Curtain Obtain Scan Gun Scan Baggage Tag Obtain Bag Place Bag on Belt The Engineered Labor Standard Process 14

15. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited The Engineered Labor Standard Process 15

16. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Optimize each process  Eliminate non-value added tasks  Change the procedure  Change the job set-up  Look at the process in its entirety – can a simple methods change upstream eliminate a task later?  If necessary, re-build the process from the ground (tasks) up, using the safest, most efficient job set-ups and methods The Engineered Labor Standard Process 16

17. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited  The question and answer phase of the ELS process may raise as many questions as it answers  The solutions developed during this phase could mean everything to success of the overall system once the ELS has been implemented The Engineered Labor Standard Process 17

18. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Optimizing the Baggage Handler  Can the tug be parked in a different position?  Can the walk to the carts be shortened?  Can the luggage tag be scanned before it is removed from the cart to eliminate the extra handle?  What can be done upstream to improve the efficiency in this process? The Engineered Labor Standard Process 18

19. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Optimizing the Baggage Handler  Improved positioning of the tug eliminates the need to walk around the fuel hose, eliminating 10 steps ( A 24 B 6 G 3 A 1 B 0 P 3 A 0 )  Adding a holster for the scanner eliminates the need to retrieve the scan gun ( A 1 B 0 G 1 A 0 B 0 P 0 A 0 )  Methods change in loading eliminates the need to turn the bag allowing handler to scan the tag in the cart (A 1 B 0 G 1 A 1 B 0 P 3 A 0 ) then reach and grab for the luggage (A 1 B 6 G 3 M 3 X 0 I 0 A 0 ), and place the bag on the belt without turning it (A 3 B 0 G 0 A 0 B 0 P 1 A 0 ) The Engineered Labor Standard Process 19

20. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Optimizing the Baggage Handler  The sum of the MOST values for the original process: 1120 TMU (40.28 sec)  The sum of the MOST values once optimized: 620 TMU (22.30 sec)  This is for the first bag only, remaining bags would benefit from only the tag scan and handling (original: 360 TMU, optimized: 230 TMU)  At Atlanta’s Hartsfield-Jackson International Airport where Delta Airlines handles approximately 100,000 bags per day, eliminating the excess bag turn would translate into 130 fewer hours of bag handling per day The Engineered Labor Standard Process 20

21. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited The Engineered Labor Standard Process 21

22. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Once the process has been optimized at the task level, it must be documented thoroughly to avoid any confusion during the training and follow-up phases The Engineered Labor Standard Process 22

23. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited The Engineered Labor Standard Process 23

24. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Training, Follow-up and Demonstration  Have an effective trainer  Include both written and verbal communication  Include demonstration in the work environment  Schedule follow-up to check for understanding and ensure compliance  Results should be documented The Engineered Labor Standard Process 24

25. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Engineering the Labor Standard 25

26. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited  Begin work sampling and operational observation  Build elements based on the written methods and observation  Engineer appropriate allowances  Engineer appropriate variances for conditions  Test and Validate the new ELS Engineering the Labor Standard 26

27. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Managing with an Engineered Labor Standard 27

28. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited  Front-line management people are the “keepers of the standard”  130% is as bad as 70% on the Operation Reports  Recognition, re-training and accountability are continuous processes  Update the ELS with changing conditions to maintain accuracy Managing with an Engineered Labor Standard 28

29. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Faster, Safer, More Accurate 29

30. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited  The Engineered Labor Standard is not the “silver bullet” to “Faster, Safer, More Accurate”  An ELS is the final measuring stick for the greater Engineered Labor Standard Process  Successful Engineered Labor Standards are rooted in the properly defined work processes and tasks that are enforced with proper training and follow-up Faster, Safer, More Accurate 30

31. © 2012 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent prohibited Questions / Comments 31