Operations Management for Business Excellence

Building Sustainable Supply Chains

David Gardiner, Hendrik Reefke

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9780429640711
• Topic: Business
• Subtopic: Business General
• Index: Business

All businesses strive for excellence in today's technology-based environment in which customers want solutions at the touch of a button. This highly regarded textbook provides in-depth coverage of the principles of operations and supply chain management and explains how to design, implement, and maintain processes for sustainable competitive advantage. This text offers a unique combination of theory and practice with a strategic, results-driven approach.

Now in its fourth edition, Operations Management for Business Excellence has been updated to reflect major advances and future trends in supply chain management. A new chapter on advanced supply chain concepts covers novel logistics technology, information systems, customer proximity, sustainability, and the use of multiple sales channels. As a platform for discussion, the exploration of future trends includes self-driving vehicles, automation and robotics, and omnichannel retailing. Features include:

• A host of international case studies and examples to demonstrate how theory translates to practice, including Airbus, Hewlett Packard, Puma, and Toyota.
• A consistent structure to aid learning and retention: Each chapter begins with a detailed set of learning objectives and finishes with a chapter summary, a set of discussion questions and a list of key terms.

Fully comprehensive with an emphasis on the practical, this textbook should be core reading for advanced undergraduate and postgraduate students of operations management and supply chain management. It would also appeal to executives who desire an understanding of how to achieve and maintain 'excellence' in business. Online resources include lecture slides, a glossary, test questions, downloadable figures, and a bonus chapter on project management.

Chapter 1
Operations and strategy

Learning objectives

At the end of this chapter, you should be able to:

• Trace the history of operations management.
• Define operations management.
• Define the customer and recognise their basic requirements.
• Describe the transformation process.
• Distinguish between products and services.
• Discuss the service package and the concept of servitisation.
• Explain the role of operations management within the context of the whole organisation and the customer experience paradigm.
• Explain strategy and strategic capability.
• Explain the concepts of core competence and competitive advantage.
• Explain operations strategy and the linkage with business strategy.
• Explain competitive capability.
• Distinguish between structural, infrastructural, and integration decisions in operations.

Perspective: Airlines – need to stay competitive

The airline industry is truly global and an intensely competitive service industry with annual (2018) revenue of $834 billion. The International Air Transport Association (IATA) represents 290 airlines from 120 countries and carries 82% of the world’s air traffic.¹

IATA measures passenger growth in revenue-passenger-kilometres (RPK) which counts the revenue received, multiplied by the number of passengers carried, multiplied by the number of kilometres travelled. Total passengers carried was 4.358 billion in 2018 and passenger growth (RPK) has exceeded 5.3% year-on-year for each of the past nine years with over 8% in 2017 and over 7% in 2018. IATA measures freight in freight-tonnes-kilometres (FTK), and the increase in this measure exceeded 9% in 2017 and exceeded 4% in 2018, with over 60 million tonnes of freight carried in 2017 and 2018. These are outstanding operating performance increases for any industry.

Total operating profit exceeded $56.3 billion for each of the four years, 2015–2018, representing an operating profit margin greater than 6.8% for that period. The corresponding net profit margin for the same period exceeded 4.1%. These are outstanding financial margin performances for any industry of comparable size.²

The airline industry uses aircraft technology and innovation dominated by Airbus (Europe) and Boeing (United States). Airline companies depend on other organ-isations for their performance and their outcomes – airport companies, air traffic controllers, government aviation regulators, security checking agencies, food outlets, ground transport, and parking operators. Most of the decisions for these dependencies lie outside the direct control of each airline. Additionally, airlines depend on supply chain management for their choice of aircraft, maintenance services, fuel supplies, food supplies, and information technology solutions. Decisions for these dependencies lie within the direct control of airline management.

With the preceding data, it is relatively easy to calculate the average performance for an airline. That means, of course, that half the airline performance data is better than average and the other half is worse than average. It is doubtful that any company would strive to be the worst. So, what does an airline company have to do to be the best? They must develop and execute a strategy to remain profitable and offer service products that satisfy the requirements of most of their customers so that customers build loyalty and keep coming back for more.

Successful airlines are realising the power of data analytics as customers have almost total freedom in searching the Internet and using web-based applications to find the best airlines, the best service, the best schedules, the best airport lounges, and the airline with the most innovation. Customers make choices that provide the best total experience.

AirlineRatings.com analyses and publishes world airline reviews for full-service airlines, regional airlines, and low-cost airlines. Their full-service carrier product criteria include product rating, safety issues, aircraft age, investment grade rating, innovation, customer feedback, operating profit, environmental issues, industrial issues, premium economy, and flat beds in business class. The industry uses their findings extensively in promoting and benchmarking services.³

Air New Zealand received the accolade ‘Airline of the Year’ for the five years from 2013 to 2017.⁴ Air New Zealand challenged their business models and improved their business processes just to stay alive and remain competitive. Their strategy has been to satisfy customers by providing them exactly what they want, to be the first to introduce new ideas, to give customers no reason to consider the competition, and to challenge competitors to match the offerings if they wish.

Perhaps the most significant process improvement in recent years was the revision of the check-in process using the axiom of ‘no queues’ as a driving force. All airlines know that the traditional airport queue is a stressful process for passengers. Relaxation is impossible, since passengers cannot anticipate the length of the queue and do not know how much time to allow before reaching the front to complete the check-in process before their flight closes. Traditional queues zigzag across the foyer and passengers must continually pick up and move their luggage a few more metres.

At a time when competitors were introducing check-in processes up to 12 months in advance of the flight, Air New Zealand redesigned their processes to allow check-in as close as possible to departure.

When passengers for domestic flights arrive at the airport with no printed flight documentation, they go to a self-check-in kiosk, identify themselves, and generate a copy of the boarding pass. Passengers with the Air New Zealand app installed on their smartphone can bypass the printing of the boarding pass and use the app when boarding the plane – no hassle. Passengers with luggage to check in proceed on arrival at the airport to a self-check-in kiosk and identify themselves using the Air New Zealand app, a credit card, or a frequent flyer card, typing their name on the screen, or showing the barcode on the computer-generated document sent to the passenger when making the booking. That covers most possibilities, if not all. Moreover, the frequent flyer card does not have to be an Air New Zealand one – it could belong to another airline – no problem. The passenger takes the tagged luggage to a drop-off bay and places the luggage on a conveyor belt. What a great example of automation making the service experience a little bit enjoyable.

When travelling with no checked-in luggage, a passenger on a domestic flight can check in online and go directly to the boarding lounge. When boarding the domestic aircraft, passengers can use the Air New Zealand app on their smartphone as documentation – again, no hassle.

Passengers use the self-check kiosks for international flights as well, but not exclusively. When used, the kiosk scans passports, matches that data to the booking reference, prints a boarding pass, and prints luggage tags for all the checked bags. The passenger takes the tagged luggage to a drop-off bay and places the luggage on a conveyor belt.

On international flights between Australia and New Zealand (in both directions), passengers with the Air New Zealand app on their smartphone do not require a boarding pass; the app is enough documentation for boarding the aircraft.⁵

When unaccompanied minors check in at the airport, they can elect to have a small wristband attached to their wrists. When activated, this wristband sends messages to up to five contact addresses so parents and guardians at the drop-off location as well as at the pick-up destination know when the child departs, when they arrive at the destination, and when they are picked up safely.

As soon as a passenger with the Air New Zealand app on their phone enters the frequent flyer lounge, the app asks the passenger whether they want their usual coffee ordered and sends a subsequent text message saying the coffee is ready. This is not a big deal, but it does make the frequent flyer feel special.

These process improvements have revolutionised the airport and travel experience. Air New Zealand claims the redesigned check-in process was a world first and significantly streamlined the airport experience, setting them apart from their competitors. The total service package looks different from competitors, feels faster to customers, and is providing benefits to high-value customers.

Innovative process design and process improvement can have a strategic effect on the success of the business as it competes fiercely with other businesses. Air New Zealand identified who their customers were and what was important to them and redesigned the customer experience to differentiate service offerings and to support the brand. Their customers keep coming back, increasing their spending, and talking about their customer experience with friends, family, and business associates.

Now, we want you to imagine that you are the chief executive officer of a very successful airline and you are about to sign an order for additional aircraft. Each aircraft may cost a few hundred million dollars, has a delivery lead time of three, four, five, or six years, and has an expected fleet life of 15–20 years. Now, how many aircraft will you buy, what size will they be, when will they be delivered, what routes will they serve, what loading factors will apply, what maintenance requirements will exist, what are the staffing and training requirements, what is the pay-back period, will this be a profitable acquisition, and has finance been arranged to pay for them? Executive management will prepare the answers to these questions for you, but they will need a well-defined and well-communicated strategy.

Introduction

It would be virtually impossible to present a book on any function within an organisation, let alone operations management, without mentioning strategy. Strategy is at the heart of any business, whether it is a manufacturer, service provider, government department, or not-for-pr...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Publisher Credits
• Contents
• List of figures
• List of tables
• Author biographies
• Contributor biographies
• Preface
• Introducing Dr Hendrik Reefke
• Acknowledgements
• 1 Operations and strategy
• 2 Demand management and forecasting in operations
• 3 Capacity and revenue management
• 4 Process design and strategy
• 5 Applying lean thinking to operations
• 6 Achieving balanced results and measuring performance
• 7 Quality management and product design
• 8 Inventory and resource planning
• 9 Collaborative supply chains
• 10 Advanced supply chain concepts: Technology and sustainability
• Case study summaries
• Case 1 Three crises for Toyota
• Case 2 Tube Forgings of America, Inc.: Surviving and thriving during the downturn
• Case 3 Jarden Fresh Preserving
• Case 4 Airbus and the A380
• Case 5 PUMA Sportlifestyle: Journey towards sustainable supply chain management
• Case 6 Ottoman Co.
• Case 7 SteelCom
• Case 8 Tait Communications
• Case 9 Nat-pak and Tastie-food
• Case 10 Waikato District Health Board: Consumables supply for elective surgery
• Case 11 Implementing circular economy at HP
• Case 12 Fischer fixing systems: Moving forward with the workforce – change communication at the Global Distribution Centre
• Case 13 Bridging design prototypes
• Index