July 19, 2010

Operations Management Lesson 2 Exercise

Question:

Take two processes with different volume and variety characteristics. Profile these processes and establish the process choice and layout decisions they have taken. Critically appraise the design decisions taken.

For the purpose of this exercise I have selected two air transportation services providers: Ryanair and Qatar Airways.

Irish Ryanair is well known as low cost & no-frill airliner operating within Europe and Morocco more than 1,100 routes. It operates fleet of almost 250 aircraft. Qatar Airways is carrier based in Doha linking over 90 international destinations with fleet of 84 aircraft. It is a 5-star airline (rating given by UK consultancy company Skytrax, performing in-flight research services), one of only 6 airlines in the world indicating high quality of customer service. It also operates Qatar Airways Executive division offering private flights.

1. Performance objectives

Table below captures the analysis of performance objectives as defined by Slack et al. (2006).

Performance objectives

Ryanair

Qatar Airways

Quality

Ryanair objective is not quality of customer service and it has been heavily criticized for many aspects of customer service quality.

As already mentioned high rating of 5-star airline makes Qatar Airways one of the top airlines in the world with high focus on quality of customer service.

Speed

Communication with customers is brought down to minimum; therefore in the created communication channel airline reacts fast. Any non-standard requirements are answered late or not at all.

Speed being part of customer service satisfaction is on priority list of Qatar Airways. Its Executive division offers bookings of flight only 4 hours in advance, which requires very fast response time.

Flexibility

There is little or no flexibility due high focus on minimal costs.

Qatar Airways strives to provide unique customer experience. Flexible service is therefore also a priority.

Dependability

Transportation service is very punctual as any delays might drive extra cost for airline.

Flight delays are minimal and only occur due to unexpected circumstances outside of airline influence.

Cost

High focus on efficiency in order to minimize cost and offer highly competitive prices to customers.

Cost control is important, but not to the extent to compromise the quality of customer service. Margin expansion is achieved mainly by economies of scale and pricing model (especially for premium products).

2. 4Vs

There are four characteristics of demand which have a significant effect on how processes need to be managed (Slack et al. 2006). Let’s have a look at 4Vs of Ryanair and Qatar Airways transportation processes, visually captured in Figure 1:

Ryanair has higher volumes than Qatar Airways, which is mainly determined by number of flights, fleet size and competitive prices. Thanks to the volumes and minimal costs Irish carrier can still benefit from economies of scale despite the low prices.

Variety, on the other hand, is higher at Qatar Airways, since in 2009 company has launched its new charter division Qatar Executive. It is providing customers with exclusively premium travel experience. Qatar Executive’s customers can book an aircraft four hours before departure, 24/7 and check in 15 mins before departure. Regular Qatar Airways flights offer options of Business, First class or Economy. Entertainment system in Economy class is rated very highly. Ryanair provides only the service of continental transportation, Economy class only without any add-on services.

Variation in demand is on higher side for both due to oil prices and seasonality.

Visibility in both processes is fairly high, however due to the fact that business model of Ryanair does not establish clear communication channels, part of travel service is not visible to customers.

3. Process type

In terms of selected process types, as introduced by Slack et al. (2006), both airlines operate largely mass services process analyzed in Figure 2 below. The aim is to achieve economies of scale in order to maximize the margins. High number of passengers (specifically Ryanair) requires highly standardized service. On the other hand I consider Qatar Airways Executive division more of a Service shop process due to higher flexibility (although still limited due to nature of air travel and air travel procedures) and higher costs which are covered by premium prices.

4. Process Layout

Using Slack et al. (2006) definition of process layout I have come to conclusion that both airlines have selected Product layout to operate their processes. This enables them to handle large volumes of customer movements (Ryanair) and ensure all the security procedures are complied with. Even if smaller volumes of passengers are serviced (Qatar Airways Executive), the Product layout is still used, which is mainly due to the fact that airlines operate their processes jointly with airports operating massive amount of passengers on daily basis, therefore airlines have to adjust their processes accordingly. It can be handled on different quality levels increasing variety of service (e.g. Premium Terminal for First & Business Class passengers of Qatar Airways including nursery play area, spa treatment rooms, conference rooms, etc), however essentially the process layout is the same.

References:

Arabian Aerospace Online News Service [Online]

(http://www.arabianaerospace.aero/article.php?section=business-aviation&article=qatar-s-executive-offering-goes-from-strength-to-strength) (Accessed 17 July 2010)

Qatar Airways [Online] (www.qatarairways.com) (Accessed 17 July 2010)

Ryanair [Online] (www.ryanair.com) (Accessed 17 July 2010)

Slack, N., Chambers, S., Johnston, R., and Betts, A. (2006). Operations Process Management. London: FT Prentice Hall

Waley, P. (2010). Operations Management. Coventry: Warwick Business School


- 3 comments by 2 or more people Not publicly viewable

  1. Beata,
    Please e-mail me each time you post a blog, it will ensure much prompter feedback.

    r.wynne@bradfordcollege.ac.uk

    This is agood entry, demonstrating knowledge, understanding and application. You need to pay attention to the Harvard systemof citation in that the academic underpinning (theory) provided in the blog needs to be cited and sourced to the bibliography.

    22 Jul 2010, 07:35

  2. Beata,

    Thanks for the files with the diagrams contained therein. They illustrate your blog very well.

    25 Jul 2010, 10:14

  3. Beata Bencova

    This blog has been updated for tutor’s comments.

    29 Jul 2010, 05:48


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