Tuesday, March 26, 2013

OPERATIONS MANAGEMENT THEORIES


OPERATIONS MANAGEMENT THEORIES
Introduction:
Operations are the element of a business that mainly deals with the productions of goods and services. In the case of the airline industry, we are going to deal with the aspect of operations in regards to the services that are offered to the passengers or the clients of the airline companies. Services are those activities that require the combination of aspects like time of an individual the location of the service from and the value that the service has on the recipient. In order for a business to enjoy and be able to carry out their operations effectively, they require the contribution of other areas of the business like the finance function, marketing function and the operations which is the core of the business. Operations management is the management of the systems of the organization and the processes that help in the provision of the services to its customers. It is essential to understand that operations and supply are linked and that both are needed to ensure that the business is in a better position. A supply chain system of the organization is the arrangement and the sequence of the organization in regards to the facilities the functions that re involved in the production of the goods and service that are required by the clients of the organization (Cole, 2004). This sequence starts right from the point of acquiring the raw materials needed in the production process to the service that will be offered to the and users of the company. All these functions revolve around the idea of purchasing, information management, quality assurance and delivery, distribution and the management of customer service.
The easy is therefore going to analyze the aspect of operations management in the airline industries in regards to the theoretical perspectives, the tools and the techniques that have been used to determine how successful they have been in propelling the industry to another level.
Analysis
One of the theories that have been put forward to explain the evolution of operations management is the scientific management theory. This theory is based on efficiency as the main aspect of production of service delivery. The theory was put forward by Fredrick Taylor who advocated in the science of management. The theory is based on the concepts of observation, analysis and improvement of work methods, Measurement of processes and offering of economic incentives. In this theory the emphasis is placed on identifying the best processes possible for doing a job. Taylor also believed that the management of a company should be responsible for the planning purposes of the company, selection and the training of the employees of the company whilst finding the best way possible to deliver their duties with both the staff and the management cooperating (Barney 2001). In the European airline industry, the element of scientific management has been taken very seriously. The companies are acting towards maximizing their revenues and outputs concurrently through the adoption of the short haul routes in order to insure that their volume of passengers is increased an incentive that enables them to charge low cost fares.
This way they are able to get more market share then they were previously getting. This is because the fares that have now become affordable for all the passengers compel them to travel more. This has therefore led to the development of about 100 European Airports which acts as a host for most of the low cost airline companies (The Guardian, 2007). This element of price reductions has not only been beneficial to the travelers but also to the service providers of the airlines in terms of making their operations easier and effective. This is because in order to offer the eservice to the customers, all they need is one type of aircraft that is to be used in the short haul distance ferrying the passengers from one location to the other. In terms of their operational costs, they are also lowered and drastically reduced since the short haul distances allow for the airline companies in the European zone to have greater crew flexibility and thus no need for many stand by personnel, consequently, this helps to lower the training and the maintainace costs of the air line companies (Clarke, M., et al. 2000).
Still through the application of the scientific management theory, most of the airline companies in the European zone have struggled and thus are now attaining lower costs in operating in regards to the costs per passenger (Belobaba 1987). This is because they have devised the technique of providing many seats on board at a go with the aim to fill the seats so at to achieve maximum profits and revenue for the company.
The theory has also emphasized the need to ensure that a company maximizes the output with little regard for the workers of the company. Other scholars also came in to contribute to the development of the theory Like Henry ford through the recognition of offering non monetary rewards to their staff so that they would be motivated. Henry ford also came with the idea of using division of labor so as to ensure that tasks were completed in time and that specialization was encouraged so as to increase the levels of efficiency of an organization (Metters, King-Metters, Pullman, 2003). The need for an organizational structure also was argued and advocated for in this theory of management.
Another theory of operations management is the human relations theory which advocates for the use of the technical aspects for the job and the need for incorporating human element in the execution of the job designs. Through the Hawthorne studies that were conducted in light of this theory it was noted that it was very essential the employees of a company are mo6yivated so that they can be more productive in the company. It is also in this theory that Abraham Maslow was also to come up with the theory x and Y advocating for the appropriate motivation of the employees of a company, that was further refined by Douglas McGregor. Theory X was of the emphasis that workers disregarded work and that they need to be controlled and punished from time to time so that they can be able to executer their duties and responsibilities are required of them, On the other hand, theory Y was of the view that workers enjoy being at the work place and fulfilling their obligations as required of them. While theory x was more likely to lead to an environment of adversaries, theory Y was more focuses on the development of motivated employees. Through the application of this theory, especially in regards to the theory y aspect of it, the airline industry in the European zone has been able to motivate their employees more and thus they have been able to exercise efficiency at the work place especially in delivery of their skills where customer service is concerned (Nag, Hambrick, Chen, 2007).
Tools
There has been a need to develop appropriate tools by the European airlines in their operations in order to ensure that they are able to gain a considerable market share as compared to their competitors and that they are also able to attain more profits for their company in order to propel them to further heights. It is also of essential notice that they are bale to develop ways that can ensure that they effectively manage their customer relationships and so as to maximize on the customer loyalty and revenues that they finally attain.
Most of the airline companies have geared their focus on the reduction of costs in regards to attaining more efficient operations. One of the tools that most of the airline companies in the European region have resorted to, is the customer relationship management tool so as to effectively mange their relationships that they have with their clients (Berdy 1998). It is through the use of this tool that most of them have inaugurated the use of value and needs based segmentation in order to meet the needs of the high value customers. They have developed an approach to CRM that enables them to get better revenues other than just being followers of other airline companies in the industry (Barney 2007). This tool has also enabled them to instill service capability in the employees to understanding the fact they are also a major player in the delivery of the services to the customer and thus are required to act like a part of the company and delivery of the customer’s needs.
Another important tool that the airline companies have integrated in their processes is the use of the airline industry forecasts. This is majorly based on the issues that help them to predict the future demand so the customers so that they can be able to minimize investment risks (The Guardian, 2007). Through the use of this tool the European airline industry has been able to successfully predict the future needs of the passengers as regards freight demand and the global air travel market demands as a whole. Through the use off this tool the airline industry in the European zone has been able to gain considerable amounts of data that have ensure that it creates an effective and profitable network especially through the creation of the shot haul where most of the companies in the industry have been able to maximize their levels of profits. It is also through this tool that most of the companies were able to understand that the ne emerging markets in terms of travel traffic was the short distance travelers and thus acted to wards this analysis and made it cheaper and easier for the passengers to fly from one place to another (Richard, 2000). This way, they were also able to determine the evolution of the market in respect to the evolving trends and the history of passengers at different times and seasons of the year in reference to volumes of freight.
Techniques
It is essential for every company and airline business to ensure that they appropriately manage their operations so that they can be able to satisfy their customers and enhance the profitability of their companies (Barney, 2001). In this part of the essay, the writer is going to examine the techniques that could be practically applied by airline companies in order to ensure that they have maximized their profits while at the same time retaining their customers.
One technique that is employed by all airline companies in Europe have learnt is that of achieving customer satisfaction. In this regard the technique is aimed at helping them increase the reliability of customers by creating loyalty. As stipulated in the management theory customer satisfaction starts by the first action. This involves welcoming the customer warmly and giving them an experience of a lifetime. This has been the primary objective of the cabin crew members and the customer’s service crew who have really acted their part in ensuring that customers gain the desired service and maintain a memorable experience of the companies’ in the region (Gomez-Mejia, David and Robert 2008). The airline industry in the region has thus taken their ample time to train and perfect the art of customer satisfaction with the aim of gaining in the long run. The technique has seen the industry boast remarkable growth and profitability. It is important to note that customer care of utmost importance in this industry. In this regard the hotel policymakers have made this technique one of their main mission and goal. On another note, managers who effectively establish and maintain this technique reap great benefits in terms of growth in the customer base and competitive edge. It has also been noted that the airline industry operates on the basis of the perfection. There services are up to standards with most of them being exemplary and there have been no complaints so far that have been presented in regards to the issue of safety, or any other major issues.
Another technique is the revenue management which is normally employed to help maximize profitability. It involves rate management whereby perishables like inventory is controlled in regards to deciding how the many seats should be reserved fro the customers that might make late bookings and so on. This also involves the decision of charging different fares for the different seats and the issue of controlling the seats. Yields can therefore be increases by increasing the average fare per customer or through increasing the load factor. These are also charged differently for different customers (Wladimir, 2009). In this case this brings more revenue for the industry or for the specific business. In other instances overbooking is employed as a revenue management technique. When well managed this technique increases long term profitability. Airline companies tie this to yield management to earn extra (Gomez-Mejia, David and Robert 2008). It is important to note that airline products are highly perishable in nature, fixed costs are high and variable costs and demand vary with time. In this case to survive cut throat competition and profitability, the hotels’ management has to effectively manage reservation and occupancy to increase profits. On the same note this may damage an institutions reputation. This technique is mainly employed with the aim of maintaining good returns. In order for a business to be competitive and successful the three aspects of organizations need to be met. Regarding revenue the airline industry in the European zone has to make strategic decisions. Techniques put in place to manage this include pricing, occupancy and marketing. Balancing demand, reservation and variable pricing is employed to effectively manage revenues while maximizing profit. The technique involves selling the available service to the right customer at the right price and at the right time (Priem, 2007). Another technique that the airline companies use is the strategic alliance development and procurement. These alliances add value while at the same time improving quality (Fort, 2001). This enables such companies to be able to effectively purchase their supplies in large volumes and thus cut costs and enjoy cheap supplies giving them a chance of high revenue.
Another technique employed by the industry has been through the marketing of their services. In this scenario marketing is considered to increase profitably by influencing the behavior of an institution’s customers. These hotels embark on advertising as well as marketing programs which are measurable, profitable and sustainable. The methods may involve the use of print, TV, radio; mail among others (David, 2005). The systems employed are those that will enhance quick drive of revenue and profits. The technique is helping those in the hotel industry to reach larger audience of potential customers. The airline companies also get a chance to improve their customer base and thus increase revenue.
The employees of the companies also play a major role in the success of an Airline industry. There are several techniques that management employs to make sure they have staff with the capacity to meet the organization objectives while at the same time pulling customers to their service (Fort, 2001). Most of the players are using resources to improve their teams and therefore earn the payoff that comes with it. The technique is advantageous in the following ways, first there is reduced staff turn over, improved attitude or morale, and this leads to improved bottom-line output (Adner and Helfat, 2003). Training of employees is aimed at making them understand their roles as well as became aware of what is expected of them. It also helps staff to deliver services that ensures that the hotel maintains a competitive edge (Boyne 2010). The staffs have been trained to the extent that they act as problem solvers to the problems that have not yet arisen. They have ensured that the public relations and the customer service attendants are kept updated regarding any changes that may affect the customers. The timing s have been kept up to date with the air traffic controllers made available to handle any run way issues that may arise from time to time. The operations managers of the industry are also very vital in ensuring that the processes are maintained as required.
















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