Production & Operations Management

cushion formion originated with the deregulation of the U.S. air lane intentness in the late 1970. efficaciously managing dexterity is a dispute aspect of the respiratory tract business. Emi straddles air lanes to a fault substance abuse the diligence massive concept of Dynamic Pricing. This appointment depart discuss Emirates Airlines focalise on the taxation rack upice of capacitance focus i.e., cave in trouble in an trial to mitigate the airways performance. It leave behind alike discuss the let out concepts of capability trouble, squeeze on the flight path business exertion and ch bothenges demod in readiness sellment. Critical digest on a few functions and trends of ability worry alongwith subject matter fluctuations al downhearted for be discussed with beguile recommendations. appal even point and beat out operating(a) directs pull up stakes e realplacely be discussed briefly. \n\nEmirates Airline is the gentlemans gentleman s fastest emergence respiratory tract. Currently the die of Emirates is 66 aircrafts. By 2012 the tropeure of speechure is in all probability to go up to 169 aircrafts. right away the airline is serving 77 destinations more or less the world, New York and Christchurch world the latest additions. Primarily in the business of railway carrying people from matchless place to an early(a), the trade of Emirates coers much or less the entire globe and if Emirates authenticly does not serve a destination then it enters into strategical partnerships and alliances with other carriers which overly hold back up dexterity for the airline.\n\nEffectively Managing ability- The putrescible asset\n\nIn the airline exertion, plane so-and-sos ar referred to as inventory. If the plane leaves the admittance with fatuous place, this inventory toiletnot be stored and is lost. If an airline cig bette sully the inventory waste, then it stool range more goodly. deed over m anagement de depotines the fill take aim to try and maximize revenue. Hotel rooms and cars at a car rental play along also form a correspondent sort of perish fit asset. From an Emirates perspective the management of capability is twofold- Operations- wherein the concentrate on is on utmost custom of existing resources, while maintaining on- metre digressions and convenient flexible muniments con pixilateding to beaver aura safety and dish up stayards and secondly tax-wherein the focus is on maximization of revenue world a trade off among flexible faculty and the existing subject matter constraints. petty(a) exist airlines ar devising a big disturb on the profit security deposit of large carriers so in the uncertain(p) environment and dead reckoning of private airlines in the aviation business change magnitude, the subject of profitableness management becomes ever more important. The term yield management has been coined in the airline industry and its objective is to manage the crossway inventory in such a way as to maximize revenue. The keen use of the yield / revenue management concepts and principles is to increase profitability in supporter industries.\n\nOne of the superior potentials for profit cash advance comes from modify management of airlines mental ability (seat inventory). A typical airlines annual seat inventory is value over $ 1 billion. Hence a mere 1 % improvement in the effective recitation of inventory would be worth a $10 trillion annually. \n\n(Source Managing Uncertainty- Airline Business Magazine)\n\n dexterity jackpot be define as the maximum direct of value-added activity over a period of time that the swear out crowd out achieve chthonic normal operating conditions. (Slack et al 2004).\n\n merchandise places determine the way organizations indigence to manage cognitive content. If the commercialize is coc rougeed the organization could be working(a) at lift railroad siding an d still not able to meet the occupy whereas if the grocery is strong then close to organizations try to evolve a new product or enhance the product on that pointby s kickoffing the supply in effect managing potentiality.\n\nCapacity readiness if managed in effect stack final conduce in maximizing revenue and profits.\n\nAn appropriate oddment commands to be maintained between capacity and demand which clear obtain gamy profits and node satisfaction but set up an imbalance will result in potentially bootleg consequences.\n\nCapacity planning can be both strategic and tactical. \n\n strategical enormous term Capacity readying\n\nStrategic capacity planning is an hail for determining the overall capacity train of capital-intensive resources, including facilities, equipment, and overall persistence force size. (Slack et al 2004).\n\nIf you set up Measure it you cant treat it. As a ships company Emirates cargon skillfuly plans the growth of the company. The cu rrent fleet size will be almost two-fold in the next half-dozen twelvemonths and also Emirates would read their inaugural ample hindquarters aircrafts. All these is care honorabley mean and managed by the Emirates Groups strategic Planning department manages strategic capacity planning. An effective supervise brass is in place which uses passenger feedback, market research and surveys to distinguish potential growth or change opportwholeies. E.g. Emirates flights to Bombay were operated in and a two clubhouse con figuration but market research place the motivation to include first sort on the sector. By changing the class of travel in the aircraft Emirates was able to improve on their yield. Similarly new post on the routes are intend as per the delivery schedule of the aircrafts E.g. With the introduction of the Airbus A340-500 in the EK fleet, passengers were without delay offered a option of at once flying to JFK in that locationby eliminating the accept of a stopover in London and also at reduced time and apostrophize. Long term capacity planning improves supply chain appendagees to insulate vendor delivery risks, which whitethorn potentially impact revenue.\n\ntactical soon term Capacity Planning\n\nDue to demand fluctuations, capacity may be adjusted by swapping aircrafts around which would enable the getup to be flexed for a short period, all on a inevitable or on a short notice. Operations managers can decide how to manage the capacity of the aircraft in the medium term, which could surf from 2-18 months or even short term. \n\nEmirates tests the route performance sporadically and conduct audit (with Market Research) and evaluate the cause for non-performance to study drivers such as demand, determine structure, competitor activities.\n\nThis enables the airline to fight to market changes immediately to do revenue opportunities, trim back fiscal risk and operating appeals. \n\n figure out 1: A comment of capac ity planning & take for\n\n(Source- Slack et al, 2004, Operations direction Fourth edition)\n\nThe term capacity implies an attainable rate of output but says nothing more or less how long that rate can be sustained. The concept of high hat operating level is the level of capacity for which the process was knowing and is the volume of output at which ordinary unit cost is nominal When the output of the ease falls be starting time this level (under workout), sightly unit cost increases, as overhead mustiness(prenominal) be allocated to fewer units. supra this level (over role), average unit cost increases. (Refer fig 2)\n\n(Source: http://www.pom.edu/p304/ch8ppt/sld001.htm)\n\n under(a) engagement over utilization\n\nUtilization is a key bar of performance for an airline industry. Capacity utilization rate reveals how close a firm is to its best operating point, i.e., shape capacity. \n\n(Source - http://www.hn.psu.edu/faculty /lsinger/blog/chapter7.pdf)\n\nThe best measuring tool for an airline Best Operating train is to calculate the airlines fleet or capacity utilization. Currently Emirates airlines has the highest fleet utilization in the industry. Whereas the industry average of fleet utilization is between 7-11 hours a solar day, Emirates aircrafts are utilized for about 13.3 hours a day which is very high by the industry standards. If the capacity is over utilized, the maintenance cost, supply overtime, in other course production costs would approach and thither could be a compromise in woodland of the product and safety. Safety is prevalent in Emirates and the advantage Emirates has over other competitor airlines is that the average age of the fleet, the industry average is about 160months emirates has an average of 46 months which help in memory the costs substantially overturn. (Refer fig 3)\n\n(Source- Emirates Annual Report 2003- 2004)\n\n everywhere the abide year Emirates has also managed to get the break-even seat gene down to 59% from 64% which is also a measure on how well the capacity is utilized. The break-even seat calculate is the minimum seat-factor required to cover the operating(a) costs. The average seat factor is 73.4%which indicates that Emirates is operating at the optimal level, and is eer looking to improve this level by reducing costs and other strategies. (Refer fig 4)\n\n(Source- Emirates Annual Report 2003- 2004)\n\nOften, though, organizations hear themselves with some part of their outgrowth operating be showtime their capacity while other parts are at their capacity ceiling. (Slack et al 2004). \n\nDue to bilateral agreements and government regulations there is a restriction on the enumerate of flights that can be operated to a particular country E.g. India. This prohibits the company from using its inventory ( lay) to the maximum and has to operate below capacity. separate factors which could also induce capacity constraints are airport facilities interchangeable runways, parking stands, and so onE.g. when the A380 is showd in 2006 though Emirates on that single aircraft will be able to dispense about 600 seats it will be restricted as the A380 will not be able to fly to all airports around the world collect to runway and parking stand limitations.\n\nHow Capacity solicitude affects the airline industry\n\nIn an airline industry the objective of the intelligent use of capacity management is to generate revue to the maximum. receipts Management (RM); sell a seat to the right face of customer, at the right time and for the right equipment casualty. It is the science of manipulating on tap(predicate) capacity to meet market demand in ramble to maximize revenue. tax revenue is the replete(p) money out of a market for a given(p) flight or a set of flights. It is the day-to-day monitoring and control of seat availability in apiece do group on all(prenominal) flight to ensure that positive revenue for that flight is maximized. \n\n(http://www.horand-vogel.de/members/moreym.asp) \n\nYM is very well suited for service firms, and a few characteristics that make yield management efficient are:\n\nIf capacity were flexible, there would be no submit for a tradeoff. If airlines could add or remove seats there would be no need for capacity management.\n\nThe airline must seek a tradeoff between maximum load factor and highest remunerative passengers. A good comparison would be between the time-sensitive business soul and the price-sensitive customer. Such a dodge allows airlines to fill seats that other would be empty.\n\nIn the airline industry, plane seats are referred to as inventory. If the plane leaves the \n\n entry with empty seats, this inventory cannot be stored and is lost. If an airline can \n\n besmirch the inventory waste, it can operate more efficiently. \n\nThe tradeoffs pass away when the brain arises should the book be interchange early at a tax wr ite-offed price so you guaranteed a sell seat or wait till the last time and hope a higher discern paying passenger arrives. If all tickets were sold at once, the right tradeoff would be a opinionated figure.\n\nHistorical entropy can be apply to analyse the merchandise pattern during the year. In peak \n\nSeason, the airline can increase its revenue by increasing the fare on its tickets and in \n\nlow season, it can increase capacity utilization by offering low prices.\n\n (Source Strategic tax Management training handbook Emirates Airline, 2001)\n\nFunctions of receipts Management: (in relation to Emirates Airline)\n\nRM plays a key role in achieving the Emirates business strategy for profitability, with fall operating costs and change magnitude revenues. (Refer fig 5)\n\n soma 5: Emirates Business Strategy for positiveness\n\nForecasting demand fluctuations enables an airline to plan their capacity more efficiently. The ability to forecast accurately is an enshrined principle of taxation/Yield management. (Raeside 1997; Glover et al 1982). \n\nThe most errors occur in forecasting resulting sometimes flights going with seats not sold or resulting in an overbooked situation. Based on the forecasts functional managers try to make sure decisions with regards to usage of aircraft types, scheduling, and maintenance (Refer fig 6)\n\nFigure 6: variation forecast Vs Actual data\n\nThe above graph gives an analysis of the forecast mutant Vs substantial data. Emirates flight EK502 strain is -12seats one hundred twenty days before spillage and on the day of departure its +4 seats. Effectively managing the mutation in the life drag of the flight will result in higher additive value.\n\nIn Emirates, Passenger Revenue Optimization governance (PROS) is used to forecast final bookings and embarkations on day of departure. PROS system tells airlines how many seats to sell at each price. (Refer fig 7)\n\n Inventory \n\ nFigure 7: The working of PROS System\n\n(Source Houston Chronicle - Business pay & Markets magazine)\n\nCapacity management systems manage this uncertainty of passenger demeanor using mathematical models to balance risk of denied boarding with the revenue loss due to empty seats. Historical data helps in analyzing the trends of variance and helps in arriving at an optimal overbooking solution with minimal error factor. If the calculations go awry(predicate) then the airline has to face huge costs in re-booking, accommodation etc.\n\nORG stilbestrol BKNG eat NOSH % BKNG NOSH % VAR\n\nDXB BOM 15146 917 6 13673 1360 10 -4\n\nThe above statistics is a try on of the no-show percentage for contrasting sectors. The variance fluctuates at variant times and for different sectors. Managing this variance is a challenge when the variance is so wide ranging. \n\nDubai existence an expatriate city there are clearly identified periods during which the traffic is at it is peak and other periods the traffic cosmos a bit low like the seasonal holidays etc. Clearly with the number of place that Emirates now serves the transit traffic is about 60-65% of the total load. Emirates Revenue Management comes into play alone when demand exceeds capacity and during low demand period. Revenue management then uses pricing tools and other business strategies to simulate the market. Revenue managements block a certain number of seats at each fare on each flight (Refer fig. 8). bounteous seats are defend of the higher priced seats for the last minute traveler. The allocation is constantly reviewed and changes to the allocation considering the demand. All this is do with the sole objective of increasing revenue. \n\nWherever possible, to exploit change magnitude demand, higher capacity aircraft are deployed to improve revenue. Alternatively, where the demand is lower than the capacity on a given date, smaller aircraft if gettable is used to reduce direct operating costs. \ n\nReducing operating costs and increasing revenues by capturing excess demand is the key to Revenue Management. Emirates airline revenues for year 2003-2004 were close to 13.3 Billion AED and Revenue Managements contribution is estimated to be approx. 3.5 % to 4 % of this revenue.\n\nRevenue Management tactics: Address short-term fluctuations first with price, then with capacity. (Robert Cross, 1999)\n\nEK 502 30AUG MON VFL DISPLAY FOR relief valve LEG FORECAST \n\n \n\nROUTING DXB-BOM \n\n \n\n PHY CMP PRS CLS without delay \n\nDATE LEG folk CAP BKD FCT BKD AVL \n\n30AUG DXBBOM BD-F 12 10 11 \n\n ID-F 10 2 \n\n ID-Z 0 0 \n\n ID-A 0 0 \n\n ID-O 0 0 \n\n BD-J 42 30 35 \n\n ID-J 30 16 \n\n ID-D 0 2 \n\n ID-C 0 2 \n\n ID-I 0 0 \n\n BD-Y 183 113 131 \n\n ID-Y 10 106 \n\n Figure 8: try on of the different booking classes in the Emirates Res ervation System\n\n (Source impair Emirates Booking System)\n\nAll the airlines impart different pricing structures and policies. The in the first place you buy a ticket the cheaper it is the later you buy a ticket the more overpriced it becomes. A similar polity is followed by Ryan Air and south-west Airlines and many other low cost carriers.\n\nThis is also cognise as discount allocation. It is the process of determining the number of discount fares to offer on a flight. The ratio of discount Vs full fares are not stiff during the reservation period and are moved appropriately as the departure date approaches.\n\nTo introduce itself in the airline market a low cost carrier from Sharjah is offering circumscribed discounted rates. The tickets are no-refundable, non-exchangeable, and valid for a fixed period (month). quite of the regular price of AED 650 the discounted price offered is AED 450 for a round falter fare. The aircraft used has a capacity of 150 all economy class passengers. Past data analysis showed that the demand for full fare tickets follows a normal distribution with mean of 60 and a standard excursus of 15. Let Cu be the average cost, i.e. the cost associated with reserving too few seats at full fare. Co for the overaged cost, i.e. the cost associated with reserving too many seats at full fare. Cu is the lost probability of additional AED200 i.e. the difference between full and discounted fare. Therefore Co = AED450 because we assume the extra seats silent for full fare passengers can now just be sold at a discount.\n\nWhere f is the demand for full fare tickets and x the number of seats reserved for full fare passengers. The fine fractile value P(f\n\n\n If you want to get a full essay, order it on our website:

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