Key Developments in Airline and Automotive Industry and Respective Business Organization - Assignment Example

Identification of some key (recent) developments in operations design or practices within the airline industry and automotive car industry.  You are then required to examine and evaluate how these key developments are contributing to (or have the potential to contribute to) improving the effectiveness of the operations of businesses within these industries. This case study is aimed at applying the theoretical side of the study of operations management to a real world company. Operations management is a very broad term and thus it incorporates within itself many various issues and activities through which an organization’s goods and services are changed and transformed from the inputs that were put to the outputs that are produced. It is about the various operations that are performed on the goods and services from the moment their production starts to the moment the customer receives it. Operations management consists of ten areas in which an operations manager has to make the right decisions so as to fit the company’s strategic vision with what the budget allows, and to achieve that competitive advantage too, all at the same time. A strategy is the course of action that a company aims to take with respect to achieving a particular goal. Strategic fit would be when the company has very well integrated the firm’s mission as well as the strategies along with the internal capabilities that it has and the external environment that it has to survive in. thus, missions (what needs to be achieved) as well as the strategies (how it needs to be achieved) must be in alignment with what the company is capable of doing itself and how much the outside environment and externalities will allow it to perform. (Slack, 2005) As far as operations management is concerned, the operations manager has to take decisions in ten critical areas. They are product design, quality management, process design, location selection, layout design, human resources, supply chain management, inventory, scheduling and maintenance. When it comes to operations management, the operations manager has a wide variety of choices as to how to go about it. Operations management is all about increasing the productivity of the company, thus efficiency has to be present, along with effectiveness in the first place. With the rise of competition, it can be said that new methods need to be found which will keep an air cargo company going and at least give him a place in the top cargo service providers of the country. For this, many owners of the cargo companies have suggested that it is important to position your aircraft on the right trade lanes. This means that most of the air cargo is used for the purpose of doing trade. Now it is up to the air cargo company to identify which route they should set up their air cargo for which will get them the utmost business. At this point in time, this factor is not a problem; rather it is an opportunity and a challenge because setting up routes and links which will connect the most customers to the company is no less than a challenge. This task of building global links lies in long term planning and is sure to generate long term revenues for the company. Nowadays, many air cargo companies are using tactics which will generate short term cash and revenues, and therefore, this would not keep them going on for long. (Thuermer, 2006) Companies should be intelligent when they are making these links. Sometimes, many networks have to be set to ensure sufficient amount of customers. At other instances, the businesses within a single route can be so much that serving to a single to and fro simple link could do wonders for any air cargo company. Companies like American Airlines have set the single link between Shanghai-San Paolo and they claim that no other air cargo company can match the service they provide in this single link. This is because they have focused all their energies on this simple link. It is like niche marketing. Seeing an opportunity and serving it so well that no other company can even think of entering it. But that does not mean that covering many routes and making numerous networks and global links does not work. We have the fine example of United Airlines which is successful thanks to the business that Intel gives them. Intel has this business where it takes many raw materials from China and then for the final compilation of its one component, it moves many microprocessors to Brazil and therefore, their usage of UA helps them in quickly doing all this moving of goods for the high-tech business that they are involved in. (Seidman, 2005) Moreover, a company should not remain stagnant to the global links that it has created when it once started. Rather it should keep on building their networks so that the cargo company keeps on improving itself and serving to new customers which are always a good thing. For instance, Emirates Airlines recently started serving South America by going through to Brazil. Another major innovation or key development in operations design is that of incorporating an information system named CONFIRM. Innovating is one of the key elements which give company the competitive edge that they need over their competitors. When it came to the airline industry and the automotive car industry, the need to have a central integrated system was found and AMRIS came up with the idea of CONFIRM, which would serve the needs of three different industries: the airline industry, the hotel industry and the car rental industry. These three industries were usually needed by all travelers in each of their traveling trip thus a central reservation system which would take care of all three facilities was the need of the hour and innovation at its best. The two models of innovation are: Adoption model This model emphasizes on the fact that the organization needs to actually adopt innovation from its surroundings without the need for a personal research and development department. This model is a very idealistic model and is purely based on theory. Basically, the adoption model needs creativity and out of the box thinking which should stem from outside of the organization so that it can effectively adopted by the organization. Our environment is very complex and therefore innovation is a continuous part of this general environment. We possess excellent thinkers, people with vivid imaginations that ultimately lead to a successful product and creative people who know where to use their creative side. This innovation might not always be present in our organization but it is a duty of the organization to learn from others and adopt what they feel they could. Innovation through adoption also gives pretty successful results. The model tells the company various processes and ways in which it can practice this innovation. The model is a very useful guide in this adoption. (Cushman, 1993). As far as CONFIRM is concerned, it cannot be said to be following the adoption model because such a system had never been invented before and the company AMRIS and its INTRICO are innovating a central reservation system integrating three powerful and popular industries. Diffusion model The diffusion model is a model where the company is one of the first to pioneer and come up with the innovation and then spread it to other firms and places to be adopted by others. This model has its own branches, ways, methodologies, practices, processes and variants. The model is a winner because it is practical and is based on empirical research. This research has been conducted various times and proves that the diffusion model is a better model of innovation and gives a solid proof of the company taking on the position of the market leader. This position is granted to the company because of its innovative products by the customer and because the customers felt loyal to the product and felt greatly impressed the innovation brought about by the company. The diffusion model makes a leader and therefore, requires greater hard work, attention and perseverance. (Dearden, 2006) When it comes to the CONFIRM case study, it can be said that it was following the diffusion model of innovation. This is because the information system CONFIRM was the first of its kind. Moreover, as abovementioned, this model requires greater hard work, attention and perseverance and the exact opposite was delivered by all the parties involved, whether it was the employees, the management or the client-partners. And that is what resulted in its failure. The effectiveness of the operations of the business of these industries greatly improved because of the CONFIRM system. It checks for empty airline seats and available cars and chauffeurs and allots them to requesting customers, would facilitate the needs of a traveler in one go, the makers of which will be the information system developer and designer companies, and which will have its own set of limitations since it is part of information technology. Then, operations design in the air cargo industry has also given it an edge over other cargo industries like the ocean freighters. The good news for operations design is that not every business can adjust for the time lag that they get when they chose any other mode of transport but air freighters. Air cargo still gets the special consignments or the cargo delivery of valuable goods, irrespective of the money that they charge. This is just because the crucial factor of time and the factor where the customers expect special treatment of their goods by the freighters. These two factors are only available with the air cargo freighters. As far as the recent developments in operations design in the automotive car industry are concerned, the solutions and enlargements are happening so fast and the impact is more or less global. Any development produced in one part of the country is soon easily transferred to other parts of the globe within days, thus ripping the true manufacturer of enjoying long lasting profits on his operations design development. The price premiums that a pioneer manufacturer can charge for his manufacture has been shrinking with respect to the period of time in which he keeps on getting it. The period of time is decreasing and the price premiums can only be enjoyed for a short span of time. Moreover, doing research and development on a factor like automotive car industry means big money, meaning the costs are very high when it comes to the product and the manufacturing costs. With high costs and considerably low returns, no investor would want to pitch in for design developments in this industry. Nonetheless, enhancements are taking place and that too rapidly. Furthermore, the product development process in an automotive car industry is getting more complex day by day. One of the reasons is that the number of ways in which design developments are taking place are increasing, thereby opening new areas for such developments. There can be process design, there can be product design – all will contribute to a better operations design and come under the category of operations management. The second reason is that big companies have design teams which are scattered throughout the globe. (Roger, 2005) Their collaboration becomes a challenge, and more so, the integration of their individual idea into one design development. A consensus is needed among the design team when the company is to spend millions of dollars on a new design approach, and thus the design team needs to be in mutual agreement with each other over such issues. And this consensus gets difficult to achieve because of the physical distances that exist between the team members. Another reason for the accelerating complexity of the product development process is the dispersion of not just the design teams, but of the manufacturing facilities as well. Design teams need to be involved throughout the production or manufacturing process so they can keep a check on how their idea is being brought to life, or if their idea is practical enough to be brought in physical shape. In addition to all of this, a car is a consumer good. And since it’s a high-involvement product, the consumer would spend a great deal on time on weighing the pros and cons of a car and deliberating on a single company’s single brand of car. This increases the pressure on design team. (Michael, 2003) Slight faults within the design of the car would lead to the hampering of the image of the company, resulting in long lost sales and loss of goodwill. The time between the provisions of new design cars to the market is getting shorter and the customer would not wait that long for a certain design to come to a single company’s car. Rather, he would switch companies, and go for the company who does it fast. Some of the operations design within the automotive car industry can be more or less attributed to technology. (Martin, 2005) A new software by the name of Product Development System (PDS) is a development, which can help automotive companies cope up with the design challenges, as well as the dispersion of teams and manufacturing sites. Today’s environment is heterogeneous, and designs need to be made within this environment. This software PDS is designed to operate in such an environment, and it also helps with effective designing of the car. Moreover, companies will be greatly able to increase their effectiveness through this software because it just does not enable the parts and design use, it also allows for their reuse, which is a great way to save costs on consistent research and development on design and the money to buy these parts again and again. The company achieves its goals because of shorter cycle times, and better communication and collaboration within the teams. Another operations design development in the recent years has been of the Global Product Development (GPD) concept, which is an outsourcing issue. This facility that companies can now outsource their product development process has greatly enhanced their effectiveness. It is not just the operations design, but even the financial handling of a company product development can be outsourced. (Barry, 2001) Value addition to the cost has actually become easier as well as cheaper. Big companies like General Motors, which have a position among the top 10 brands of the world, have employed this technique within their company. The resources available worldwide to a company are enormous, and thus GM has capitalized on that. A proper restructuring has taken place in global design, which has not only speeded up the development process of a product, but has also reduced expenses. Design software have also been incorporated which help in heightening the levels of innovation within the industry. Moreover, a company would need to do some division among the type of activities that are performed in the process of adding value in a product development process. Segregation of those activities which add high value to those activities which add low value will help the company go a long way. This can be more or less called the Pareto principle, in which 20% of the activities are those which add 80% of the high value within a product. Therefore, it is essential that companies put more effort in performing those 20% of the activities, rather than dividing their energies among all activities, and not only losing their effectiveness, but also their efficiency. Companies should also focus on increasing the portability of the design work. The process should be altered accordingly, and the same goes for the infrastructure of technology. There are various ways in which an automotive company’s effective can be increased, one of them being the real time CAD collaboration that this approach provides. (John, 2005) References: 1. Krajewski, L& Ritzman, L 2006, Operations Management Strategy and Analysis, Prentice Hall 2. Slack, N., Chambers, S. & Johnston, R. A. B. 2005, Operations & Process Management: 3. Chapman, C. & Ward, S. 2003, Project Risk Management: Processes, Techniques and Insights, John Wiley and Sons Limited 4. Hoyle, D. 2006, Quality Management Essentials, Butterworth-Heinemann 5. Jeston, J. & Nelis, J. 2006, Business Process Management: Practical Guidelines to Successful Implementations, Butterworth-Heinemann 6. H, John. 2005. Global Product Development – an imperative for the automotive industry. 7. J, Martin. 2005. The organization of the firm: international business perspectives. 8. L, Michael. 2003. Operations management. Routledge. 9. R., Barry. 2001. Operations management. Prentice Hall 10. S., Roger. 2005. Operations management, contemporary concepts and cases. McGraw Hill Read More