Montreal's Innovative Public Bike System - Case Study Example

BIXI Montreal: Operations Management Strategies Introduction As of April 2009 the BIXI self service, rental public bicycle system is about to be rolled out in Montreal. It is managed by Statioinnement de Montreal. Statioinnement de Montreal is a subsidiary of the Board of Trade of Montreal that is responsible for on- and off- street parking, and overall improvements to urban transit in Montreal. The following report will identify and then propose approaches to solving the problems that may emerge in the wake of the roll out. Throughout the report, the goal that the BIXI system be breaking in the second year of operations will be kept in the forefront of the analysis. Further, throughout this report operations management strategy will be defined as the total network of decisions, programs and policies that foster the long-term capabilities of the organization, contribute to the overall goals of the organization and do so by reconciling market requirements with operations resources. (It will also be assumed that this report is based on the facts as presented in the case and that anything not mentioned in the case has not be considered up to this point - April 2009. Findings The overall system design is excellent. The bicycles seem to be well designed, safe and easy to ride. They are user friendly (seat height can be easily adjusted) and they have a low center of gravity. They include a small basket with a tough cord for carrying items and the chain mechanism is entirely enclosed to avoid snarling or dirtying riders clothing. Reports are that they can be ridden for up to 100,000 kilometers before major overhaul is required. This figure means that they should be able to withstand a seasons riding and major overhauls can be conducted during the bicycles winter season downtime. The docking stations demonstrate similar valuable characteristics. They are freestanding and reasonably portable in that they can be disassembled, moved and reassembled at any suitable location relatively easily. This builds a great deal of flexibility into the system. They are also solar powered. In terms of both bicycles and docking stations, the hard components of the system their remains the problem of vandalism. Theft and damage have proven to be a significant problem for public bicycle rental systems in other cities. Time magazine notes simply, “the designers packed in all the technology they could find, in a desperate attempt to out-engineer human iniquity... Too bad they cant redesign riders too.” That statistics for a similar system in Paris are both shocking and disheartening. Out of a fleet of 20,000 public rental bicycles 7,800 (39%) disappeared and 11,600 (58%) were vandalized. If these figures are correct they are outrageous, fully 97% of the bicycles were ruined through theft or vandalism. On the basis of these statistics, extraordinary measures must be undertaken, to chart a different course in Montreal. The obvious problem with theft and vandalism is costs. Stolen bike is a lost investment and imposes replacement costs. There are also other, hidden costs. High rate of theft and vandalism will result in negative reports in the media. This will have a wide range of negative impacts on the BIXI system. It will encourage naysayers. It will undermine public confidence. It may make the system less convenient for users as it implies that less bikes will be available for rental inconvenient locations. Finally, it will impact negatively on interest in other jurisdictions and impair the ability of Statioinnement de Montreal to sell the system to other municipalities. The key to the software is radio-frequency identification. (RFID) The bikes, docking stations and pass cards are all linked through this system. RFID provides information on the location of all bikes and system data such as usage at each docking station, duration of bicycle usage and location of pick-up and drop-off. It is an excellent technological system and well designed for this application. However, its usage is not being optimized and the recommendations section of this report will identify the manner in which its applications should be extended. The identified goal of the system is to become self-financing in its second year of operations. This is a very bold and aggressive goal. When it is achieved the BIXI system will be the first public bicycle rental system in the world to have achieved this goal. For this reason careful attention must be paid to revenue streams (assuming that the cost of theft and vandalism is controlled). Acknowledging that low rates will encourage usage and facilitate introduction of the system they may be so low that they undermine the goal of a self supporting system. The recommendations section of this report will address this issue and propose changes. In summary, there are four particular issues related to operations management that need to be reconsidered, issues hat the organization needs to be prepared to address immediately if the potential problems do emerge. These issues can be categorized as damage to hard components (theft and vandalism) and cost control, utility or customer friendliness, and the fee structure or revenue streams. Recommendations Vandalism and Theft: Opportunities to address vandalism and theft have been neglected. First, the police department has to be briefed on the system. The BIXI bicycles are distinctive and they need to be drawn into prevention through an information campaign that encourages them to stop any BIXI bike that appears to be being mishandles, vandalized, stripped down or otherwise abused. It may also be useful to link their dispatch system into the RFID system so they can rapidly trace any stolen bicycles. Liaison with the police is a neglected area of theft and vandalism protection that must be explored. (Theft Protection”) In a similar fashion the stations need to be equipped with posters warning users and citizens to be aware of the possibility of theft and vandalism that emphasizes that the bicycles and stations are public goods (inherently the property of all residents) and that citizens are entitled to regard them as their property and report theft or vandalism. A telephone/text number that offers an immediate response from a call centre should also be considered. Third, enhance use of video technology needs to be considered. This does not have to be an expensive project. Simply put, the presence of video surveillance equipment should be considered in the site selection process for stations. Metro stations already have a comprehensive system of video surveillance. Many BIXI stations are located at Metro stations. Therefore, it is simply a matter of ensuring that stations are located in the viewing angle of this preexisting equipment. In a similar fashion Statioinnement de Montreal already maintains video surveillance equipment at many of its off-street parking locations. Consideration of this equipment needs to be calculated into the siting of docking stations. These recommendations are all inexpensive ways to address the problems related to vandalism and theft. The cost and other impacts of vandalism and theft will be a key challenge for the operation of the BIXI system and they demand a multidimensional approach. User-friendliness will be a key to the appeal of the system, its usage and the revenue that the system generates. Therefore, two key recommendations address that issue. First, introduction of a bicycle trailer system needs to be considered. The current system has two acknowledged weaknesses. The carrier is too small to handle large, bulky items such as multiple grocery bags. Also, it is unavailable to people who have a small child with them. A multi-use trailer for children or large parcels would alleviate this problem and make the system available to a wider variety of users with a wider range of needs. Docking could be incorporated into the existing docking stations as a new component. They would be RFID equipped and their management, location and usage could be monitored in the same manner as the bicycles themselves. They could be designed and be build using the supply chain already established for the bicycles. Cycles DeVinci does not currently manufacture a bicycle trailer however it is reasonable to assume that they could, if that proved not to be the case another manufacturer would have to be considered. (“DeVinci”) Second, despite the high quality of the bicycle design problems are inevitable. Tire punctures cannot be avoided even with the use of nitrogen in them. Minor mechanical problems are bound to arise. Even careful handling can result in bent rims and other mechanical problems. Addressing these issues will require the introduction of two systems. First, a small team of mechanics must be available with vehicles that allow them to quickly repair or replace malfunctioning vehicles. With minor changes existing Statioinnement de Montreal vehicles could be adapted to fulfill this role, arguably while conducting routine parking patrols and other existing duties. Only the personnel involved would require special training. Additionally, the system needs to be capable of permitting a user to return a malfunctioning bicycle to a station, report the damage using the call centre of the RFID card, and replace it with a functional bicycle. The RFID system also needs to be used to ensure that bicycles are available in appropriate locations. There is the distinct possibility that bicycles will be most commonly picked up at some locations and most commonly dropped off at others. The mobile teams responsible for repairs would also be employed to move bicycles to ensure they are distributed across the system appropriately. Automobile rental agencies already use a system of this nature to ensure that heir vehicles are optimally distributed and this system needs to be adopted by BIXI. (Yang et al., 2008) The costing of the system as it is presently structured is simply too low. This will encourage usage but undermines the goal of breaking even in the second year. The vast majority of trips will be very short. It is predicted that many will be less than 30 kilometres and that almost none will be more than 60 kilometers. The current pricing system will not become self-sustaining if this proves to be true. Therefore, the current rate structure needs to be presented as a low-introductory offer to encourage usage. While the monthly membership rate may remain at its low cost, the price per trip will have to be increased. Further, in financial terms, the finances of the BIXI system must be kept free and clear of the larger budgeting issues of Statioinnement de Montreal. When it begins to break even if the revenue will have to be directed exclusively to expanding and improving the system it cannot be allowed to be subsumed into general revenues. Finally, the BIXI system is only one component of the operations of Statioinnement de Montreal. Therefore, the system will require a champion to manage intra-organization relations and potential conflicts. It requires a champion to advocate for the system and presents its needs and benefits to the wider organization. (Gattiker and Carter, 2009) Conclusions The BIXI system is a bold proposal. It will confront problems (notably theft and vandalism) but has been well-designed and planned and there is every reason to presume that it will be successful and be breaking even by its second year of operation. That said, there remain serious operational management issues that must be addressed in the wake of the roll out. The recommendations in this report anticipate and address these potential problems. References Center for Management Research.(2009). “BIXI: Montreals Innovative Public Bike System”. ICMR, Plot #49. Prepared by Pummy Chatterjee and Debapratim Purkayastha. Cycles DeVinci. http://www.devinci.com. Gattiker, Thomas F. and Craig R. Carter. (January 2010). “Understanding project champions ability to gain intra-organizational commitment for environmental projects” Journal of Operations Management. 28 (1), 72-85. Tagsys RFID. “Theft Prevention”. http://www.tagsysrfid.com/Markets/Applications/Theft-Prevention. Yang, Yazou. Et al. (2008) “A Pool Segmentation Method for Car Rental Industry”. Modelling, Simulation and Optimization, 2008. WMSO 08. International Workshop. http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=4757050. Read More