Role of Information Technology for Efficient Operation Management in Airlines - Book Report/Review Example

Role of Information Technology for Efficient Operation Management in Airlines Introduction Information technology is defined by Marsden (1988, cited in Sheppard, 1990, p.171) as “an enabling tool … whose whole purpose is to enable the company to improve the bottom line.” Information is the central idea of technology because it allows communication, regardless of the geographical location of the business. Moreover, communication is vital in managing the internal and external environments that have an impact on the success, or failure, in the execution of business strategies. Thus, in the definition of Marsden, IT is a medium, which is designed for the improvement of products and services of a company. This is evident in the innovation of the airline industry which is the first service provider that incorporates IT. The companies’ decision was influenced by the tragedy in September 11, which affects the revenue of airlines. Viability is important in the business; hence, airlines use technology in handling their business-to-business and business-to-customer operations to increase sales and reduce cost. This signifies that airlines are dependent on the benefits provided by the World Wide Web (www) and databases, which are aligned with the core objectives, strategy, and operational management of every business organisation in controlling and predicting the outcome of planning. Low-cost carriers adapted this strategy followed by flag carriers. This paper analyses the application of technological innovation in achieving the five organisational objectives of operation such as speed, flexibility, dependability, quality, and cost. It will further explore the alignment of these objectives in managing the different areas of operation in the airline industry. Operations Management Operations management refers to the “activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with policies communicated by management” (Monks, 1996, p.4). The company designates a production manager, or operations manager that oversees the production of goods and services. Operations control the inputs that undergo a transformation process to produce an output. The output is presented to customers that require the service of the company. On the one hand, the aviation industry uses information technology to control and manage the inventory and reservation management. This area is concerned with the ticketing and scheduling, check-in, and allocation of seats for travellers. Inventory and Reservation Management In managing the inventory of airlines industry, they establish the computer reservation system (CRS). It was first introduced by the American Airlines due to the threat imposed by forecasting errors that may affect the inventory management of the company. During the 1950s, the company used the information technology called the SABRE system “to keep track of seat availability on hundreds of flights for thousands of passengers booked all over the world” (Smith, et al., 2000, p.2). With the development of internet, information technology influences the growth of airlines industry. It enables companies to attain their marketing objectives such as improving the service, and enhancing the customer’s experience. Furthermore, CRS aids the company in managing the distribution of ticket and schedule of global flights, which prevents the air traffic. Through incorporating CRS, the company has achieved the organisational objectives such as flexibility and speed. Lucas and Olson (1994, p.161) posit that the limitation caused by operating manually was eliminated by CRS. Manual reservations process consumes the time of business operators and customers. Furthermore, manual inventory increases the errors in scheduling due to lack of information on the availability of seats and flights in other stations. Therefore, CRS is relevant to the business operations of airlines because it allows them to be flexible in changing their flight schedule to meet the market’s demand. In addition, CRS evolves into global distribution systems (GDSs) to reach global stations that need the service of air transportation. GDS is more developed than CRS because it enables users to manage their booking online through the digital media, and allow customers to search for hotels and car rentals. Internet, as the new medium, empowers the airline industry to gain competitive advantage. Pemberton et al. (2001, p.61) note that the automation process contributes to the efficiency of operation and reduction of cost in the travel industry. The companies coupled the improved operation management with tactics so that competitors will be hurt economically. However, the tactics applied by the companies have generated issues on the system of CRS. CRS-owning airlines trap their competitors in the aggressive game by allowing them to display or advertise information on their ticketing and reservation system, but owners take advantage of generating profit by overcharging cost, or price discrimination; hence, the CRS-owning carriers gain profit from their competitors, which was deregulated by the government. The CRS and GDS systems are significant in the operations management of the company to alleviate the customers’ experience. Airlines have decreased their expenses in producing their products, while increasing their customers’ service. They are not obligated to hire additional workforce that would cater to diverse and geographic markets because they connect virtually with them. Furthermore, machines are more efficient, reliable, and controllable than human resources. However, machines have disadvantages that demand the reinforcement of human capital. Technology malfunctions, or the data losses result to manual processing of inventory and reservation management. Revenue Management The sophistication of technology encourages airline industry to depend on the inventory control systems, but ICS focuses on the revenue management of the airline industry. Aviation industry pays for information service providers that handle the inventory control of the management. Moreover, revenue management involves the pricing strategy of companies, so the IT providers administer the pricing-decision assistance systems that review the rate of competitor’s fare, which becomes their basis in pricing decisions. The information systems are used to spy the schedule of flights, price, and check the competitors’ website for benchmarking. Other examples of IT utilized by airlines are Igentica Flighmonitor, Sabre AirMax refers to modules, iRobot, Lufthansa Systems’s ProfitLine/ Price, and the Sabre AirPrice fares management systems (Qui, 2005). The softwares are decreasing the cost of revenue management, and lessening the errors in forecasting method of the company. The saving of airlines such as Air France and China Southern is higher than non-users due to the accurate information generated in databases, or softwares. Information systems are reliable source of information, which predicts the outcome of the company’s strategic decision. The development of software enables the airline carriers to discover the tactics employed by their competitors. It demonstrates that the competition is tough to their business circle; hence, innovation of products and services must be constant to keep abreast with others. Inspection and Information Technology Airlines are facing dilemma with the aging commercial air carrier that needs maintenance to provide high quality service with the travellers. However, it adds burden to the companies because maintenance requires additional expenses for the company. Aging aircraft fleets are vulnerable to corrosion, crack, internal engine blade cracks, or composite disbanding, which increases the rate of accidents. In retrospect, aircraft used X rays to inspect and detect faults visually. This equipment is similar with the laboratory and field test methods. Larsen et al. (2001, p.41) assert that the conventional equipment used is 10 to 35 % effective. The authors added that the cause of aging aircraft is the companies’ failure to utilize effective technology that can detect faults, and the availability of advanced technology that can suggest on how to improve the design and manufacturing process. To improve the security and safety of travellers, the companies adapted the advanced technology that was originally designed for the Air Force. The FAA- certified advanced technology NDI system is “automated inspection technologies in which digitized images of an intact aircraft structure are collected nondestructively, and the resulting images overlaid and analyzed by computer” (Larsen et al., 2001, p.42). The recommended inspection technologies are X-ray radiography, laser-ultrasonics, and neuron ray. When used simultaneously, these technologies can almost detect faults, or damage of commercial air craft. When compared to the conventional system of maintenance and inspection, advanced technology with the enforcement of IT can lower the cost of maintaining aging air carriers. IT is aiding the companies in reducing the number of accidents caused by poor maintenance because companies cut cost to remain viable in business operation. Technology is designed for the quality improvement of the physical features of goods, and enhancement of the intangible product which is called service. Through the advanced technology, the customers are secured of the travel safety rendered by airline companies. In addition to inspection and IT, air carriers engage in detecting the checked-in baggage of travellers. The European Civil Aviation Conference (ECAC) recommended the automated departure control system due to the failure of American to discover the threat of bombing after the terrorist attack in 9/11. Although American airlines are dependent on high technologies, the machines were not able to detect explosives, or dangerous objects. Wallis (1993, p.75) emphasizes that the x-ray technology has shortcomings in detecting plastic explosives despite the improvements in color enhancing and automatic imaging. Although the American introduced the FAA that monitors the passengers’ baggage, there were 20 cases in which other dangerous objects were not detected. However, the advancement in detection and inspection system has been improved and developed to a screener’s visual display unit (VDU) that displays the form of weapons. Staff will alert the security system if they have identified the image projected on the screen. The aviation industry must not rely alone in the benefits of information technology in the network of computer-based equipment. For an instance, the VDU can display the image of weapons that is detrimental to public security, but it needs trained staff to identify the object. Therefore, human capital must go hand-in-hand with technological advancement. Radio Frequency Identification Airline companies continue to devote in technological innovation to improve customers’ service. The latest demand and trend in the aviation industry is the use of radio frequency identification (RFID). Guah (2009, p.245) defines RFID as a “technology that uses microchip in a tag or label to store data.” The transmission of data is possible when the microchip, tag, or label receives the signal from the RFID reader because of radio waves; hence, the owner can trail the action of the bag. The source of airline companies’ devotion to IT is the hassle created by the old system called barcode system where higher rate of complaint from customers is generated. The consequences of incorrect baggage handling of customers are poor service, and high compensation cost. On the other hand, RFID ameliorates the security, operations, and management of the airline industry in guiding passengers. The level of dissatisfaction caused by barcode system gradually eliminated, thereby, it is replaced by satisfaction. However, implementing RFID requires a huge amount of budget. Thus, the strategy of smaller airlines is outsourcing where large companies handle the passengers’ baggage. Communication Management IT is not only substantial in reducing the cost and achieving the organizational objectives, but it is vital in the communication process of an organisation. Operation management caters to the human capital, stakeholders, and customers. To effectively and efficiently communicate the company’s agenda globally, internet has been utilized to bridge the existing gaps of information. The method use in reaching with employees is through intranets. According to Buhalis (2004, p.806), intranet is designed for a “user-friendly access” of employees to the organisations. Since airlines have branches worldwide, communication with employees is necessary to convey the marketing strategies and standardisation of service offered to customers. Furthermore, organisations must also communicate with the stakeholders. Stakeholders are the business partners of the airline industry, which have impact to their operations. The stakeholders and organisations must collaborate productively to establish internal efficiency and effectiveness. Note that stakeholders are part of the decision-making process of the companies; hence, their response to the strategic choice and management of operation by an organisation is relevant. Through the use of internet, the organisations are establishing a partnership with the customers. The aim of customer relationship manager is to provide a satisfactory service through demonstrating speed, reliability, flexibility, and quality. Thus, the airlines have invested in eTicketing, a paperless activity to save cost in printing. In addition, internet allows customers to manage their bookings online, to process their request immediately, to choose their preferences in flight schedule, and to arrange seats. The customers are searching for companies that can provide a better service; hence, airlines industry promotes interactive marketing. On the contrary, eticketless has limitations because other companies may differ in "technology standards", and etickets are unavailable in other stations, or branches of airlines (Qui, 2005, p.33). This problem in the airline industry has solved because databases such as Lufthansa system can manage the deviating technology standards. Furthermore, communication via the internet to customers is not limited to computers, but it is extended to mobile technology. Similar with computers, mobile allows travellers to check the booking schedule and arrange their seats in the utilization of the service. Through technology, the operators can perceive and analyse the preferences of the market because of communication. The operators could conduct a survey or observational method in an attempt to connect with travellers. Sustainability of IT It is factual that information technology helps companies to gain competitive advantage, but the question is on the sustainability of IT. Clemons and Row (1991) point out that the competition is fierce in the airline industry, which encourages the duplication of services using IT; hence, IT will no longer sustain competitive advantage. The strategy of other companies is imitating the innovation of another company, which signifies that there is no originality and difference in the kind of service offered by airlines. The brand recall of customers is affected because of product similarities. The authors suggested that to sustain the market using IT, differentiation of resource and integration of strategy must be applied. This will enable customers to differentiate the service of a particular firm from the competitors. Moreover, the imitators are usually the benefactors of the IT initiators. Thus, changing the structure of technology and other resources may add value to the airlines company. Conclusion Information technology is the driving force of change in the business operation of airlines industry. Due to the difficulty encountered by the company in operations management, it results in profit losses. To reduce the cost of production, at the same time to maintain the quality of products, the management decided to adopt technology. In the reservation and inventory management, airlines utilize the computer reservation system, which concedes the customers in purchasing tickets, choosing the flight schedule, alteration of schedule, and seat arrangement. With the committed aim of airlines to invest in IT, the CRS evolves to global distribution systems (GDSs) - a more improved system. The company adds services that involve the hotel reservation, itineraries, or destinations, and car rental. Moreover, the company relies on the databases provided by IT practitioners that investigate the pricing strategy of other competitors. It determines the revenue or sales generated during operations. IT is also used in detecting and inspecting the explosive materials from the terrorist, while RFID is the latest tool in baggage handling, which decreases the negative feedback of customers. Communication in the internal and external environment is made possible because of the internet. Thus, the organisational objectives are consummated due to the advantages of IT. However, it is encouraged that airlines must differentiate their structure and resources. References Buhalis, D., 2004. eAirlines: strategic and tactical use of ICTs in the airline industry. Information and Management, 41 (7), pp.805-825. Clemons, E.K. & Row, M.C., 1991. Sustaining IT advantage: the role of structural differences. MIS Quarterly, 15 (3), pp.275-292. Guah, M., 2009. 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