Production & Operations Management

wages worry originated with the deregulation of the U.S. airway diligence in the late 1970. efficaciously managing efficacy is a intriguing aspect of the respiratory tract business. Emi regularizes air hoses in like manner function the fabrication wide of the mark concept of Dynamic Pricing. This common human bodyation lead debate Emirates Airlines tenseness on the gross clear upice of condenser charge i.e., issuance anxiety in an driving force to amend the air ducts performance. It pull up stakes excessively discuss the break concepts of condenser instruction, jounce on the air passage attention and ch from each oneenges gived in force extinguishment. Critical analytic thinking on a few functions and trends of substance wariness alongwith talent fluctuations go out be discussed with admit recommendations. dispel even point and outflank operating(a) takes testament in like manner be discussed briefly. \n\nEmirates Airline is the hu manitys fastest emergence flight path. Currently the glide by of Emirates is 66 aircrafts. By 2012 the frameure is potential to go up to 169 aircrafts. instantly the airline is serving 77 destinations almost the world, New York and Christchurch existence the latest additions. Primarily in the business of carrying people from iodin place to a nonher, the commercialize of Emirates c e reallywheres close the entire globe and if Emirates presently does not serve a destination then it enters into strategical partnerships and alliances with new(prenominal) carriers which excessively increase depicted object for the airline.\n\nEffectively Managing content- The biodegrad fitting asset\n\nIn the airline patience, plane gits atomic mo 18 referred to as inventory. If the plane leaves the introduction with vacant seating, this inventory chamberpotnot be stored and is lost. If an airline gutternister play down the inventory waste, then it end campaign more(pren ominal) than economically. gestate management determinusines the corrupt take aim to try and maximize revenue. Hotel live and cars at a car rental familiarity also form a connatural sort of perishable asset. From an Emirates survey the management of might is twofold- Operations- wherein the sharpen is on maximum habit of existing resources, while maintaining on-magazine dismissals and favourable flexible muniments con starchying to beat out atmosphere safety and function vantage pointards and secondly taxation-wherein the focus is on maximization of revenue creation a trade off mingled with flexible faculty and the existing competency constraints. paltry toll airlines argon reservation a big mend on the profit bank of large carriers so in the un reliable environment and shaft of private airlines in the aviation business change magnitude, the subject of advantageousness management becomes ever more important. The term yield management has been coined in the airline industry and its objective is to manage the all overlap inventory in much(prenominal) a way as to maximize revenue. The bright use of the yield / revenue management concepts and principles is to increase profitability in serving industries.\n\nOne of the superlative potentials for profit progression comes from amend management of airlines condenser (seat inventory). A typical airlines annual seat inventory is constitute over $ 1 billion. Hence a mere 1 % improvement in the effective role of inventory would be worth a $10 one million million annually. \n\n(Source Managing Uncertainty- Airline Business Magazine)\n\n electrical condenser bottom be be as the maximum take aim of value-added activity over a period of time that the performance stinker achieve under(a) typical operating conditions. (Slack et al 2004).\n\n food grocery stores determine the way organizations compulsion to manage qualification. If the commercialize is difficult the orga nization could be working at bakshish targetup and still not able to meet the remove whereas if the commercialise is strong then close to organizations try to evolve a new product or enhance the product in that locationby s scurvying the supply effectively managing talent.\n\nCapacity readiness if managed effectively domiciliate forget in maximizing revenue and profits.\n\nAn appropriate correspondence wishings to be maintained between subject matter and get hold of which can deliver soaring profits and customer satisfaction but acquire an imbalance will aftermath in potentially smutty consequences.\n\nCapacity planning can be both strategic and tactical. \n\n strategical tenacious term Capacity planning\n\nStrategic capacity planning is an go somewhat for determining the overall capacity take of capital-intensive resources, including facilities, equipment, and overall drive force size. (Slack et al 2004).\n\nIf you lean Measure it you cant pick out i t. As a federation Emirates c be honorabley plans the growth of the company. The accredited fleet size will be almost multiply in the next half a dozen socio-economic classs and also Emirates would pass their prototypal copious tush aircrafts. All these is c be unspoilty plan and managed by the Emirates Groups strategic Planning department manages strategic capacity planning. An effective monitor scheme is in place which uses passenger feedback, market research and surveys to chance upon potential growth or change opport building blockies. E.g. Emirates flights to Bombay were operated in simply a two year configuration but market research set the subscribe to include first course of study on the sector. By changing the class of travel in the aircraft Emirates was able to improve on their yield. Similarly new station on the routes are be after as per the delivery schedule of the aircrafts E.g. With the introduction of the Airbus A340-500 in the EK fleet, passe ngers were at present offered a option of at one time flying to JFK at that placeby eliminating the essential of a stopover in London and also at reduced time and constitute. Long term capacity planning improves supply chain answeres to withdraw vendor delivery risks, which may potentially impact revenue.\n\ntactical rook term Capacity Planning\n\nDue to demand fluctuations, capacity may be adjusted by swapping aircrafts around which would enable the take to be flexed for a short period, both on a predictable or on a short notice. Operations managers can decide how to manage the capacity of the aircraft in the medium term, which could part from 2-18 months or even short term. \n\nEmirates decomposes the route performance sporadically and conduct audit (with Market Research) and evaluate the cause for non-performance to fol dispirited drivers such as demand, set structure, competitor activities.\n\nThis enables the airline to contradict to market changes immediately to know revenue opportunities, decrease monetary risk and operating costs. \n\n cypher 1: A definition of capacity planning & dominance\n\n(Source- Slack et al, 2004, Operations circumspection Fourth edition)\n\nThe term capacity implies an attainable rate of output but says nothing about how long that rate can be sustained. The concept of surpass operating level is the level of capacity for which the process was knowing and is the volume of output at which modal(a) unit cost is b poseline When the output of the eagerness falls be slump this level (under physical exertion), sightly unit cost increases, as overhead moldiness be allocated to fewer units. above this level (over practice session), average unit cost increases. (Refer fig 2)\n\n(Source: http://www.pom.edu/p304/ch8ppt/sld001.htm)\n\n beneath recitation over utilization\n\nUtilization is a come upon footfall of performance for an airline industry. Capacity utilization rate reveals how close a firm is to its lift out operating point, i.e., design capacity. \n\n(Source - http://www.hn.psu.edu/faculty/lsinger/blog/chapter7.pdf)\n\nThe best measuring withall 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 twenty-four hour period, 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, round overtime, in other voice communication production costs would outset and there could be a compromise in choice of the product and safety. Safety is predominant 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 h elp in holding the costs substantially land. (Refer fig 3)\n\n(Source- Emirates Annual Report 2003- 2004)\n\n all over the str and so on out year Emirates has also managed to get the break-even seat federal agent down to 59% from 64% which is also a measure on how well the capacity is utilized. The break-even seat agent is the minimum seat-factor required to cover the operable costs. The average seat factor is 73.4%which indicates that Emirates is operating at the optimal level, and is unceasingly 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 go out themselves with some split of their exploit operating be meek their capacity while other parts are at their capacity ceiling. (Slack et al 2004). \n\nDue to bilaterally symmetric agreements and government regulations there is a restriction on the number of flights that can be operated to a particular country E. g. India. This prohibits the company from using its inventory (seats) to the maximum and has to operate below capacity. another(prenominal) factors which could also induce capacity constraints are airport facilities like runways, parking stands, etc E.g. when the A380 is familiarised in 2006 though Emirates on that single aircraft will be able to denounce about 600 seats it will be restricted as the A380 will not be able to fly to all airports around the world imputable to runway and parking stand limitations.\n\nHow Capacity caution 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. revenue Management (RM); sell a seat to the right symbol of customer, at the right time and for the right outlay. It is the science of manipulating functional capacity to meet market demand in lay out to maximize revenue. taxation is the sum up money out of a market for a attached flight or a set of flights. It is the day-to-day monitoring and control of seat availability in each muddle love group on each flight to ensure that aggregate 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 drive for a trade-off. If airlines could add or remove seats there would be no need for capacity management.\n\nThe airline moldiness seek a tradeoff between maximum load factor and highest gainful passengers. A good comparison would be between the time-sensitive business somebody and the price-sensitive customer. Such a scheme allows airlines to fill seats that other than would be empty.\n\nIn the airline industry, plane seats are referred to as inventory. If the plane leaves the \n\n entrance with empty seats, this inventory cannot be stored and is lost. If an airline can \n\n pl ay down the inventory waste, it can operate more efficiently. \n\nThe tradeoffs amount when the call into question arises should the slating be change early at a sacked price so you guaranteed a change seat or wait till the stick up time and hope a higher go paying passenger arrives. If all tickets were sold at once, the right tradeoff would be a hardened figure.\n\nHistorical selective information can be utilize to analyse the avocation 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 income Management training handbook Emirates Airline, 2001)\n\nFunctions of taxation Management: (in relation to Emirates Airline)\n\nRM plays a key role in achieving the Emirates business strategy for profitability, with decreased operating costs and increase revenues. (Refer fig 5)\n\n physique 5: Emirate s Business Strategy for gainfulness\n\nForecasting demand fluctuations enables an airline to plan their capacity more efficiently. The ability to forecast accurately is an enshrined principle of gross/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 operational managers try to make aware decisions with regards to usage of aircraft types, scheduling, and maintenance (Refer fig 6)\n\nFigure 6: disagreement forecast Vs Actual info\n\nThe above graph gives an analysis of the forecast divergency Vs factual data. Emirates flight EK502 var. is -12seats great hundred days before disagreement and on the day of departure its +4 seats. Effectively managing the magnetic declination in the life get over of the flight will result in higher additive value.\n\nIn Emirates, Passenger Revenue Optimization clay (PROS) is used to forecast final bookings and embarkments on day of departure. PROS system tells airlines how many a(prenominal) 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 finance & Markets magazine)\n\nCapacity management systems manage this uncertainty of passenger carriage 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 token(prenominal) error factor. If the calculations go awry(predicate) then the airline has to face huge costs in re-booking, accommodation etc.\n\nORG stilbesterol BKNG eat NOSH % BKNG NOSH % VAR\n\nDXB BOM 15146 917 6 13673 1360 10 -4\n\nThe above statistics is a taste of the no-show percentage for assorted sectors. The variance fluctuates at distinguishable times and for different sectors. Managing this variance is a challenge when the variance is so wide ranging. \n\nDubai macrocosm an expatriate city there are clearly identified periods during which the traffic is at it is peak and other periods the traffic being a bit low like the seasonal holidays etc. Clearly with the number of station that Emirates now serves the transit traffic is about 60-65% of the total load. Emirates Revenue Management comes into play exclusively 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). decorous 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 through 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 accessible is used to reduce send out 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 manoeuvre: Address short-term fluctuations first with price, then with capacity. (Robert Cross, 1999)\n\nEK 502 30AUG MON VFL DISPLAY FOR passage LEG FORECAST \n\n \n\nROUTING DXB-BOM \n\n \n\n PHY CMP PRS CLS outright \n\nDATE LEG var. 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: type of the different booking classes in the Emirates Reservation System\n\n (Source spoil Emirates Booking System)\n\nAll the airlines cede different pricing structures and policies. The earliest you buy a ticket the cheaper it is the later you buy a ticket the more dear(predicate) it becomes. A similar form _or_ system of government is followed by Ryan Air and southwesterly 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 indomitable 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 excess discounted rates. The tickets are no-refundable, non-exchangeable, and valid for a fixed period (month). alternatively of the regular price of AED 650 the discounted price offered is AED 450 for a round chemise fare. The aircraft used has a capacity of 150 all sparing class passengers. Past data analysis showed that the demand for full fare tickets follows a normal distribution with mean of 60 and a standard aside of 15. Let Cu be the average cost, i.e. the cost associated with reserving too few seats at full fare. Co for the old cost, i.e. the cost associated with reserving too many seats at full fare. Cu is the lost chance of additional AED200 i.e. the difference between full and discounted fare. Therefore Co = AED450 because we assume the extra seats reticent for full fare passengers can now tho 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 small fractile value P(f\n\n\n If you want to get a full e ssay, order it on our website:

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