Management of Information and Operations Flow - Essay Example

Management of information and operations flow: British Airways Case Executive Summary Several factors exert pressure on organisations thus making them seek for effective operational processes (Slack, Chambers and Johnston 2007, p. 102). These factors include the need to deliver value adding products and services of exceptional quality, on time, and at competitive prices. In order to meet these objectives, the firms have to pay unwavering attention to their operational effectiveness. This paper proposes the adoption and complete implementation of Lean model in British Airways. Lean Model has helped manufacturing firms to achieve significant performance improvement. Currently, service providers are increasingly employing Lean to optimise their operations. In order to optimise its operational process, British Airways should employ Lean thinking in its operations. British Airways has adopted Astute Solutions to improve its flow of operations. While Astute ensures delivery of excellent responsiveness across BA’s global area network, Lean can be used to optimise the process. The focus should be on customers’ satisfaction through high-quality service provision. Carlzon (1987, p. 59) observes that the only true assets of the airline are its customers. The airline information and process flow should be focused on the customer. A smooth flow of the process cannot be achieved without an efficient and reliable operations process. British Airways Operational Overview British Airways is the leading United Kingdom International scheduled airline flying over 36 million passengers in over 216 destinations annually (British Airways 2014, p. 1). BA operates a fleet of 240 aircrafts (Airbus and Boeing). Effective management of information and operations flow has propelled British Airways to the status of one of the most profitable airlines in the world. At one time, British Airways was the leading airline in terms of profitability. In 1996, British Airways overtook Singapore International Airways to become the global leader in profitability. However, towards the end of the millennium BA’s profits slackened, and it recorded the worst financial results in 18 years. BA Operational Research group that is considered to be the largest private sector research group in the UK played a great role in directing a change that helped BA to rise in terms of operations and profitability. Changes in operations included operations planning and delivery, flight and services, and crew resources. During the same challenging period (2000-2003), BA adopted Lean in order to avoid being pushed out of business. However, since its implementation, a loss of focus on the model of the management has been witnessed. Lean is being used sparingly, in some areas. In areas where Lean is being used, there are a number of observable improvements. If the company fully deploys Lean in information and process flow, Lean can become BA’s vehicle for change, leading to optimised customer satisfaction. However, the management must understand that it has to be totally committed – a commitment that will begin at the highest executive level and cascade to all departments and levels. Lean Thinking Lean was first developed for the manufacturing industry. However, it is becoming popular in the service industry. Differences between Lean principles in manufacturing and services have been highlighted (Womack and Jones 2003, p. 55). Lean thinking was developed by the Toyota car manufacturer. Lean dramatically raised Toyota’s productivity and quality level. Though Lean has been used mostly in manufacturing firms, it is being adopted at a fast pace in areas such as transportation, construction, and services. Jones and Mitchell (2006, p. 34) defined Lean as a process optimisation methodology with a special focus on improving process efficiency. They further assert that Lean eliminates all activities that do not add value to the customers. Service businesses have been seen to be struggling with customer demands for high-quality service and cost reduction (Graban 2008, p. 29). Currently, there are many operations departments within the service industry where Lean potential has remained untapped. Despite the adoption of Lean in BA in 2003, about 30 to 40 percent Lean projects were not completed and were eventually withdrawn in 2010 and 2011. The challenges/reasons that led to the failure of those projects should be addressed because this could be the turning point for BA. Some organisational factors may have led to the failure of these projects to achieve Lean success. Different theories can help in making a change and sustain it. In order for Lean to effectively improve process performance, the effectiveness has to be empirically validated at different levels failure to which Lean services become irrelevant and meaningless. Lean application in the airline industry has not been well documented. According to Smeds (1994, p. 3), there are five different points that Lean focuses on. These factors are; i. Elimination of non-value-adding activities ii. Learn as you go iii. Trial and error iv. Promotion of rapid radical change v. Depends on intuition Smeds (1994) points were taken further by Womack and Jones (1996) who described them as possessing five principles; Value, values stream, flow, pull, and perfection. In 2006, BA was criticised for its slow innovation efforts (Doganis 2006, p. 165). Eight years later, it seems that this problem has remained largely unaddressed. In 2008, BA also failed in its attempt to target the price conscious consumer through low-cost airline operation (Eirma 2008). Despite a high number of criticisms (Piercy and Rich 2009, p. 1477), it is possible to develop the concept of ‘Leanness’ in BA in order to address the above problems. British Airways has taken a number of steps to create value in its process. BA has simplified its processes, eliminated waste, and improved flow with time. However, much remains undone. For example, the adoption of Lean Process Model by BA in 2008 left the airline marred by baggage handling backlogs, cancelled flights, and packing problems for its staff. Flow, pull, and perfection remain largely unaddressed. Adoption of Lean IT has to be followed by operational, organisational, and behavioural change. Over the recent past, an increase in complexity in customer needs has been witnessed possibly because the customers are becoming more educated and more demanding. A number of changes have occurred over the past one decade. There is increased global connectivity that allows people to compare and review websites. Price comparison has increased among the airline customers. Hines et al. (2004, p.1001) concluded that Lean exists on two levels: operational and customer-centred strategic thinking. BA can approach Lean from Smeds’ perspective. BA can begin its Lean journey where the first step involves applying Lean tools in its areas of operation within the organisation. BA has accomplished the first step – redesigned its management to advance superior customer focus and improved governance as well as leadership. The next level is the System level that involves creating a more integrated and sustained improvement model. In the System level, the employees develop a deeper understanding of the uniqueness of empowering the organisation. BA still needs to maximise service flow within and outside the organisation. BA can accomplish this by employing business process management and workflow technology. Business Process Management (BPM) and Workflow Technology BPM is focused on aligning the organisation with the needs and wants of the customers. This approach promotes business effectiveness while striving for flexibility, innovation, and integration with technology. Its focus is to improve processes continuously (Smith and Fingar 2003). This process is simply referred to as “process optimisation process”. There are five categories in the BPM lifecycle. These categories are design, modeling, execution, monitoring, and optimisation. In BA’s case, the management seems to have failed to execute all the steps of the process accurately and completely as it has been observed earlier. Therefore, BA needs to revisit the execution category of its business process management. In the optimisation phase, BA has not conclusively been retrieving the process performance information from modelling or monitoring phase. This may explain why BA has not created greater business value to make it the leading airline in the world. Most airlines lost their business strategy focus during the last 2008/2009 financial crisis. Nevertheless, for some key players in the airline industry such as British Airways, services remain as their cornerstone. The process of delivering these services plays the major role in ensuring that these players remain in business and continue to record profits despite the challenging economic environment. BA cannot underestimate the competitive advantage that is brought by process optimisation. Service Process Model Service is viewed as a sequence of processes with each of those processes generating a different value for the service in question. Input (expected service) Service Process Output (perceived service) Figure 1: Service Process Model The process starts at the point where an input enters. The success of the process is determined by the nature of value added to it. The value adding transformation of the process is as a result of the internal activity. In order to perform the activity, the process needs resources. In BA’s case, the resources are the staff, the airplanes, and other resources within the Company. For a process to function properly information is needed. Information facilitates, while the object triggers. The process output is the object out. For the process to achieve its objectives, services have to be of high quality. The quality of inputs, the quality of processes, and the quality of outputs determine the level of service quality. In the airline industry, quality of input refers to services such as clean and comfortable waiting areas, skilful and knowledgeable service personnel, and up-to-date equipments. Process quality refers to quality of interaction between the service provider and customers, and it includes factors such as availability, accessibility, and willingness of the service provider to help. Output quality refers to both tangible and intangible benefits. Delivering superior service quality to customers is the key to a successful process. The core characteristics of a process Information Object input Object output Transformation Resources Figure 2. Characteristics of a process. Adapted from Ljungberg (1998) The primary goal of the logistics system is to offer support to the strategic goals of the company. The value basic services that are valued by customers in airline service process include information on flight schedule and ticketing, communication in case of delay in flights, and ensuring that there in no delay in baggage delivery. Operations Management British Airways has recognised that human factor is critical to the functioning of its operating systems. Most formal models tend to assume that human beings in the operating system are fully rational. The operation management discipline has utterly failed to depart from this rational assumption. In order to realise greater benefits from its strategy, BA should incorporate behavioural factor into their system of operation. In its 2008/2009 annual report, BA asserted that in order to establish a high-performing business environment, it has to build a rewarding work environment. In such an environment, its talented workforce can maximise their ability (BA 2009, p. 34). BA seeks to make operations management its vehicle to success. In 2009, BA established a 3-year change programme dubbed ‘Complete 2012’. The programme was aimed at helping BA to achieve its vision of becoming the leading global premium airline in the world (BA 2009, p. 28). The restructuring effort made BA more efficient and helped it to draw new talent in its business. Under this programme, people were encouraged to move into different functions in order for them to gain wider experience. British Airways is focused on creating a diverse, challenging, and rewarding work environment while at the same time reducing its workforce to streamline its business. BA has two pension schemes: Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS) (BA 2009, p. 38). Table 1 below is an extract from 2009 BA Financial statements. Total Members March 31, 2009 APS NAPS BARP Active members 1,494 28,130 6,770 Pensioners in payment 19,266 15,699 Dependent pensioners 7,301 2,756 Deferred pensioners 3,143 22,307 584 31,204 68,892 7,354 Table 1: British Airways pension schemes Strategic Alignment Warnock (2000, p. 25) considers strategy to be the firm’s long-term approach to implementing its plan by employing the resources in order to achieve its objectives and goals. The consistent analysis of the importance of strategy to change over the last 45 years clearly demonstrates that the firms increasingly understand the significance of the role played by strategy in improving operational performance (Cummings and Daellenbach 2009, p. 239). Strategy plays a very significant role in aligning innovations such as enterprise information systems and operational effectiveness to achieve great operational performance. Restructuring Management Under ‘Complete 2012’ change programme, BA created a leaner and a more agile structure (BA 2009, p. 35). The Company redesigned its management to promote greater customer focus and better governance and leadership. Figure 3 below represents British Airways Management structure. Chief Executive Customer and Management Reporting to the Operations Executive Board Chief Executive Communication Customer Investments Customer Engineering Legal and government and industry affairs Engineering Finance and performance Safety and security Flight operations People and organisational effectiveness Operations Sales and marketing Strategy and business units Figure 3. British Airways Management structure BA view is that change must start at the top. The restructuring therefore involved reorganising the top management team. The top management is further split into two groups – the Management Board and the Customer and Operations Executive. This organisation captures the human factor in the Company as well as outside the Company. While the Management Board is responsible for providing strategic direction to the Company the Customer and Operations Executive Board is responsible for day-to-day customer service, and improvement in operational performance (BA 2014). Management of information and operations flow Technological Innovation Effectiveness (TIE) Model Issues that characterised 2000-2003 period included processes that were lengthy and complicated, impossibility of reporting on company-wide service failures, and multiple customer databases. These issues in additional to BA’s non-integrated collection of technologies complicated the BA challenges. The Technological Innovation Effectiveness model addresses these challenges. This model was developed by DeLone and McLean, who described the model as the extent to which information systems enable a firm to achieve its organisational goals and benefits (DeLone and McLean 2003, p. 11). The TIE Model includes six interrelated dimensions of information success namely system quality, information quality, user satisfaction, organisational impact, service quality, and intention to use. Today, there is a common tendency of searching for information over the internet. It is important to have a well-designed website that makes customers have a special experience of the company. The company’s agent should have enough knowledge about the subject in order to give the customers the information they need. People play a very important role because they are not only about outcomes but are also about the process producing these outcomes. For BA’s process to be seen as fair, its customers must give their input in order to influence decision. After performing poorly in the period 2000-2003, BA launched overhauled its technology infrastructure and service processes. Its focus was expansion. It adopted Astute Solutions ‘ePowerCenter’ in order to accomplish its expansive objective. The ‘solution’ gave BA existing and potential customers a different view of BA, streamlined processes, and enhanced information gathering and reporting. Prior to the adoption of ePowerCenter, BA relied on its 11 non-integrated systems. ePowerCenter solution runs on a single application on a single, global database, and it is currently being used in over 25 countries. This solution reduced its technological platforms. As a result, it enabled better cost management across the Company. This solution eliminated degradation in performance even during peak load times when approximately 230 agents were processing cases concurrently. This solution eliminated many challenges that were being experienced by BA at that time (BA 2014, p. 2). This ensured that BA regained its competitiveness and maintained it by ensuring that BA provides and maintains good levels of customer service. The most desired outputs that have been realised from the adoption of ePowerCenter solution include: i. Improvement in baggage delivery and tracking ii. Improvement of customer databases iii. Ensuring that the service representatives get complete view of customer information in real time. iv. A unified, highly scalable solution that handles interactions, addressing complex customer complains in less than one hour v. Automation of workflow between different departments within the organisation and; vi. Enhanced service offering based on better information (BA 2014, p. 30). Deployment Flowchart Deployment Flowchart is recognised today as an ideal technique for capturing operational details of business activities. A strong deployment flowchart can display process knowledge clearly. It encourages the subsequent improvement of the process. Through process flow, inputs are transformed into outputs. A process cannot flourish unless it is led. As it was observed earlier in the paper, British Airways adopted the Lean Model but it immediately lacked leadership that rendered it inefficient. This observation reveals the importance of integrating the process with the strategy of the firm. Conclusion and Recommendations As it has been found earlier in this paper, British Airways has been criticised for poor reliability and baggage handling, and slow innovation (Doganis 2006, p. 165). This shows that there are some instances where BA has failed to respond to the changing customer needs. This paper recommends provision of good leadership in the use of Lean model. BA should consider establishing a ‘Lean’ leadership team that will give direction regarding the application of Lean into the Company. Integration of Lean and Deployment model in British Airways will help the management to capture all the operational details of the Company. The five fundamental principles of Lean can be applied to optimise the service process in British Airways Company. Through customisation of Lean, BA will be able to fit Lean principles into its organisational specific context. BA should start its Lean journey in order to achieve its strategic vision of becoming the leading airline in the world. References British Airways. 2014. British Airways’ Global Customer Relations Program Takes Off with Astute Solutions’ ePowerCenter. Astute Solutions. Available at www.astutesolutions.com Carlzon, J. 1987. Moments of Truth. Cambridge: Ballinger Publishing Company. Cummings, S. and Daellenbach, U. 2009. A Guide to the Future of Strategy?: The History of Long Range Planning. Long Range Planning, 42 (2), pp. 234-263. DeLone, W. and McLean, E. 2003. The DeLone and McLean Model of Information System Success: A ten-year update. Journal of Management Information Systems, 19 (4), pp. 9-30. Gliatis, V. and Minis, E. 2007. Service Attribute-Process Matrix: A tool for Designing and Managing Services. Journal of Systems Science and Systems Engineering, 16 (3), pp. 257-276 Graban, M. 2008. Lean Hospitals: Improving Quality, Patient Safety, and Employee Satisfaction. Productivity Press. Hines, P., Holweg, M. and Rich, N. 2004. Learning to evolve: A review of contemporary lean thinking. International Journal of Operations & Production Management. 24 (10), pp. 994-1011. Piercy, N. and Rich, N. 2009, High quality and low cost: the lean service centre. European Journal of Marketing. 43 (11/12), pp. 1477-1497. Slack, N,. Chambers, S. and Johnston, R. 2007. Operations Management, 4th Ed. Pearson Education Limited. Smeds, R. 1994. Managing Change towards Lean Enterprises. International Journal of Operations and Production Management. 14, pp. 3 Smith, H. and Fingar, P. 2003. Business Process Management: The Third Wave, Endorsed by the Business Process Management Initiative and the Workflow Management Coalition. Available from www.bpm3.com Warnock, D. 2000. Understanding Strategy. Strategy and Leadership. 28 (5), pp. 25-30. Read More