Supply Chain Management at British Airways - Essay Example

Supply Chain Management at British Airways Grade Supply Chain Management at British Airways The paper is focused around the concepts of Supply Chain Management and importance of the subject in the operations of any company. Supply Chain is the core component of any business. In order for a business to attain success and to maximize on it, businesses have to keep a close check on its supply chain because that’s where the company can reduce its costs and gain a profit which is its ultimate goal of the company. Since businesses are now operating in a globally competitive environment and are turning into learning organizations, there focus has now turned on building up knowledge within the organizations. However, it is important for businesses to realize that the pillar of any business is its supply chain. Thus it is important to critically analyze the supply chain of the business. Supply chain deals with all the processes undertaken to provide a valued product or service to the customer. Thus the supply chain consists of processes right from the source, to the make and lastly to the delivery. Ensuring that the service or the product reaches the final delivery in the standard quality with minimum cost, is what makes a company profitable (Taylor, 2010). In order to understand the feasibility of the supply chain management, we will consider a case in point relating to British Airways. Since British Airways is a well established and successful organization, it will also have well established supply chain process. Let’s discover whether the supply chain of British Airways can improve according to the changing requirements of British Airways. Introduction to British Airways British Airways is a name well known around the globe for its global airline service throughout the year at low fares. It also has the honour of being flag carrier airline for the United Kingdom. British Airways was formerly known as Imperial Airways. British Airways has a very good repute amongst its customers as it is known to be environment friendly. The company constitutes almost 48000 employees. Despite the economic crunch, the company has managed to maintain successful operations and is constantly striving to increase its profitability in the coming years. However that is only possible if the company identifies and builds upon its core competencies aligned with the changing trends of the global environment. The success of any company is determined by how it operates. The existing success of British Airways can be determined by the same reason. In the current situation, the company has set an exceptionally well working environment by determining certain KPIs (Key Performance Indicators) for itself. The KPIs that British Airways set for itself are financial, customers, operations & employees. The company pays a special importance to its employees as it believes that employees can make or destroy the organization. Thus various ways are sought to constantly improve on the ability of the employees. It is worth mentioning that the company actually measures and compares the performance via each of these key performance indicators. Since every KPI is worth the profit British Airways is gaining from its customers. Organisations need to ensure that they strategically work out their business plan so that they can attain long term success. They need to focus on their competitors, suppliers, bargaining power of substitutes, and the opportunities and threats prevailing in the market. Let us now enter the world of British Airways and discover the challenges that the company faces and the strategies that it undertakes to sustain its competitive advantage. Evaluating the Existing Supply Chain of British Airways A supply chain is actually a logistics network of any company. Suppliers, manufacturers, distributors, ware houses and retail outlets combine together to form the supply chain. Since it is called the supply chain it is evident that something passes through the chain to give the final customer a certain value (Cohen & Roussell, 2004). Products pass through the supply chain in the form of raw materials, the work in progress inventory and in the end the final product itself. Even if it’s a service industry, the service will have to pass through the same chain but in different forms. Raw materials will then be intangible in most cases but not in all cases, there will be a certain level of inventory if it is required to deliver the service. In case of airlines, planes have to be kept as an inventory to deliver the travelling service to the customer and instead of the final product there will be a final service (Ellram, 1991). Hence, in process of delivering the final service to the customers, the company incurs certain costs that add up to the total cost of the final product. In order to maximize profits, the company must ensure that the cost it incurs during its supply chain activities is at a minimum level without compromising on the quality of the product. This can only be ensured if the company has strong supply chain activities (Ellram, 1991). The supply chain of British Airways consists of two main suppliers that are Airbus and Boeing. Apart from these a lot of suppliers are present out of which 25 can have a huge impact on the performance of British Airways if any of them backed out or ceased to work. Since British Airways is not selling a product, its supply chain does not consist of retailers or distributors however it does consist of inventory i.e. (aircrafts, planes, etc) which clearly state the need for warehousing or inventory keeping. It is also notable that the inventory of British Airways is not stagnant; it is constantly on the move thus it doesn’t require extra storage requirements. The company has also embedded the element of technology in its supply chain and overall operations. Although technology was embedded through heavy investment but it helped the company to cope up with the changing global trends and to have an edge over its competitors. The fixed cost of technology might be high, but it reduced the other variable costs prior to technology which helped the company to provide the customers with the core competency that they have in comparison to their competitors, the core competency of providing low fare rates to the customers. Since we are now familiar with the supply chain of British Airways, we will now evaluate the current supply chain strategy being followed. The current strategy of British Airways is supply oriented strategy. British Airways is constantly building positive relationship with its suppliers as it’s the company’s requirement to buy millions of materials from its suppliers. Without a strong relationship with the suppliers the company would not have had survived the economic crunch. Let’s discover how the strong relationship helps the company to be profitable. Strong relationships with suppliers help the company to operate with cost effective measures. Suppliers can provide the necessary raw materials at a relatively lower cost. Although concentrating their focus on suppliers, is a good decision taken by the management of British Airways it is still a good decision only till the external factors remain constant. Constant is a never existing phenomenon, the only thing that is constant is change itself. To cope up with the ever changing external factors and customer requirements, the management of British Airways should focus on something more than just the suppliers (Ayers, 2005). The vision of British Airways is, “Our corporate responsibility vision is to become the world’s most responsible airline, and we have developed guiding principles that describe what we are doing to achieve this goal.” It is clearly visible that the vision of the company is focused on the word “responsible.” This depicts that the current corporate strategy and supply chain strategy are well aligned with each other and the vision statement. The strategy undertaken to fulfil the vision at this point in time is involvement in community investment activities, being environment friendly, constructing a workplace for sustainable employment and building a strong relationship with customers and the suppliers. The company’s vision has its corporate strategy embedded in it. The supply chain strategy in the current time period is pertaining to the vision and the corporate strategy but in the long run it might not be aligned with them. Thus before a negative outcome, it is necessary to explore opportunities and devise new strategies in order to maximize on profits and enhance the competitive advantage in the long run. Identifying Issues with British Airways As the existing supply chain strategy of British Airways is already focused on the suppliers what are the major issues with the supply chain of British Airways? The major issue is with the actual service provision and the ever changing customer trends. Even though a huge chunk of cost is controlled by the suppliers, an even larger chunk is in the control of the operations and service delivery. The major issue pertains to focusing on the supplier side and ignoring the operations and service delivery. The second major issue is the ever changing customer trends. The customers’ requirements keep on changing. Although British Airways is constantly trying to align itself with the changing requirements of the customers but it is doing so with only one factor that is the “supplier.” It is concentrating only on the factor of reducing the price through the suppliers only. Although it seems to be a viable option in the short run but in the long run, it would not only spoil the relationship with the supplier but would also put a halt at the success of the company. Companies can remain successful only and only if they comply with the changing environments. There are a lot of risks associated to the current supply chain strategy of the company. The risks are capital investment, brand reputation, deregulation, competition, fuel price, environments, financial commitments, and economic crunch and government interventions. How is capital investment a risk? It’s a risk because all the investments are based on planning and if the planning turns out to be wrong the capital investment will expose the company towards a loss that might turn out to be lethal for the company. The brand reputation is also a risk. If due to any simple reason, the company doesn’t live up to its brand reputation, the customers would turn to other companies for service acquisition as competitors exist. British Airways has the ability to offer global routes. This was one of the strategic plans of British Airways that allowed it to gain competitive advantage from its competitors. They are able to implement this with the differentiation strategy which they use for catering the market. This gave British Airways success until the demand decreased after 9/11. The revenues and profitability of the firm reduced with the increase in prices of fuels and other types of inputs requires for running the business. Supply chain problems started to occur and therefore British Airways had to look for ways in which costs would be non-fuel related. They began outsourcing their catering services. Gate Gourmet became the supplier of the airline, and costs were reduced this way for British Airways. Recommended Supply Chain Strategy The recommended Supply Chain Strategy focuses on the operational and service enhancement in a cost effective way. It requires the company to analyze its service operations such as food provision to the airline travellers, ticket provision etc. After analysis the company should cut down any extra thing that does not have much of an input but is adding up to the cost. Eliminating an extra olive in every food package and an extra booth for the tickets when the tickets can be provided online, can decrease costs to a huge extent. The company has reached its maturity stage and can only sustain it if it reduces it costs. The more costs it reduces the more profit it will gain. The company should also adopt thorough forecasting analysis not only for the customers but also for the suppliers. Since the bargaining power of suppliers is extremely high, they have the power to affect the profitability of the company negatively. It is important to have an insight about what the supplier is going to do in the near future. This would help the company to prepare for any unforeseen challenge related to the supplier. The partnering approach within the supply chain management should be integrative and strategic. The company should form alliances with the suppliers, i.e. treat them as a partner while dealing with them as a supplier. The company should also form alliances with its major competitors. It will not only help them enhance its resources but will also increase the capital that the company currently has. However in doing so, British Airways should clearly decide the level of information sharing with the partners. Conclusion In conclusion, it can be stated that the overall company should opt for an operational strategy and minimize uncertainty via strong forecasting analysis and integrative approach. All these things will add up to enhance upon the benefit of profit maximization. Since the company is actually looking towards opportunities to enhance their growth in future they should focus on the strategy of market development. Since British Airways has already penetrated into the markets it is operating in it should look for new opportunities that would expose the company to a whole new market segment. It needs to focus on the bargaining power of suppliers and customers and also ensure that all the stakeholders are addressed well by the firm so that long term success can be attained by the firm. A firm rooted supply chain can allow the bank end operations to work smoothly and allow the firm to face high success at the front end. REFERENCES Ayers, J. (2005). Supply Chain Strategies. 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