Capacity utilisation atiya&wadhihah

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CAPACITY UTILISATION BY: AIN ATIYA AZMI BT NAZMI NUR WADHIHAH AMIRAH BT MOHD SHOKRI IISM A LEVELS (2017)

Transcript of Capacity utilisation atiya&wadhihah

CAPACITY UTILISATION

BY: AIN ATIYA AZMI BT NAZMINUR WADHIHAH AMIRAH BT MOHD

SHOKRIIISM A LEVELS (2017)

CASE STUDY: WORLD’S AIRLINES INCREASE OUTSOURCING

O Previously, all global airlines had their own team of qualified aircraft engineers.

O Recent move is towards outsourcing aircraft maintenance.

O E.g: Jet Blue planes are sent to El Salvador for maintenance, US Airways cut 2000 mechanics jobs

O Malaysian Airlines denied rumours that it wants to outsource its in-flight retail operation, Golden Boutique

1. Analyse the potential benefits to major airlines from outsourcing the maintenance

of their aircraft. (10 marks)

O It is cheaper. Airlines do not need to employ and train their own mechanics.

O The mechanics working for outsourcing companies in countries such as El Salvador do not have to be licensed and are paid a fraction of the wages earned by mechanics working directly for the airlines.

O The cost saving will help airlines be more price competitive and boost profits.

O There is greater flexibility. By removing mechanics from the payroll and buying in services, fixed costs are converted into variable costs.

O Contracts with outsourcing companies can be cancelled if there is a fall in demand.

O There will be no need to make staff redundant.

O It is easier to manage. O The airlines no longer have

responsibility for recruiting,training and retaining staff .

O They will no longer have responsibility for employee rights at work.

O The HR department may be reduced in size as there are fewer direct employees

2. Explain two reasons why Malaysia Airlines may not want to outsource in-flight

retailing. (8 marks)

O • Controlling quality − the in-flight retail operation called Golden Boutique has an important impact on passenger perception of Malaysia Airlines. If the retail operation is outsourced, Malaysia Airlines will lose some control over the quality of the service and this could damage its reputation.

O • Loss of jobs − Malaysia Airlines will have to make some employees redundant. This will lead to demotivation in the workforce and there may be industrial unrest during the transition.

O • Loss of profit − Golden Boutique offers good value to Malaysia Airlines. Outsourcing the operation may lose the airline revenue and could reduce profits – the outsourcing company will only offer a service if it is able to make a profit.

3. As a business consultant, write a report to the chief executive of your own nationalairline discussing the process of outsourcing and recommending whether all non-coreactivities should be outsourced. (14 marks)

O The process of outsourcing involves airlines using other businesses to deliver services such as baggage handling, in-flight meals and retail operations. It may also involve the airline using a third party to provide operational activities, such as maintenance of aircraft .

O Should all non-core activities be outsourced? An airline would need to consider the following issues.

O • Cost saving from outsourcing − specialist firms providing meals, for example, will benefit from economies of scale and can, therefore, offer competitive prices to airlines.

O • Impact on quality and aircraft safety – an outsourcing firm is specialised and,therefore, has expertise in the service it offers. Quality may be improved as airlines have less knowledge of non-core activities. However, outsourcing does not guarantee quality and there is a loss of control over quality for the airline. Minimum service level agreements will have to be drawn up and monitored.

O • Core activities − outsourcing frees up management time to devote to the core activity of the airline, leading to improvements in performance.

O • Flexibility − the airline is responsible for fewer staff and will find it easier to respond to changes in demand.

O If demand falls, contracts can be terminated; if demand rises, contracts can be extended.

O However, if outsourcing fails, it may be difficult and expensive for the airline to reopen its own operations.

O • Security − airlines have a particular need to protect security as they have a great deal of sensitive information and there is always a threat of terrorist attack.

O Thus, would using an outside business to perform an important IT function present a security risk or would the airline benefit from the expertise that an outside firm can offer?

O • Customer backlash − outsourcing telephone call centres may lead to customer dissatisfaction.

O Outsourcing can also lead to negative publicity as it is often seen as a cost-cutting exercise.

END OF PRESENTATIO

N.THANK YOU.