Operations Management on the Airport Perimeter. In-flight Catering and Services

Contents

1. Introduction

2. Operations Management on the airport perimeter
2.1 Facility layout
2.2 Process selection
2.3 Demand to the supply chain
2.4 Forecasting supply and demand
2.5 Inventory

3. Vulnerability in the operations system
3.1 Unknown demand
3.2 The ordering process

4. Key findings

5. Conclusion

6. References

1. Introduction

This paper refers to a catering supplier called creative catering Ltd. (CC), based in Basel Switzerland. In 2015 they opened a new branch called “Inflight Services and Catering” (ISC), providing services to the inflight industry (Hovora 2001, p.177; King 2001,p.182). ISC serves on a high-class level to private, corporate, governmental and royal customers from an international setting with multicultural backgrounds (Hofsteeded et al 2010) who do not have a local airline service for their needs (Hovora 2001, p.177). ISC cannot be compared to the more basic services provided on first-class charter flights (CF) (King 2001, p.182), because it provides to a smaller audience focusing much more on individual needs as a CF (Chang 2007, p.47).

ISC is delivering up to 4 flights a day, to small business jets and wide-body long-haul aircrafts. Listed below in Figure 1, is an overview showing the scale of the main services and goods provided.

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Figure 1: Overview of ISC Services (Patrick Wiget, 2019)

As mentioned by Stevenson (2009, p. 7), “goods and services often go hand in hand”. Based on Figure 1, the division related to the tendencies between goods and services and its interaction (Stevenson 2009, p.7) is shown in Figure 2.

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Figure 2: Division of the process related to goods and service, source: ISC www.inflightcatering.ch (Patrick Wiget. 2019)

In 2018 the ISC generated a revenue of CHF 280`000.00 which is about a 4th of the CC total income. The combination of services and goods provided by ISC (Stevenson 2009, p.7) in relation with the difficult forecasting situation will be discussed thoroughly throughout the paper (Stevenson 2009, p.75). This difficult relationship shows how important a clearly defined operations management and process setup is (Stevenson 2009, p.10; Slack et al 2013, p.5; Greasley 2013, p.3). Catering is the largest part of the branch, therefor this paper mainly considers the inflight catering sector with its process of the ordering system, discussing the vulnerability and challenges within the system and analyzing a lean approach to improve its performance and evaluate new findings.

2. Operations Management on the airport perimeter

Operations Management is the term used to describe a self-contained organizational unit that is responsible for the production of goods and/or services (Stevenson 2009, p.4). Part of the service of ISC is operating on the airport perimeter, a security domain described by Bassetti (2018, pp.288) with a “complex interorganizational nature”. The interacting main stakeholders are: a) Caterer (ISC) b) Ordering client c) Passenger who receives the service at the end of the supply chain (Flynn, Hue and Zhao 2010, p. 58), with a wide variety of needs and goals (Bassetti 2018, pp.288-311; Jones 1995). Before it is possible to serve clients properly in the new aviation environment (King 2001, p.182), the provider needs to have a thorough knowledge of the industry by consulting experts (Womack 1990, p.3; Petropoulos 2012), what did not happen in the case of ISC. A risk identification is essential (Asbjornslett 2009, p.24; Hollnagel 2004, p.181; Slack et al 2007, p.122) in order to design (Stevenson 2009, p.134) the processes and facility layout. Focused effort needs to be put into preventing any security or safety issues (Stevenson 2009, p.248). The impact of such a risk would be very harsh (Jüttner & Ziegenbein 2009, p. 213; Gaudenzi 2009, p.79) but the probability of occurrence is unlikely (Gaudenzi 2009, p. 79). ISC became aware through its findings, that the services had to be provided by a new legal entity, eliminating the risk for CC to be involved.

2.1 Facility layout

Since CC already had an equipped kitchen, ISC could gain an advantage and use the infrastructure and staff from CC, therefore no infrastructure and HR investment had to be made (King 2001; p.183). As shown in Table 1 the starting investments were saved and reached up to CHF 374`000.00.

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Table 1: Investment that did not have to be made by using the existing CC infrastructure. (Patrick Wiget. 2019)

Furthermore, the facility rent could be split, as well as other monthly costs. Adapted to the Stevenson (2009, p.4) organization chart, the CC / ISC chart is shown in Figure 3, with the aim to use the synergy to ensure an efficient and smooth operational process (Stevenson 2009, p.248; Slack et al 2007, p.524).

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Figure 3: Organization Chart CC and ISC (Patrick Wiget, 2019)

To explain the organization chart: In blue is the organization as umbrella (Stevenson 2009, pp.15-16) which monitors the goals and the whole cooperation, in green is the CC company which also embodies the marketing and HR functions for the ISC and marked in red is ISC which is integrated as an independent, because of the above mentioned risk mitigation (Stevenson 2009, p.15). Having the organizational structure set to assure a professional service to the customer, Stevenson (2009, pp.9-10) mentions, “a key aspect of operations management is process management”.

2.2 Process selection

As mentioned by Stevenson (2009, p.236) “process selection refers to deciding on the way production of goods or services will be organized”. Because of ISC’s different engagement to CC, in both goods and service oriented processes (Greasley 2013, p.8; Stevenson 2009, p.10) it needed not just legal independence but operational processes as the ordering system shown in Figure 4 as well. Because the main part of the ISC was the production of meals shown in Figure 2, the process type by Stevenson (2009, pp.236-237) “A job shop” would be most similar to the characteristics of ISC process showing in Table 2.

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Table 2: Description of characteristic of the process type (Patrick Wiget, 2019)

Below is the visualization of the ordering process (Slack et al 2007, p.528) that was designed to start the inflight services provided. Depending on who was just working, the processes were executed as defined or not, sometimes point 2.1 as shown in Figure 4 was omitted, due to time pressure the communication to the kitchen or to the dispatcher was not executed according to the process sequence (Slack et al 2007, p.524) and step 5 jumped to step 7 as mentioned in the following Figure 4. Further, no documentation was available when and why the process was changed, therefor ISC was not able to provide a basis on which an improvement suggestion could have been built up (Slack et al 2007, p.524).

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Figure 4: The ordering process visualized by ISC ( Patrick Wiget 2019)

The above mentioned ordering process was heavy on administrational efforts, step 1 to 7 often took more time than preparing the food and would put a lot of stress on the production in the kitchen, as the “total throughput time would be close to the demand lead time” (Slack et al 2007, p.540). In addition, the time of step 1 to 7 was charged to the client as mentioned in Figure 4. Operational processes are vital for they have a direct impact on customer satisfaction (Martin et al 2010, p.227; Stevenson 2009, p.4). Having to serve several flights a day made it very complex and time consuming. A possible approach could be a structured forecasting procedure, having a clue what would be ordered, shortening the processes mentioned above in Figure 4 by having the items on stock that would be needed the most (Stevenson 2009, p.146).

2.3 Demand to the supply chain

As described by King (2001, p.183) CF have a more stable demand as the service of ISC. The need for an inflight service by ISC arises very irregularly, i.e. only when a passenger or his company charters an aircraft. Such patterns of ”passenger consumption behavior” (Hovora 2009, p.177) are not predictable and the demand occurs “infrequently and is interspersed by time periods” (Martin et al 2010, p.226; Slack et al 2007, p.530) and with a lower volume and higher variety as in the CF demand (King 2001, p.183). In addition, there are individual orders that are not pre-booked (Hovora 2009, p.177; King 2001, p.184) and requirements like: 1) halal food, 2) kosher and 3) gluten free; to mention the most occurring of goods or service provided, for which demands are received at very short notice, up to 12 hours before departure, and latest at 4 pm in order to organize all the items needed (Chang 2009, p.52). A further challenge are the opening hours of the supply chain partners to shop the ingredients and the volume of the order that can vary greatly, depending on the size of the aircraft, number of guests and distance of travel (Hovora 2009, p.177). Martin et al (2010, p.226) call such patterns "lumpy". As in general goods related processes involve more use of inventory (Stevenson 2009, p.9), but with the mentioned “lumpy” patterns (Martin et al 2010, p.226). Having a high stock for “buffering” (Kalaitzi et al. 2017, p. 799; Slack et al 2007, p.239) would mean an unrealistic investment with the risk of fresh food and beverages with a “short shelf life” as mentioned by King (2001, p.183) and Slack et al (2007, p.524), to suffer from spoilage of food (King 2001, p.183). On the other hand, a permanent situation of having “too little inventory” (Stevenson 2009, p.35) correlates with the risk of shortage and dissatisfaction of the customers. On the other hand this is the concept of a lean approach, “the removal of inventory in order to expose operations problems” (Slack et al 2009, p.541). It is necessary to foresee which approach can guarantee a smooth process, for this purpose the supply chain up- and down-stream is visualized in Figure 5 (Slack et al 2007, p.528) to create a basis for a solution.

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