These are the stakeholders that would be affected by the current decision that has to be made. ANALYSIS Manufacturing versus Services Traditionally a manufacturing organization, OFF has worked over the years to align its manufacturing processes with the needs of its customers. It has realized growth in manufacturing, and has also taken steps to diversify its product line (25% of production is non-interiors). At this point, its experience in service has been limited to sales of its products and supporting the design processes of certain customers.
The ANA Offer and Discussion of OFF Alternatives Fell-FAA Products (OFF) has been approached by Northern American Airlines (ANA) with an opportunity to assume complete management of the airline’s aircraft interiors business. Based on the offer presented by ANA, there are three alternatives to consider: (1) Accept the offer and enter the business of airline interiors management; (2) decline the offer and continue to work on improving its core manufacturing business; (3) agree to manage portions of the service model or only certain geographical locations.
Since ANA stated it would like to eliminate this part of the business from its organization, agreeing to assume only portions of the business (Alternative (3)) does not appear to be an option. However, OFF may devise a plan to divide the services among itself and other companies. This option is worth considering, as it may reduce the required investment, allow the sharing of service industry expertise with OFF, and thereby potentially reduce the overall risk.
Alternative 3 may still require OFF to develop a service infrastructure of its own to some varying degree, and there would need to be further investigation to determine the different options for sharing the easiness and if this option might eliminate benefits achieved using economies of scale. The challenges to building a service infrastructure are further discussed below in relation to Alternative (1). In order to implement Alternative (1), OFF must, based on its current situation, consider the inputs it will need to build a successful interiors management service organization.
Fps lack of experience in the service sector is a concern as is the large investment required to develop the necessary service infrastructure. These required inputs (based on information currently available) have been categorized and ranged along the skeleton of the Fishbone Diagram which has the development of a “Successful Interiors Management Service Organization within OFF” as its objective While there seems to be a number of challenges that would need to be addressed with respect to implementing Alternative 1, there are strengths and opportunities to this choice as well.
SOOT ANALYSIS for Alternative (1) – Proceed with Opportunity to Develop a Successful Interiors Management Service Organization within OFF Implementing Alternative (2) will require no additional action on the part of the OFF. Strengths, weaknesses, opportunities and threats associated with this decision are outlined in the SOOT Diagram C. SOOT ANALYSIS for Alternative (2) – Decline Opportunity to Develop a Successful Per the SOOT analysis, if the OFF approves of Alternative (2), it will be discarding an opportunity to diversify into services and move away from its dependence on product sales.
A second more serious concern is the implications of a competitor accepting this opportunity. The impact on future sales and market share could be significant. Not accepting Ana’s proposal is a risky proposition. Therefore, although OFF has emitted experience in the service industry, OFF is advised to move forward with either Alternative (1) or Alternative (3) and accept the offer to develop an aircraft interiors management arm to its existing company. This decision is based on: 1) The opportunity to diversify being inline with Fps desire to expand. ) Having the support of a major airline and having it as Fps first guaranteed customer. 3) The option to partner with other companies to mitigate financial risks as well as those affiliated with the learning curve. 4) Entering a service sector with few competitors – first-mover’ advantage. ) The ability to protect future sales channels for the company’s production arm. Factors to Consider Prior to Moving Forward Prior to moving forward, it is useful to consider a number of ‘opportunities for improvement’ as far as current practices are concerned.
The operational flow chart below details the current maintenance process as performed by ANA. On average, it takes 1 employee 19 minutes to replace a seat cover; most of the time is dedicated to trial and error in fitting the covers to the appropriate chair, as they are not currently sorted or identified by seat type once they come back from the cleaners. As identified in the flow chart, damaged seat covers are reported directly before need of use; thus causing the rush orders from OFF and causing Fps to stop its normal production cycle. Pick] If Fell-FAA managed the entire process, could the damaged cover seats be identified earlier in the process? Could a stripped cover seat be deemed damaged beyond repair and sent back to Fell-FAA? As the cover returns, it triggers an order of the same seat type; after all, the covers are labeled and bar-coded by OFF. Could a cover be deemed damaged after its dry cleaned but before it is cycled back into the leaned covers? Similarly the cover could be returned to OFF to trigger an order.
These scenarios would be possible if the maintenance crew and dry cleaning crew were trained to identify standards of quality. This process would nearly eliminate the need for OFF to interrupt their normal production runs to make rush orders and it would decrease the number of airplanes that would be grounded waiting for a replacement seat cover. The flow chart below proposes the early identification of damaged cover seats. This new process would allow OFF to better meet its customers’ current needs in guards to manufacturing such as cost, quality, and dependability.
Costs would decrease due Fps increase in lead time on replacement covers and the upfront identification of a damaged cover would decrease the need for the airline to hold safety stock, thereby reducing inventory as well. OFF could investigate remunerating the damaged covers and reduce costs even further. Quality would increase because a more level production system results in fewer rush mistakes. OFF would be more dependable as the new process would increase its ability to be on- time and not ground an aircraft. In this perspective, the new business would not detract from the core manufacturing activity, it would enhance it.
Sorting Lack of a sorting process is the cause of poor productivity; measured at 19 minutes per seat cover change. OFF could introduce a technologically sophisticated system at higher costs or a basic system which involves more labor but lower costs. The first is a bar coding system. Under this premise, each cover seat would be scanned with hand-held readers at each point in the process; leaving OFF, entered into ANA inventory (placed in airline bin), placed on seat, taken off seat, shipped to dry yester would allow a crew member to pick any cover out of the bin, scan it and have it’s identity known (Boeing 747, economy A).
If OFF were to utilize such an electronic system, it could also be used to identify damaged covers by scanning the cover and pressing D for damaged, the system will trigger an order. [Pick] This new process would allow OFF to better meet its customers’ needs in regards to maintenance such as cost, quality, and dependability. A basic sorting process could reduce the time per seat cover change by half, thereby reducing costs. Also outsourcing and the use of non-union labor would decrease costs. Increased efficiency at a lower cost is increased quality and in this case, fitting the right cover to the right seat in minimal time is quality.
Dry Cleaning OFF does not intend to acquire additional infrastructure if they accept NASA offer; except perhaps for dry cleaning. Perhaps Fps should investigate purchasing an existing dry cleaner with experience in caring for this type of material. It would be advisable to at least hire a dry cleaning expert to manage the process. Manufacturing Competencies & Service Adjacency’s Management at Fps is concerned that they are not cut out for the service industry. OFF should consider that this service does not have a high degree of interface with the direct consumer, so high levels of standardization are possible.
OFF describes its core competencies as manufacturing flexibility, materials management, and communication with customers. Manufacturing flexibility allows OFF to take rush orders and produce interiors with various textile materials. OFF knows their manufacturing process and has a system for dealing with systematic and extraordinary customer requests. This process can be applied to the service end of things as well. Materials management is associated with organization and handling f various material types. This process could also be applied to inventory management of seat covers.
In addition, customer service is Just as important in a manufacturing realm as in a service realm. If OFF is good at customer service now, they can apply the same philosophy to the service realm. Glen Fell notes, “Companies do business with us because we’re good at making things. ” If Glen looked deeper at why his company was good at making things, he would see that his company is good at standardized processes; processes which are transferable to the proposed Job of interior maintenance. Location Should OFF accept this new business they will be responsible for servicing aircraft on both the east and west coast.
OFF only has current operations on the east cost; probably making servicing the west cost center more timely and costly. The map identifies Ana’s maintenance centers and Fps manufacturing facilities. OFF should consider purchasing or locating at least a dry cleaning operation near the west coast to increase time efficiency, decrease inventory holding, and decrease transportation costs. Labor should be a consideration in the success of this venture. OFF must understand he culture of the current union employees who do this work for ANA.
Will the current union workers lose hours or Jobs due to this change? If so, the union workers could try to sabotage the OFF crew due to ill will. If OFF can hire a crew at $15 per hour and reduce time per seat cover change to 10 minutes, labor cost will be reduced from $475,000 to $125,000, -74% annually. This proposition can only be a reality if the crew is able to work in a non-hostile environment. ACTION PLAN At this point, it is not possible to resolutely determine whether Alternative (1) or (3) is the best fit for this situation.
Therefore, OFF is advised to take the following phased course of action outlined below. It also seems to make sense to consider whether some or all of the service type businesses that are part of the supply chain associated with providing the complete management of the Ana’s aircraft interiors business should be outsourced and managed by an outside supplier. At the outset, a timeline should be drawn up for completing phases I and II. Additionally, cross- functional teams should be created to implement each of the steps below.
The members of the team should include management and field knowledge experts who eave a stake in the outcome, as well as objective participants who might not be directly affected by the step and who can therefore provide alternative input. Phase I 1 . Clearly identify the scope of work which ANA expects to be assumed. 2. Establish the processes flow in the form of a diagram with explanations. This should encompass the entire scope of work. There should be an overall general flow, with each major sub-process having the input, conversion processes / tasks, and outputs clearly shown, but at a high level.
Each of these sub-processes should be broken down into greater detail on another sheet(s). Depending on the size of the sub- process, it should continue to be broken down until a reasonable level of detail is available. The information provided at each level should be able to answer the question of what will be entering the sub-process, what type of process/service will be performed, what tools/technology/machinery will be needed to perform that process successfully, and what skills will be required for staff members who are a part of that process. 3.
Regulations/constraints should also be identified including legal/industrial regulations for dry-cleaning, seat cover material, for safety and other easiness constraints such as Ana’s required turn-around times for airplane seat re- covering, deadline for implementing this service, etc. 4. Clearly identify with ANA where it expects the re-covering to take place or if it is flexible. Begin to establish a strategy for the geographical implementation of interiors management. Note that this may require numerous iterations as more information is received. . Once the machinery/technology/tools/storage space/workspace needs have been identified, OFF should determine what it can obtain from ANA in the form of costs. It should then estimate the costs for obtaining the remainder. With this information, OFF will have a better understanding of the financial requirements, together with preliminary plans on location, the type of processes it will need managed, staffing needs, etc. Next it can begin Phase II: 1 . Determine Fps financial position with regard to implementing the interiors management service.
Answer the following questions: Will outside financing be required? How much is ANA willing to assist to see this service management become a success? Will it be necessary to enlist partners in this business to gain access to geographical resources, warehouses, service knowledge, etc. And to share risk overall? B 2. Based on the information gathered in the above steps, create the implementation plan. This plan may undergo several iterations depending on timeliness, capabilities/constraints of FOP and any of its potential partners, and requirements of ANA.
It will require the project leader to identify the management structure which will oversee the plan implementation and break each process down into the details needed for implementation. Phase Ill Implement the plan and revise as necessary. Using this phased approach, OFF will be able to determine which alternative, (1) or (3), is the best fit for this situation; and if (3) is chosen, the phased approach will also allow it to determine to what extent the business is shared.
Risks / Contingencies Once the final implementation plan has been prepared, a risk assessment with risk ranking and mitigation/contingency plans can also be prepared. The main weakness of this plan may appear to be the time required to reach Phase Ill, and whether ANA is willing to wait. However, careful planning is important to successful implementation, and if needed, OFF and ANA may work out a way in which parts of he service business are handed over more quickly in order for ANA to begin to realize benefits.