Managing operations

Individual Research Report

“Managing Operations for Customer Satisfaction and Enhanced Profitability”

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The role of operations management is the production of goods and services and to ensure efficiency and effectiveness in the operation process, that means use as little resource as needed and meet the customer requirements. Moreover, it is converts inputs (in the forms of materials,labour and energy) into outputs (in the form of goods and services) and aims to increase the content of value-added activities in any given process in an organization. (Meredith and Scott 2007)

In this report, will be discussed the role of operations management in the airline industry with the main idea of how to reach customer satisfaction and at the same time enhanced profitability withoutgetting both into conflict.

The airline industry is a competitive market and the entrance of a new breed of low cost airlines beginning at the turn of the century has accelerated the demand that full service carriers control costs. The economic crisis has brought a collapse in demand; in consequence, companies have been obliged to make significant economics adjustments, as reduce capacity andfrequency. According to IATA, “this dramatic fall in demand can lead to a rise in unit costs that are not related to fuel, and which cannot be cut proportionally”. Furthermore, adding the fluctuation in the oil prices, managers need to consider lowing costs in order to fulfill any increase in those prices that might affect companies’ profit. (Estrategia 2009)

In the airline industry, it is alwaysa need to reach high levels of customer satisfaction and enhanced profitability. In this time of economic crisis, that need should become a priority to airlines in order to increase revenues; starting from the point that if you reach customer satisfaction that will lead to enhanced profitability from an operations management perspective. Managers need to understand that chains of cause and effectbetween their operational drivers and business performance so that they know how to get the right and most effective response from their limited resources.

1. Customer Satisfaction

When the company is looking for customer satisfaction, is all about what customers want. In order to fulfill that satisfaction, there is a need of a good service quality and improvements in service delivery.▪ Service quality

“There is a definition of quality, which suggests that quality is determined by a product or service’s fitness for the purpose for which it was designed. On that criterion, Southwest airline offers cheap, reliable, frequent service that get passengers from A to B as fast as possible and with a minimum of fuss. On that criterion, Southwest airlines can be said to beoffering a high-quality service.” (Hill 2005)

The performance of airlines in terms of being on time is a key measure in terms of meetings customer needs and expectations. In consequence, there are questions that need to be asked:

✓ Are we having on time delivery service?

✓ Our customers are satisfied on how we are dealing with flights delays, cancellation and lostluggage?

From an operation’s perspective, when the objective is customer satisfaction, customer judgments decay into service quality. During the service process in order to asses’ satisfaction there should be an understanding of how customers are satisfied and a key role is to manage customers’ perceptions during that process. (Johnston and Clark 2008)

▪ Service delivery“Improvements in service delivery result in improved perceptions of performance leading to increased customer satisfaction. As a result, customer satisfaction will have a direct and positive impact on financial performance. As Lord Marshall, chairman of BA, once point out: “Many service companies ignore the fact that there are plenty of customers… who are willing to pay a little more for superior...