Operations Management BN2210
TUTORIAL 2
Gecko
Jeff Sacreé turned his small, struggling, surfboard business into one of Europe's
leading specialist helmet manufacturers on the basis of a casual conversation. His
business was extremely seasonal and so he was looking to find a way of diversifying
his products. Speaking to a lifeboatman, he found the RNLI needed a lighter, more
suitable helmet for use on the seas. It happened that he had been working on a
helmet for surfers and so was well placed to supply the RNLI. After eventually
securing the contract with RNLI, the question for Sacreé was where to take the
business next.
Some potential markets sprang to mind immediately: specialist helmets could be
usefully worn by river police, coastguard and customs officers - and a recent model
has been designed specifically for helicopter winchmen. But, as the craze for new,
extreme sports blossomed throughout the 1990s, a much wider market suddenly
presented itself. Skateboarders, snowboarders, mountain bikers and powerboat
racers all needed protection.
Prototype headgear was produced, tested and modified for each discipline, and
users were encouraged to respond with comments and suggested improvements.
Gecko soon discovered that producing low-volume, handmade products is a distinct
advantage when it comes to satisfying the niche markets of extreme sports. It
involved less financial risk and allowed for the continual, minor improvements that
customers wanted. "We decided not to go down the automated production route,'
says Sacree 'and it seems to have paid off. Making everything by hand gives us the
crucial advantage of flexibility, so we can add altimeters and video cameras, torches
and two-way radio systems - pretty well anything a customer asks for."
Source: The Department of Trade and Industry, www.dti.gov.uk
Question
1. The performance objective of flexibility has 4 types;
Product/service: Handmade products gives distinct advantage when it
comes to satisfying niche markets of extreme sports
Mix:
Volume: flexibility to increase the overall volume easily, individual
volume for Gecko won’t change but they go back and forth in what
products they produce[mix]
Delivery:
Which of these is Gecko using to compete?
***Product/Service and Mix
2. Why has Gecko decided to compete in this way?
Allows for flexibility[to add altimeters, video cameras, two-way radio
systems, customize for consumers]
Ryanair
Ryanair was founded in 1985 and by 2014 it carried over 80 million passengers per
annum. It had a profit margin of around 15% in 2015 and a passenger load factor of
88%.
This performance was achieved using strategies such as a common aircraft fleet,
contracting services, online ticket booking and network expansion to secondary
airports. These strategies resulted in better operating margins, increase in load
factor, on time flight movements and fewer passenger complaints. Ryanair’s
strategies included the following:
Marketing
Ryanair focused on spreading the idea of lower fares in various routes through an
advertising campaign using various media and the slogan “Ryanair.com Fly Cheaper”
to build a brand identity around low price.
Secondary airports
Ryanair concentrated on point to point flights between secondary airports (i.e. not
hubs) between places such as Stansted, Luton, Pisa and Barcelona. This strategy
allows for quick turnaround times leading to increased frequency of flights. Regional
airports generally offer less congestion, fewer terminal delays, easy airport access,
lower terminal costs, less operating restrictions and more slot flexibility than major
airports.
Common Fleet
In order to reduce buying costs Ryanair has generally bought a single aircraft type
from a single supplier (Boeing 737-800).
Staff Policies
To maximise productivity Ryanair emphasises pay incentives and a salary structure
based on working hours. Ryanair’s pilots flew more hours and the cabin crew served
more people compared to those in traditional airlines. Online booking systems were
introduced to reduce staffing costs.
Providing Ancillary services
In order to increase revenue Ryanair offers several ancillary services such as
beverages, food, merchandise, mobile phone facilities on board and hotel and
vehicle rentals offered when booking online. Fees are charged for credit card
payments. Also advertising space is sold on the aircraft wings and body and on tray
tables.
Questions
Q1The five operations performance objectives are quality, speed,
dependability, flexibility and cost. Identify the performance objective(s) for
Ryanair.
Order winning competitive factors: why do they choose this company over its
competitors
*Low price
Qualifying competitive factors: You have to be good enough to be considered
otherwise you won’t be chosen
*Safety
Performance objective: derived from order winning competitive factors
*Cost
Q2 Explain how the operations strategies of Ryanair help to achieve the
performance objective(s) you have identified.
Structural:
Facility Location: Which airports they fly from: secondary airports – lower landing
charges
Process Technology:
Online booking system
Supply network design:
Purchase of new aircraft from single supplier
Long-term capacity planning:
Aircraft - they’ve expanded for economies of scale
Infrastructure:
Job design – low wages, pay for own training, uniform etc.
Capacity Management:
Takes time to bring new planes = planes is fixed
Variable: Seats = not having people in seats = they deal with this using *Yield
Management*
Process Design:
Efficient Boarding