skyline aviation final

7/28/2019 Skyline Aviation Final

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SKYLINE AVIATION

OPERATION AND RESOURCE MANAGEMENT

ANALYSIS.

M A N A G E M E N T 3 6 2 0

B Y :

K A L E Y D U L F E R

H E A T H E R K I N G

A N D R E W R U B I O

E B A A D A H M E D

SKYLINE AVIATION



OPERATION AND RESOURCE MANAGEMENT ANALYSIS – SKYLINE AVIATION. 2

OPERATION AND RESOURCE MANAGEMENT

ANALYSIS – SKYLINE AVIATION.

SUMMARY:

This document outlines a project plan to evaluate and analyze the operations and resource

management strategies of “Skyline Aviation”, a world renowned custom aircraft manufacturing

company who has been in the business for over half a century. Safety, luxury, and efficiency has

been the vision and manufacturing custom air transport solution to serve its customer base is the

mission of Skyline Aviation for the last several years. The company has been operating with

increasing revenues and profit margin until lately. Due to the fierce competition Skyline Aviation

has recently lost considerable market share. The company has not only lost the business, but also

has given up a significant part of its seasoned and experienced work force in the hands of new

and upcoming competition.

The purpose of this document is to review and analyze some of the processes and

procedures being followed and monitored to improve enterprise wide operations of Skyline

Aviation. It also includes proposals to alternative practices and methodologies using Total

Quality Management, Supply Chain Management and inventory control to reduce operating

costs, enhance quality, increase employee morale, and find ways and means to incorporate value

added innovative solutions to its existing product line. It will also suggest methods to train and

educate sales force, and strategically locate them to best serve customer based communities. This

document will review the process of gathering customer feedback and market surveys to help the

organization understand future trends and strategically position itself to meet the upcoming




challenges. It also puts forth some suggestions to improve the quality of workforce and educate

them to enhance productivity and commitment towards the organization.

This document also focuses on means and measures to implement and adopt key Supply

Chain management concepts to harness unmanaged inventories, procurement procedures and

purchasing workflows. It also talks about ways to better plan ordering cycles to align the

production and demand forecasts and eliminate nonproductive process steps to conserve

resources and increase efficiency. It also suggests ways to build long term relationships with

vendors to explore alternate and innovative solutions to existing manufacturing materials and

processes. It recommends some crucial steps needed to survive and regain the market share by

developing key alliances to reach out to potential customers and better serve the existing

clientele by a highly trained and aggressive customer service team, and strategic location of sales

and service points, thus impacting increased profit margins, dependable, reliable, and high

quality products, consistent organizational growth, and higher return on investment.

The project will encompass most of the aforementioned factors and components of the

plan with respect to the topics prescribed by the text and concepts discussed within the

framework of this course.




INTRODUCTION:

About 85 years ago, on August 16, 1927, Glenn L. Martin established the Glenn L.

Martin Company in Los Angeles, California. He started the company after building his first

plane in a rented church, where he took a leap of faith on his risky but innovative new aircraft

design at the urging of none other than Orville Wright.

Four months later and four hundred miles away, on December 19, 1927, Allan and

Malcolm Newhouse founded the Alco Hydro-Aeroplane Company, later renamed the Skyline

Aircraft Company. Talented mechanics, they set up shop out of a garage, constructing seaplanes

that would shatter speed and distance records for overwater flights.

A church and a garage, these were humble beginnings. But these were also men of

unrelenting vision and unwavering purpose. The gift that Martin and the Newhouse brothers

shared was a unique ability to look past the obstacles of today to the promise of a brighter

tomorrow. And they knew – as we’ve known for 100 years – that innovation, performance and

purpose were the keys to accelerating that tomorrow.

Together Glenn Martin and the Newhouse brothers combined their efforts to form the

United States’ fifth largest custom aircraft manufacturing company named Skyline Aviations –

providing luxury performance aircrafts to customers worldwide – using the strategy of

differentiation. The company differentiated its products through constant innovation, unique

features, and high quality. Increasing sales, expanding list of future orders, and potential buyers

at company headquarters in Los Angeles, California, suggested that the strategy was working.

Since its inception in 1927, Skyline Aviations has designed, produced and delivered more

than 193,500 airplanes around the globe. This includes more than 6,300 Citation business jets,




making it the largest fleet of business jets in the world. Today, Skyline Aviations has two

principal lines of business: aircraft sales and aftermarket services. Aircraft sales include Citation

business jets, Caravan single-engine utility turboprops, single-engine piston aircraft and lift

solutions by Skyline Air, a subdivision focused to design and fabricate propeller aircraft.

Aftermarket services include parts, maintenance, inspection and repair services. In 2008, Skyline

Aviations delivered 689 aircraft, including 183 Citation business jets, and reported revenues of

$2.990 billion.

Skyline Aviation has been a pioneer in custom aircraft manufacturing business and has

held the highest air safety records in the industry due to the quality, dedication and innovation

that was induced to build master piece aircrafts exclusively designed and fabricated according to

the specific need and requirements of its customers and clients. Expanding from its humble

beginnings, Skyline Aviations has designed each aircraft with a special purpose and

determination, but due to the recent economic downturns, lack of attention to innovation,

antiquated and outdated processes, and upcoming fierce competition, the company has lost a fair

amount of market share. Skyline Aviation failed to secure some critical contracts and was

unsuccessful to deliver to few of its crucial clients. In the airline business, safety is the first and

foremost concern, and due to some unforgiving safety incidents, a couple of crashes and unsafe

landings added to the list of reasons to a swift decline in company reputation. This document will

provide some insight as how the company can reclaim the fame and regain the lost status in the

industry by the help of some key concepts mentioned in the prior section.




CHAPTER 1:

In order to bring Skyline Aviation’s processes and practices up to date with modern

times, it will have to make some fundamental changes to the way it approaches business

operations. One such implementation to promote a change to the way it conducts business is to

implement Total Quality Management (TQM) into its business practice. TQM provided a means

to encourage all members of Skyline Aviation to make improvements to the culture, products,

and services that they provide. By giving each member of the organization a vested interest in

the ongoing success of the company, Skyline Aviation will be better positioned to stimulate

innovative growth within the company, thereby allowing the company to offer new and

improved services and products to its clients.

Continuous improvement will be an essential element to ensuring Skyline Aviation is

able to recapture its lost market share and increase its revenue stream. This cultural shift must

begin with the managers and leaders within the organization. In order to offer better products and

services, they must first gain a better understanding of their client’s desires. Meeting customer

requirements will allow the company to have long term growth with clients as their own needs

change. As a manufacturing company, customers are repeatedly most disappointed with products

that are either defective or do not meet the specifications previously contracted. To address this

issue the leadership of Skyline should have one, or more, all staff meetings to identify the faults

in processes and procedures which enable defects to pass on to the customer. Additionally they

should promote more meetings between business departments to identify solutions to systematic

problems which cause negative customer feedback. One example to curb the amount of defects

in their products, would be to install an inspection process when a product moves on from one




operation to another. This would help to identify where frequent problems may be arising in the

manufacturing process, thereby allowing the leadership to better focus its efforts to correct the

issue. Another way to ensure customer satisfaction and help identify if products are meeting the

needs of the customers, is to conduct surveys 3-6 months after shipment of the product. This will

give the customers ample time to evaluate the product and determine if it meets their

requirements. When conducting the survey, the company may want to outsource the

development of this survey to a third party to ensure that the right questions are being asked. A

company such as Direct Opinions can help Skyline Aviation to better understand how to obtain

the most crucial information from a survey in order to better understand their clients. However,

regardless of the results of the survey, the company should still reach out to its clients on a

regular basis to see if they have any suggestions for improvements. While this will target new

opportunity areas for improvement, it will be of far more benefit by safeguarding against loss of

current and or new customers.

In order for a culture change to be successful, the leadership of Skyline must make their

employees a priority as well. The company’s inability to be innovative in the airline

manufacturing field can be attributed to its inability to attract and retain qualified prospects that

can help bring new and creative ideas into the business. Additionally, emphasis must be placed

on initiating improvement initiatives for its current employees. Management must help foster an

environment where employees are encouraged to find new and more efficient ways to process

daily activities in order to reduce cost and guarantee client satisfaction. One way to promote

innovative thinking within the organization is to offer employee trainings and education.

Employees should be knowledgeable in all aspects of the design, production, and shipment

process so that they can be better equipped to improve upon their individual business processes




for the betterment of manufacturing company as a whole. For example, by providing more

information and better understanding of the design process to employees in the production unit in

relation to the customer needs, they will be more equipped to assist with meeting the client

needs. If the client desires to reduce cost and makes a request to use a cheaper material, the

production unit will be able to understand the client’s needs and recommend alternative materials

to use which may produce better results at a lower cost. Material cost to performance ratio is

something the client may not be aware of, and by having each employee thoroughly educated in

the overall manufacturing process, it will be less likely that the client is unsatisfied with their

order due to a lack of information being distributed through the work flow. With this in mind,

one of the trainings which should be implemented into employee’s educational material is the

use of cost-benefit analysis (CBA). CBA is a systematic approach to comparing the costs and

benefits of a given project, policy, etc. This will enable each employee to effectively analyze the

monetary implications of their decisions, or client related projects by determining if the financial

investment into a project is sound, and will provide a base for comparison for any alternative

projects or solutions for a given issue. The use of CBA will be very important to Skyline

Aviation due to the unique aspect of each individual order of a custom aircraft. Customers will

want to maximize the value of each order while minimizing costs. Sharing this information with

the customer will help to promote a trust between the customer and the company, thereby

increasing the likelihood of the order meeting the customer’s requirements.

Managers and leaders will also have increased responsibilities if they are committed to

implementing the TQM (Total Quality Management) process company wide. In addition to

creating educational and training programs to assist their employees with ensuring customer

satisfaction, they will also have to utilize additional tools to further safeguard against poor




quality, mismanagement, or process failures. Control charts would be an excellent way to help

ensure quality by making sure that a process is falling within expected parameters. In

manufacturing, this could be used to determine, if components being produced for a specific

project, is within the acceptable range. The measurements of the materials being produced would

be gathered at set intervals throughout the process, and would then be used to plot a control

chart, with each measurement representing a single point. If the points on the chart exceed the

upper or lower limits, then the process would be outside the statistical limitations and therefore

not meet the quality standards. In this case the control chart could also help to determine the

source of the process failure as well. If the points which exceeded the limits occurred at the same

time, it could be related to a malfunction in machinery or be attributed to a user not properly

following procedures. Managers can also use Pareto diagrams to identify reoccurring issues, and

then prioritize them creating solutions to those issues based upon their respective occurrence and

significance. An example of this would be if there was large percentage of product or material

defects attributed to damage which occurred during shipping. Management could then take the

appropriate action and prioritize finding a solution to this issue. This may include a process

change to the way products are shipped, or finding a new distributor to supply materials to

prevent this issue from causing further loss in revenue. Pareto charts can also be used in

conjunction with the customer surveys previously mentioned. If the customer surveys indicate

several different customer complaints, these can be can be used as data within a Pareto chart.

Once accumulated the chart would then show which complaints are received more frequently

than others.




CHAPTER 2:

The main objective of supply chain management is to maximize value and lower waste

of resources. Supply chain management spans all movement and storage of raw materials, work-

in-process inventory, and finished goods from point of origin to point of consumption. Another

definition, provided by the APICS Dictionary, defines SCM as the "design, planning, execution,

control, and monitoring of supply chain activities with the objective of creating net value,

building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with

demand and measuring performance globally."

A few supply-chain management strategies that could be implemented into Skyline

Aviation’s strategy consist of the following:

1) Partnerships- Skyline should strive to maintain long term relationships with its suppliers.

When choosing a supplier, they should look for commitment towards producing the most

reliable and readily available products. Because of Skyline’s relationship with its

suppliers, they would be able to exchange ideas for possible new products. They want

only the best for their customers, so they must be dedicated to selecting vendors who

deliver those same standards. Using this process, they will be able to provide outstanding

customer service and ensure the safety of each aircraft.

2) Maintain low inventory- Through the control of raw material, Skyline Aviation would be

capable of reducing its daily on hand material. This helps lower costs by saving on

warehousing.

3) Strategic Sourcing- In order to control raw material inventory, Skyline could partner with

two or three main vendors for the parts necessary to build their aircraft. Their supplier




would visit on a weekly or bi-weekly basis to look at each production area and determine

what they might need in terms of products and supplies. They could take orders from the

production team and then deliver the requests within only a few days. This process could

eliminate receivables, payroll hours, and warehousing.

4) Outsourced resources – Business Process Outsourcing (BPO) - They could work with an

agency to outsource some of the recruiting and screening processes for employees,

allowing them to lower labor and material cost.

They can also use supply chain management to produce parts economically and invest

back in the company to research for new and efficient and environmentally friendly technologies.

They can use the customer feedback and market surveys to find out the trends of the market and

growing demands for new concepts and built in amenities to be for value added product. They

can locate their services to a location where they are centrally located for easy access to

their custom communities and also train their sales force and distributors to get to know the

needs and requirements of their customers and match them to most suitable products.

One of Skyline Aviation’s supply chain management strategies is visible within their

partnerships. Developing long-term partnership consists of maintaining arrangements with a few

suppliers who will work with the company to satisfy the end customer needs and ensure the

aircraft meets all required safety standards. Understanding this concept allows us to understand

how Skyline maintains a supplier partnership.

Skyline Aviation would require a strong supplier partnership, working with suppliers and

partnering relationships with providers of key materials. They would also maintain a partially

vendor managed inventory working out agreements with vendors providing assembly line




products on a just-in-time basis, not actually transferring title until parts are used. Another way

Skyline would use vendor managed inventory is contracting the recruiting and screening process

for potential employees. Skyline has also formed a sort of virtual corporation, joining with other

aircraft manufacturers in a purchasing group to work with vendors to reduce prices. Both this

strategy and the following one are incredibly important in terms of being resourceful and

maximizing value on a daily basis.

Inventory planning and control is based on identifying how much inventory is needed in

order to satisfy the customer and materials demands, and when it is needed. The objective is to

minimize total inventory costs.

To plan inventory quantity, a range of inventory models is used. The first model Skyline

will use is the expression for the annual inventory holding cost for the production order quantity

model:

Q = Number of units per order

H = Holding cost per unit per year

P = Daily production rate

D = Daily demand rate, or usage rate

T = Length of production run in days

(Annual Inventory holding cost)= (Average inventory level) x (Holding cost per unit

per yr)

(Average inventory level)= (Maximum inventory level)/2

(Max inventory level)= (Total prod during production run) – (Total used during

production run)




Annual inventory holding cost= (Max inventory level/2)(H)= (Q/2)[ ()]

The previous equation is useful when inventory continuously builds. The following is

used in situations that contain the following assumptions:

1. Demand for an item is known, reasonably constant, and independent of decisions for

other items.

2. Lead time is known and consistent

3. Receipt of inventory is instantaneous and complete.

4. Quantity discounts are not possible

5. The only variable costs are the cost of setting up or placing an order.

6. Shortages can be completely avoided if orders are placed at the right time.

Daily demand = D

Holding cost = H

Ordering cost = S

Purchase price = P

Lead time = LT

One of the most popular models is Economic Order Quantity (EOQ)

Q* =

√

Another formula that will be used when determining inventory is the reorder point

(ROP). The reorder point is the amount of inventory in stock which indicates that a new order

should be placed.




ROP = d*LT

ROP = Demand during Lead Time (DDLT)

Where: d = demand per unit time

LT = lead time

The final formula Skyline Aviation would find useful is the Quantity Discount Model.

This formula is used to increase sales by offering discounts to their customers. It is a reduced

price for items purchased in large quantities, such as aircraft parts needed in the preparation

assembly line.

Total Cost = Ordering cost + Holding cost + Product Cost

Where Q = Quantity Ordered

D= Annual Demand in units

S = Ordering or setup cost per year

P = Price per unit

H = Holding cost per year

Inventory control is crucial in order to develop a profitable company in which there exists

a quick and efficient turnover of goods and material




CONCLUSION:

To conclude, there are many techniques available at a company’s disposal to utilize in

order to improve the business including supply chain management, total quality management,

inventory control, and many others. Through constant innovation and implementing many of the

techniques mentioned above, Skyline Aviation can focus on safety, quality, value, and

efficiency, to better serve their customers. By improving supply chain management and utilizing

total quality management, Skyline Aviation can increase revenues and profit margins.

By partnering with both the suppliers and customers, Skyline Aviation can better service

their customers by meeting and exceeding expectations. Using surveys and well trained

employees to find out the customers’ wants and needs will improve satisfaction ratings and

efficiency. Training the employees to know more about the products and services will serve both

the customers and the company well through building trust and delivering quality products.

There are many useful charts and formulas available to use to improve the firm, for

example, the Pareto Chart and the reorder point (ROP). Simply creating the charts or calculating

the equations is not useful, but knowing how to interpret them and plan ways to improve upon

the results is the key. If managers utilize these tools properly, there should always be constant

improvement and new ideas how to improve results.

Overall, there are many opportunities for improvement in any company. For Skyline

Aviation, major improvements could be realized through utilizing the previously mentioned

techniques. The downward trend in revenue and profit could turn around, and Skyline Aviation

could return to their roots of innovation and luxury for their faithful customers.




BIBLIOGRAPHY:

1. Customer Satisfaction Survey Telephone and Online Research. July 30, 2012.

http://www.directopinions.com/customer-satisfaction-survey.html

2. Fisk, B. How Pareto Charts Can Improve Quality of Business Processes. August 1, 2012.

http://www.bia.ca/articles/qm-pareto-charts.htm

3. Hashmi, K. March 16, 2010. Introduction and Implementation of Total Quality Management

(TQM). August 30, 2012. http://www.isixsigma.com/methodology/total-quality-

management-tqm/introduction-and-implementation-total-quality-management-tqm/

4. Heizer, J. and Render, B. 2011. Principles of Operations Management. New Jersey: Prentice

Hall.

5. Reh, F. J. Cost Benefit Analysis aka Running the Numbers. August 14, 2012.

http://management.about.com/cs/money/a/CostBenefit.htm

6. Supply Chain Management. August 30, 2012. http://www.apics.org/gsa-main-

search#supply%20chain%20management|allResults

7. The Thirteen Quality Elements. August 5, 2012. http://www.analog.com/en/quality-and-

reliability/total-quality-management/thirteen-quality-elements/content/index.html

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