Operation Management Study: Case Study of Snowham International Airport

This study covers different topics and project related to Snowham International Airport's case study. Each topic consist of specific issue which is to be solved for improving overall operations.

OPERATION
MANAGEMENT

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Harvey Talbot – coffee procurement:.....................................................................................4
The new Juicemasters outlet:..................................................................................................6
Staff planning for the Turista call centre:...............................................................................8
Sycamore Security Systems:................................................................................................10
Baggage handling problems at Snowham Airport:..............................................................12
A new fire engine for the airport:.........................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

EXECUTIVE SUMMARY
Operation Management is essential element which help to define the core objectives of a
project and effective execution of all task related to project. This study summaries all the major
aspects of project management with help of multiple topics connected with case study of
Snowham International Airport. Each topic consist of specific issue which is to be solved for
improving overall operations. In study each issue is thoroughly analysed to provide effective
recommendations and identify issues in existing processes adopted.

INTRODUCTION
Operation management includes effective planning, controlled implementation, strict
supervision and completion of specific project in all stages in order to reach defined project goals
and accomplish them in the context of a specified time and on budget. The management of
operations interacts regularly with approaching daily and also with strategic business problems.
Project management normally relates to the planning, coordination, encouragement and
allocation of resources in order to accomplish particular objectives (Branch, 2012). Management
of operations implies to ongoing activity of an entity that conducts activities that generate goods
or services. This study covers different topics and project related to Snowham International
Airport's case study. Here in each case several computations are done to assess the viability of
decisions and recommend the best alternatives in respective topics.
MAIN BODY
Harvey Talbot – coffee procurement:
Harvey Talbot (HT) is a UK-wide network of American-style restaurants that delivers its
consumers high-quality filtered coffee. As given in project study, at Snowham international
airport, HT has one restaurant. Here company named Kenyan Coffee Supplies (KCS) Ltd
generally supplies all company's coffee. Here major issue is increasing costs of purchasing
coffee. HT's Finance Director aims to boost its overall performance through cutting spendings on
purchases on consumables. Here as per HT's director current purchasing policy adopted is far
from optimal-point and Margins currently are quite tight.
Unit cost of one standard coffee container 14.5
Company generally gets total containers ( 2 Weeks) 200
HT company trades 52 weeks a year
Annual Demand 5200
Cost of placing an order 40
Holding cost 9
Delivery Cost 7500
Total costs of procuring coffee 94000

Calculation of annual aggregate cost:
Cost of one container ( 14.5 * 100 * 52 weeks) 75400
Cost of placing order (40 * 100 * 52 weeks) 208000
Holding cost (9 * 100 *52 weeks) 46800
Delivery Cost 7500
Cost of Procuring Coffee 94000
Total Annual Cost 431700
First Alternative:
Under first alternative, it is suggested by director that ordering will be more cost efficient
in case EOQ method is applied. The purpose of EOQ method is to determine the optimum figure
of units to be order. A company could reduce its unit acquisition, distribution, and storage costs.
This is effective approach which can minimise the overall cost by identifying optimal-point for
order (Battini, Persona and Sgarbossa, 2014). Following are merits and demerits of such
alternative, as follows:
Merit: Placing order as per EOQ is more systematic method also it will help company to
minimise overall inventory cost.
Demerit: EOQ is technical method which require calculations but in practical life it is not easy to
assess accurate EOQ due to other contingent factors. Also fluctuation in annual demand affects
EOQ.
Economic Order Quantity:
EOQ = √(2 * D * S)/ H
= √ ( 2 * 5200 * 40 ) / 9
= √ 416000÷9
= √ 46222.22
= 214.99 or 215 containers
Total cost based on EOQ alternative:

Particulars 215 Containers
Cost of one container ( 14.5 * 215 containers * 52 weeks) 162110
Cost of placing order (40 * 215 containers * 52 weeks) 447200
Holding cost (9 * 215 containers *52 weeks) 100620
Delivery Cost 7500
Cost of Procuring Coffee 94000
Total Annual Cost 811430
Note: Here it is assumes that delivery cost and cost of procuring coffee are fixed costs thus
would not change.
Second Alternative:
Here in second suggestion, KCS will provide corporation a discount in case of bulk purchasing
and also KCS's Sales Director agreed to provide company a bulk buying discount, charging just
£12.75 per container. But here is condition company should order at least 2,500 containers. Here
following is merit and demerit of each alternative, as below:
Merit: Discount of 1.75 per container is main advantage of this suggestion as this will reduce
overall cost. Further no estimation require as to ordering because discount will receive only if
2500 containers ordered at single time.
Demit: Single large order of 2500 container can increase overall cost of inventory handling as
well as storage.
Thus as per this scenario aggregate total cost will be:
2500 Containers
Cost of one container ( 12.75 * 2500 Containers) 31875
Cost of placing order (40 * 2500 Containers) 100000
Holding cost (9 * 2500 Containers) 22500
Delivery Cost 7500
Cost of Procuring Coffee 94000
Total Annual Cost 255875

Note: Here it is assumes that delivery cost and cost of procuring coffee are fixed costs thus
would not change. Also it is assumed that single order will be placed in a year.
As per the above calculations based on suggestions it has been analysed that current
annual cost is £ 431700, if organisation consider the first alternative then annual cost will be £
811430, while as per second suggestion such amount will be £ 255875. Thus suggestion second
will be more appropriate. As cost in this alternative will be lower as compare to other one.
The new Juicemasters outlet:
Here in this section main issue is that one outlet has become vacant which is leased to
independent company named Juice-masters. The corporation is specialize in broader variety of
healthy juices and smoothies alternatives along with several cold-vegetarian snacks like
baguettes. Speciality beverages like teas/coffees are also available for consumers. Corporation
has already opened outlets in 3 other major airports. Company's Chief Executive officer is
enthusiastic regarding new outlet in Snowham. In this context following is overview of interior
of area provided as follows:
 Area: 17 m x 15 m corner
 2 side Storage Space
 Staff Toilet Facility
 2 doors and 4 windows
 One Main Window
Based on above details, here is following is layout for recommended floor layout, as follows:
Queueing: For managing customers crowed, there should be two queues for making payment in
two separate single windows as well as two queue for collecting food items at main window.
Ordering: Self ordering system should be adopted here, as this system provides increase in order
accuracy and require less staff.
Delivery: In peak hours, customer will collect order from main window and during period other
than peak hours delivery will be made by staff in waiting area.
Payment Processes: Company should provide all payment alternatives like credit and debit card,
cash currency, mobile banking etc. From payment windows, customer will get token or receipt
after making payment. At the time of delivery customer will provide such token/receipt. At the
end of the day tokens and payment should be matched which can increase accuracy in entire
process.

Furniture and equipment: Here following is list of all the major items of furniture and
equipments, as follows:
 Refrigerator  Knives
 Ice machine (small/ medium size)  Cutting board
 Juicer  Portion scale
 Blender  POS system
 Dishwasher  Napkins
 Measuring cups  Counter Tables
 Large trash can  Chairs
 Plastic wraps  Fruit Peeling Machine
Job Roles:
Juicer:
Customer Service:
 All buyers are treated with dignity and gratitude.
 Describe everyday items on the Glowing menu as well as its advantages. This involves
drinks, juices and other items.
 Helping customers in making order process by offering suggestions and describing each
item's nutrient value.
Food and Drink Prep & Production:
 Appropriately decreasing food wasting following recipes.
 Juice & drinks are made as per consumer and restaurant requirements.
 Washing, cutting and preparing all the fruits and ingredients for juices and smoothies.
 Know the components of juices and make recommendations based on consumer tastes.
Cashier:
 The payments are handled quickly and accurately.
 Re-stocking refrigerated bottled beverages and utensils where required.
 Update inventories of shop on regular basis.
 Periodically tally all receipts and payments.

Staff planning for the Turista call centre:
Under this section it is given that Turista Airways operating flights through no. of UK
airports. It maintains a small scale call centre at the Snowham
airport that handles calls through customers during whole year. Here company wants to assess
the aggregate cost of hiring temporary employees. Following are key calculations based on
information provided in case study as follows:
Current Scenario:
Working day (year) 250 days
(50 weeks * 5 days a week)
Last Year aggregate calls 26200 calls
Three period in a year
First Period Working days 0 and 100 5200 calls
Peak holiday period Day 100 and day 150 15000 calls
Third Period After day 150 6000 calls
Two permanent members of staff
Capable of processing 30 calls
per day each
Temporary member of staff 20 calls a day
Temporary staff cost £60 per day
Total annual budget for temporary staff only:
First Period
Peak holiday
period
Third
Period Total
Days 100 50 100 250
Calls 5200 15000 6000 26200
2 Permanent Members:

Calls can hey handle 2*30*100 2*30*50 2*30*100
Total Calls handled 6000 3000 6000 15000
Excess calls handled as compare to
last year 800 -12000
800
Net Shortage -11200
If Temporary member of staff
handle 20 calls each day
Then number of temporary
members required - (11200)/20 -
- 560 employees -
Temporary staff cost £ 60
Total annual budget required for
temporary staff only £ 33600
As per new web based call handling system, experienced and permanent staff productivity will
rise to least 50 calls per day and untrained temporary staff to 40 calls a day. This system will cost
£24,000 thus following is cost saving of company in hiring temporary staff:
Total annual budget required for temporary staff only £ 33600
New proposed system is priced at fixed cost of: £ 24000
Aggregate Saving £ 9600
Sycamore Security Systems:
Average price charged for full integrated CCTV system £ 160000
Total unit cost (including all materials and staff costs) £ 128000
Contribution each unit £ 32000

All other fixed overheads cost the company 90000
Working hours a day 8 hours
Working days a week 5 Days
Total Weeks in a Year 50 Weeks
Rates provided by employment agency:
Salesman Wages £300 p/day
Surveyor Payment £400 p/day
Manufacturing technician payment (3 technicians = 1 team) £1000 p/week
Installation technician (4 technicians = 1 team) £1500 p/week
Computation of gross yearly profit generated by Sycamore (using above provided information):
Particulars 9 Systems in a week 11 Systems in a week
Total Weeks in a Year 50 Weeks 50 Weeks
Average price charged £ 72000000 £ 88000000
( £ 160000 * 9 systems
* 50 weeks)
( £ 160000 * 11
systems * 50 weeks)
Less: Unit Cost £ 57600000 £ 70400000
( £ 128000 * 9 systems
* 50 weeks)
( £ 128000 * 11
systems * 50 weeks)
Less: All other fixed overheads costs £ 4500000 £ 4500000
Annual Gross Profit £ 9900000 £ 13100000
Also if company decided to utilise services of employment agency, following will be the
additional staff cost and extra annual profit can be generated, as follows:
Particulars 9 Systems in a week 11 Systems in a week

Average price charged £ 72000000 £ 88000000
Less: Unit Cost £ 57600000 £ 70400000
Less: Other Costs related to hiring of
staff
Salesman Salaries £ 75000 £ 75000
(£300 p/day * 5 days a
week * 50 weeks) (£300 p/day * 5 days a
week * 50 weeks)
Surveyor Payment £ 100000 £ 100000
(£400 p/day * 5 days a
week * 50 weeks)
(£400 p/day * 5 days a
week * 50 weeks)
Manufacturing technician payment (3
technicians = 1 team) £ 150000 £ 150000
(3 technicians * £1000
p/week * 50 weeks)
(3 technicians * £1000
p/week * 50 weeks)
Installation technician (4 technicians =
1 team) £ 300000 £ 300000
( 4 technicians * £1500
p/week * 50 weeks)
( 4 technicians * £1500
p/week * 50 weeks)
Gross annual profit £ 13775000 £ 16975000
Thus Extra Annual Profit will be:
Particulars 9 Systems in a week 11 Systems in a week
Annual Gross Profit (in existing scenerio0 £ 9900000 £ 13100000
Annual Gross profit (in proposed scenario) £ 13775000 £ 16975000
Additional Profit £ 3875000 £ 3875000

Baggage handling problems at Snowham Airport:
Provided Information:
Average Bag Handled in a day 2000 bags
Days in year 365 years
Normal incorrect trolley ( Percentage of bag) 0.50%
Chance of the mistake being found during aircraft loading 70.00%
Total cost of compensation averages £125 per bag £125 per bag
Cost of relocating the bag to the correct aircraft £40 per bag
Current Scenario:
Bag handled annually 730000 bags
Bags incorrectly trolley (0.5%) 3650 bags
Chance of the mistake being found 70.00%
3650 * 0.7
2555 bags
Total bags generally lost in a year 1095 bags
Cost of compensation £ 136875
(£125 per bag * 1095 bags)
Cost of relocating the bag £ 43800
(£40 per bag * 1095 bags)
Total quality costs of the baggage handling
Operation £ 180675
Joey Wong's proposal
Budget for improving baggage handling technology £ 800000

environment
Bag handled annually 730000 bags
Bags incorrectly trolley (0.25%) 1825 bags
Chance of the mistake being found 70.00%
1825 * 90%
1277.5 bags
Total bags generally lost in a year 547.5 bags
Cost of compensation £ 68437.5
(£125 per bag * 547.5 bags)
Cost of relocating the bag £ 21900
(£40 per bag * 547.5 bags)
Total quality costs of the baggage handling
Operation £ 90337.5
Aggregate cost of this proposal £ 890337.5
Ted Jones's proposal
Total employment costs £ 58000
Bag handled annually 730000 bags
Bags incorrectly trolley (0.5%) 3650 bags
Chance of the mistake being found 90.00%
3650 * 90%
3285 bags
Total bags generally lost in a year 365 bags
Cost of compensation £ 45625
(£125 per bag * 365 bags)

Cost of relocating the bag £ 14600
(£40 per bag * 365 bags)
Total quality costs of the baggage handling
Operation £ 60225
Aggregate cost of this proposal £ 118225
Dougie McDonald's proposal
Bag handled annually 730000 bags
Bags incorrectly trolley (0.1%) 730 bags
Chance of the mistake being found 70.00%
3650 * 70%
511 bags
Total bags generally lost in a year 219 bags
Cost of compensation £ 27375
(£125 per bag * 219 bags)
Cost of relocating the bag £ 8760
(£40 per bag * 219 bags)
Total quality costs of the baggage handling
Operation £ 36135
As computed above Cost in present scenario is £ 180675 and from above evaluation of
different proposals it has been analysed that of quality in handling of baggage operation is
minimum in case of Dougie McDonald's proposal i.e. £ 36135 in case it is assumed that there
will no additional cost of training staff.
A new fire engine for the airport:
In this section, Airport safety manager wants to take decision regarding selecting
appropriate firefighting vehicles. Here following are recommendations or options are available to

manager from McDougal, GVX and Schellinger regarding vehicles and scoring to assist
managers, as follow:
McDougal GVX Schellinger
Purchase price
347000 289000 295000
Annual servicing/maintenance Free of charge 18000 15000
Useful life of each vehicle 5 years
Resale value 25% of purchase price
Leasing Cost (GVX) £129,000 per year
Resale value £ 129000
Weighted scoring system:
Decision Factor (each
marked 1-10) Weight (1-10) McDougal GVX Schelllinger
Score Total Score Total Score Total
Compatibility with
existing airport
equipment 5 3 15 6 30 8 40
Ease of maintenance
and servicing 6 6 36 7 42 8 48
Overall fire-fighting
performance 8 7 56 5 40 4 32
Durability and build
quality 9 8 72 5 45 4 36
Client references 4 4 16 6 24 5 20
Maximum 195 181 176

Score = 240
Percentage 81.25% 75.42% 73.33%
*Here maximum score is sum of maximum value from total.
McDougal GVX Schelllinger
0.68
0.7
0.72
0.74
0.76
0.78
0.8
0.82
Percentage
From analysis of above scoring of all the three vehicles suggested by McDougal, GVX
and Schellinger respectively, it has been analysed that McDougal's vehicle will be more feasible
as the percentage scoring based on management provided weighted is highest as compare to
other two. Thus it is recommended to Airport to select the option of McDougal based on above
scoring. Further for more accurate decision-making, consideration of purchase price and other
financial factors are necessary which are summarised below:
Particulars McDougal GVX Schellinger
Purchase price
£ 347000 £ 289000 £ 295000
Life 4 years 4 years 4 years
(A) Annual Servicing/maintenance 0 £ 18000 £ 15000
Annual Depreciation
Residual Value (25% of purchase price) £ 86750 £ 72250 £ 73750
(B) Depreciation = (Cost – Residual Value)/ 4 £ 65062.5 £ 54187.5 £ 55312.5
Total Yearly Costs £ 65062.5 £ 72187.5 £ 70312.5

As computed above annual total costs of vehicle recommended by McDougal is optimum as in
comparison of other two vehicles. Thus it is clear that scoring wise and cost wise McDougal's
suggestion would be best, so Airport should opt the alternative suggested by McDougal.
CONCLUSION
From above study it has been articulated that operation management is critical aspect
which enable managers to take most effective and efficient decision. It also assist management in
crossing most feasible alternative among multiple other alternatives. This involve calculations to
asses the viability of a specific alternative.

REFERENCES
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