This study analyzes the supply chain management in Airasia, focusing on its challenges and opportunities. It discusses the primary and supportive activities in the supply chain network and provides recommendations for improvement.
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Running head: SUPPLY CHAIN Supply Chain [Airasia] Name of the student: Name of the university: Author note:
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1SUPPLY CHAIN Executive summary Airline industry like any other industries has many opportunities rising for airline companies. In addition, the industry faces challenges as well such as in the form of shortages in labour supply. The main purpose of this study is to analyse the supply chain management in Airasia. The study finds that the company is good at dealing with a variety of supply management tasks such as providing excellent service at low prices. AirAsia has no matching for its supply chain management. It has earned recognition for being the most cost-effective airline brands in the world. However, it also has areas where improvement is required. These areas include but not limited to managing the engines and supply of labours.
2SUPPLY CHAIN Table of Contents Introduction of the organisation.......................................................................................................3 Body.................................................................................................................................................3 Explanation of the supply chain networks...................................................................................3 Analysis.......................................................................................................................................7 Recommendations............................................................................................................................8 Conclusion.......................................................................................................................................9 References......................................................................................................................................10
3SUPPLY CHAIN Introduction to the organisation AirAsia is a Malaysian-based airline company, which is headquartered in Kuala Lumpur. It follows the low-cost business model. It has been recognised as the best airline company in the world in the low-cost airline model. It holds a pioneer status in Asia in the low-cost airline sector. The company operates in 78 destinations comprising of 25 countries (Airasia.com, 2019). Despite being a globally popular name, AirAsia has to face challenges in a variety of forms. It is a truth that there are both negative and positive trends in every single industry, which exist in this world. The airline industry is not an exception. Airline industry depends entirely on the number of customers that includes both existing and new travelers. However, the consumer base for the Airline industry is still growing and it is still not close to a huge figure (Belobaba, Odoni & Barnhart, 2015). It is affecting the growth rate. Hence, AirAsia has to ensure so many things to remain competing in the industry. The main purpose of this study is to analyse the supply chain management in Airasia. This includes explaining and illustrating the various forms and elements of a supply chain network. Body This section analyses the supply chain management in Airasia. In doing so, it takes help of articles from websites, journals and books. Explanation of the supply chain networks It is understandable that to be able to deliver value through operations companies must understand their customers. Companies should know the areas where values can be created or lost as well. Supply chain management is one very essential element of a business that makes a difference to the performance. Firms having excellent control over their supply chain will most probably fulfill the market demands. Supply chain management as a whole has two distinct types such as mentioned below (Hugos, 2018): 1.Primary Activity 2.Supportive Activity
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4SUPPLY CHAIN 1. Primary Activity: Inbound logistics In the Airline Industry, it is highly important that firms have a good understanding of their capability as well as acquainted with strategies adopted by competitors. This helps in adopting productive strategies. It is important forAirAsia to know the strategy of its competitors to remain competitive in the long-term. Strategies that should be known include finding the shortest way, managing well to remain fuel-efficient and cutting off the prices (Airasia.com, 2019). AirAsia adopted various strategies to remain competitive. The company updated the fleet of Airbus planes. Pricing was brought under control. Fuel management is utterly managed in Airasia. AirAsia is one of the very few airline companies to have decreased their waste in the forms of reducing the leftover food and drink (Airasia.com, 2019). However, they can do even better by tapping on a few identified opportunities. These opportunities include offering in-flight cateringserviceonthecustomerdemandforanadditionalfee,marketassessmentand monitoring competitors. Operations AirAsia invests a significant portion of its operating costs on driving its operations. The list of operations as managed in Airasia includes ticketing, reservations, on-board service, aircraft operations, gate operations and check-in (Airasia.com, 2019). AirAsia provides ticketing and reservation system through its official website. Customers can access to as much information as they need to make a travel. They can also book hotels and rent commutation in advance. AirAsia invests a lot on offering excellent onboard services. The seating configuration and flatbed settings just show their innovating capability. In a low-cost model, it is not easy to innovate and offer services as offered by AirAsia. Aircraft operations are one area where AirAsia can face a challenge in the future. In regards to aircraft operations, the company will be going to face a challenge in managing the engines. It is due to the increasing labour shortage in the industry (Gill-McLure & Firth, 2016). The increasing labour shortage is manageable if AirAsia can improve their talent management capability. For this to achieve, improved job advertisement, good pay packages, and training and development programs should be key factors. Outbound Logistics
5SUPPLY CHAIN Ticket booking inAirasiahappens through online sources. This makes booking easier. This also means that customers can book their tickets from being anywhere. Smartphone users will find it easier as well. Moreover, customers can easily get their boarding card printed. AirAsia uses simplest routes instead of running with transfer hubs to remain focused on a point to point network. AirAsia uses an innovative strategy to remain cost-effective as it has low-cost terminals to facilitate lower landing charges (Airasia.com, 2019). There are rooms still available for improvements. AirAsia should adopt a new flight connection option. Passengers should have options like booking tickets beyond their point-to-point network in Kuala Lumpur. Marketing and Sales Advertisement and promotion of services have now become essentials to the airline industry.AirAsia faces stiff competition in this regard. Hence, AirAsia sells all tickets primarily through its website. However, there are opportunities growing in the form of the company’s brand image. AirAsia recognised as the best low-cost airline in the world in four consecutive years starting from 2009. This has greatly influenced the brand image and the reputation of the company as well (Airasia.com, 2019). AirAsia needs to work upon its strategy for segmenting their customers to create higher impacts. Apart from segmenting, promotion of services is also important. Effective promotion of services can help to reach to a wider consumer base. More importantly, this helps to reach to the target consumer segment. An effective promotion will communicate ideas that have worked so far for Airasia. Service Service standard matters to every single industry. It is equally or perhaps even more important to the Airline industry. AirAsia provides its customers, opportunities to pre-book the checked luggage to avail lower rates for it. Moreover, there are options available to book a hotel or rent taxi through online sources. AirAsia offers vouchers to its customers for a flight delay. Service customisation is readily available and it does not require doing any compromising on quality. AirAsia ensures effective complaint handling through its efficient Customer Technical Support (Hapsari, Clemes & Dean, 2016). It helps to deliver the best service. 2. Supportive Activity:
6SUPPLY CHAIN Firm Infrastructure AirAsia constantly works on to improve its service infrastructure. The company focusses on its goals. Pricing is the lowest in the market. AirAsia believes to expand its service to different parts of the world. The company gives its utmost efforts in ensuring that the process is simpler as it can be (Airasia.com, 2019). However, they should work upon their business strategies such as doing an effective partnership with strategic business entities and managing competition. Human Resource Management Attracting and hiring skilled professionals is a challenging task to conduct. AirAsia is able to identify the needs of skills and it accordingly hires personnel from across the globe. They have a policy in place to keep the cost of recruiting low. Despite this, the company is able to boost the quality and efficiency of its operations team. The company is able to reduce expenses made over aircraft maintenance, cockpit training and standby crews. It is more due to the Airbus fleet, which is highly standardised. It also trains its staffs under cross-training format to manage its aircraft. It has its own training academy to develop a positive culture among employees (Airasia.com, 2019). AirAsia should essentially work upon its talent management strategy. This will include but not limited to, designing effective training modules, implementing strategies, identifying people those who need the training, and so forth. Technology Development AirAsia uses various technologies to become a cost-effective company by significantly reducing the cost. The company has a good tracking of its expenses and revenues. It uses a yield management system (YMS), which helpsAirAsia tracking and maintaining records on the operating cost and the expected revenues. It offers its customers web-based computer reservation system (CRS), which makes things a lot easier for customers. They are highly innovating as they effectively identify what emerging technologies can be beneficial for them. It is evidenced in the fact that AirAsia uses enterprise resource planning (ERP) to a good effect. They use enterprise resource planning (ERP) to speed up reporting as well as data retrieval process (Cook & Billig, 2017). They are regularly innovating to manage their relationship with customers as well as suppliers. They try to remain loyal to their customers by working closely with their business
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7SUPPLY CHAIN partners. They effectively utilise the aircraft seat configuration. They had shown their innovating capability when they offered a flatbed seat to customers (Cook & Billig, 2017). Procurement To remain cost-effective, it is important to have high bargaining power when dealing with suppliers. AirAsia has very good bargaining capability. This is one of the reasons, why the company has remained cost-effective for so many years in the past. The company has effective systems in place and appropriate utilisation of emerging technologies such as ERP to monitor their suppliers and track the transactions. This is how they make informed decisions and they bargain effectively every single time while dealing with suppliers (Chao, Chen & Yeh 2015). Effective relationship with strategic business entities is another reason for being cost-effective. However, there are areas yet uncovered by the company. These areas include effective branding of the company, online sales, delivery instructions and raw material specifications. Analysis In recent times, the number of aircraft is constantly growing leading to a wide number of challenges to be faced in managing these aircraft (Saranga & Nagpal, 2016). Collaboration and transparency will become integral to the supply chains. In managing supply chains effectively, one of the key factors would be to improve maintenance capability. In regards to maintenance, all parts should be in appropriate places and be accessible in real-time as well. Industry experts do largely believe in a fact that key drivers will be the supply chain transparency, predictive maintenance and regionalization. Sharing information and maintaining transparency between business partners is very important. There are possibilities that not every part is available at the nearest airports. However, it can become accessible in shorter-span of time when there is transparency in communication between business partners (Belobaba, Odoni & Barnhart, 2015). Forecasting capability is necessary for irrespective of the industry. It helps to know the market demand and the supply capacity of suppliers appropriately. However, very few firms do only manage it effectively. Hence,predictive maintenancecan be helpful in this regard, as it considerably improves the forecasting efficiency of a firm. In the airline industry, predictive maintenance can produce productive results in terms of predicting the failure of certain parts, knowing several flights in advance and maintaining effective lead-time to influence the supply
8SUPPLY CHAIN chain. There is a rising need for a proactive supply chain instead of traditional reactive supply chains. The future will bring some more challenges to airline companies. Engine maintenance is one of the challenges due to the expected shortage in labour supply. Engine maintenance has been creating challenges for a long time in the past. According to industry experts, this will continue to create pressure on the industry. The industry has a shortage of experts dealing with the engine of certain types. The role of the HRM, the global governments and the investors will be of huge importance in this regard. They should play their roles strategically to provide the best possible support to the industry.Studies conducted by Airbus and Boeingsuggest that in future there will be an approximate need for a close to 0.7 million maintenance engineers in the future (Wang et al., 2017). From the discussion on the supply chain management at AirAsia, it is evident thatthe companyknows exactly how to make things happen. It has done well so far with its supply chain management;however,currentindustrycircumstancesrequiremuchmorethantheydo currently. Some factors will keep increasing competitive advantage for Airasia. However, they need to work on a few areas to improve their respective competency and enhance their competitive advantage. These areas are the managerial system, brand image, customer base, organisational culture, strong focus on the business model and product/service differentiation. Importantly, AirAsia enjoys a lean firm infrastructure that encourages them to innovate and find creative solutions for the problems. The innovations in the form of seating configurations and flatbed arrangements have no matching from its competitors. The brand image of the company has helped it increase its brand loyalty. All these factors provide AirAsia opportunity to attain a long sustaining advantage in the airline industry (Airasia.com, 2019). Currently, the strategic capability of AirAsia meets all the criterion of "VIRUS” criteria. The low-cost model of AirAsia is valuable to the airline industry. The management capability of the company is less imitable. It offers a seating configuration, which is distinctive in nature and is an unmatched innovation. AirAsia does not just offer low-cost service to its customers but its service-level is also unmatchable under a low-budget model. However, there are areas where they need to have more focus. These are uncertainties caused due to natural disasters in its operative region, terrorist attacks, engine maintenance, and so forth (Prajogo, 2016).
9SUPPLY CHAIN Recommendations 1.There should be benchmarking and planning for supply chain activities. Some of the key measures will be forecasting the customer demands, analyse the demand patterns, capacity management, logistics, addressing key bottlenecks, engine maintenance, etc. 2.There should be scheduling and recording of maintenance operations. This will help to keep track of the costs. This will also help in doing planned and unplanned maintenance. This will help to keep an account of the costs for components, labour materials, time, etc. 3.AirAsia should work upon tracking aircraft's lifecycle. Predictive alters can be helpful in managing the components as well as the life of the aircraft. Predictive notifications will help to know in advance the components, which are due for maintenance. Moreover, the lifeofthecomponentsisalsomeasurablethroughpredictivealerts.Predictive maintenance will influence the customer service standard for Airasia. 4.One more important thing, there is a need for a system, which could help in tracking and measuring things that matter. Dashboards and key performance indicators (KPIs) can be useful in planning. In addition, this can be helpful in other ways also. Such a system is helpfulinmeasuringthingslikeconsumptionhistory,thelifeofcomponents, maintenance expenses, and so forth. Conclusion To conclude, it can be said that with the emergence of many other low-cost operators as well as full-service carriers the sustenance as a cost leader could be challenging for Airasia. AirAsia should not stop from innovating as this will keep them hitting success. There is a need for more innovation in advertising and promoting services. While doing this AirAsia should ensure that they do not lose their control on their culture, business strategy and vision. The low- cost model may create challenges in the future. Some of the likely challenges will include staff grievances as well as political interference. Uncertainties around the industry will continue to rise. Hence, AirAsia should ensure to maintain its customer-oriented approach, which is a rare practice across the airline industry. They should keep using their approach in the context of planning and innovation, and in attracting and retaining their customers.
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10SUPPLY CHAIN References Airasia.com. (2019). Retrieved from https://www.airasia.com/en/gb Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2015).The global airline industry. John Wiley & Sons. Chao, C. C., Chen, H. T., & Yeh, T. L. (2015). A comprehensive relationship marketing model between airlines and travel agencies: the case of Taiwan.Journal of Air Transport Management,47, 20-31. Cook, G. N., & Billig, B. (2017).Airline operations and management: a management textbook. Routledge. Gill-McLure, W., & Firth, J. (2016). Managing people at work: the travel industry.Operations Management in the Travel Industry, 103. Hapsari, R., Clemes, M., & Dean, D. (2016). The mediating role of perceived value on the relationship between service quality and customer satisfaction: Evidence from Indonesian airline passengers.Procedia Economics and Finance,35, 388-395. Hugos, M. H. (2018).Essentials of supply chain management. John Wiley & Sons. Prajogo, D. I. (2016). The strategic fit between innovation strategies and business environment in delivering business performance.International Journal of Production Economics,171, 241-249. Saranga, H., & Nagpal, R. (2016). Drivers of operational efficiency and its impact on market performance in the Indian Airline industry.Journal of Air Transport Management,53, 165-176. Wang, J., Zhang, L., Duan, L., & Gao, R. X. (2017). A new paradigm of cloud-based predictive maintenance for intelligent manufacturing.Journal of Intelligent Manufacturing,28(5), 1125-1137.