Postgraduate Diploma: Flysafe Airline Supply Chain Management Report

This report provides a detailed analysis of Flysafe Airline's supply chain management, addressing critical issues and offering strategic recommendations for improvement. The report begins with an introduction to supply chain management and its importance to Flysafe, followed by an examination of the challenges faced by global supply chains in the airline industry, including benchmarking, material request cycles, global vendor management, raw material sourcing, and supply disruption risks. Macroeconomic factors influencing the airline industry, such as political, economic, social, and legal factors, are also considered. The report then delves into Flysafe's current outsourcing strategy and proposes potential alternatives. It further explores supplier relationship management, utilizing the Kraljic Matrix and Supplier Preferencing Model, along with SRM software applications. A logistic report on Flysafe is included, as well as an assessment of financial data and recommendations. The report concludes with an analysis of inventory management issues and suggests solutions for Flysafe. The report aims to provide a comprehensive understanding of Flysafe's supply chain and offer actionable strategies to enhance efficiency and profitability.

1
Assignment Cover Sheet
Course/Unit Information
Course Postgraduate Diploma in Supply Chain Management and
Logistics.
Unit No. 102
Unit code PGDSCML/102
Instructor Information
Name Mr.Paul Gulston
Phone [phone] or [phone] (What Sapp # 001 868 688
9749)
Email [e-mail]
Assignment Information
Full/ Part Assignment Full Assignment
Date Assignment Issued
Date Assignment Due
Student Information
(To be filled by the student prior submitting the assignment)
Name
Email
Date of Submission
1

2
Student Declaration
I,(Name) Hereby confirm that this assignment is my own work and not copied or plagiarized. It
has not previously been submitted as part of any assessment for this qualification. All the
sources, from which information has been obtained for this assignment, have been referenced as
per Harvard Referencing format. I further confirm that I have read and understood the Westford
School of Management rules and regulations about plagiarism and copying and agree to be
bound by them.
Students Signature : ______________________
Student Name : ______________________
Date : ______________________
2

3
SUPPLYCHAIN MANAGEMENT
AND LOGISTICS
3

4
Table of Contents
INTRODUCTION...........................................................................................................................5
MAIN BODY...................................................................................................................................5
TASK 1............................................................................................................................................5
(a)............................................................................................................................................5
Issues faced by global supply chains in airline industry........................................................5
Macro factors affecting the airline industry...........................................................................7
Industry related data...............................................................................................................9
(b) Current outsourcing strategy and potential outsourcing strategy for Flysafe.................11
TASK 2..........................................................................................................................................12
Supplier relationship Management.......................................................................................12
Kraljic Matrix.......................................................................................................................14
Supplier Preferencing Model................................................................................................15
SRM Software......................................................................................................................16
TASK 3..........................................................................................................................................17
Logistic Report on Flysafe...................................................................................................17
TASK 4..........................................................................................................................................17
(a)..........................................................................................................................................17
Assessment of the financial data and necessary recommendations......................................17
(b).........................................................................................................................................18
Inventory management issues within Flysafe.......................................................................18
Suggested solution for the inventory management faced by Flysafe...................................19
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20
4

5
INTRODUCTION
Supply chain management is a very essential part of a business organization, An
organization has to make sure that the supplied material should be of finest quality and reach at
time frame allocated for the same with the best price possible. This can be achieved by managing
all the components of supply chain management in an effective manner, it is a long term process
that requires efforts and strategies from the side of management in longer run. Flysafe is an
Airline company based in Dubai, UAE. The company is engaged in the business of airlines
services (Colicchia & Strozzi, 2012). It was established in the year 1973 with only 5 aircrafts.
The company has grown significant overtime and currently, it is having around 2,000 employees
with state of the art aircraft fleet of 300 aircrafts. The market structure has changed since then
and it is necessary to make some radical changes in the policies and procedures of the company
to escape it from mounting losses and make it profitable again in the competitive sector. The
current report will going to discuss and recommend turnaround strategy to the board of Flysafe,
in order to make its supply side strong enough for conducting business overtime. The financial
impact on the organization will be considered in an effective way, and necessary strategy or
policies will be recommended to the company considering its current situation in a competitive
market like airlines industry (Ellram & Cooper, 2014).
MAIN BODY
TASK 1
(a)
Issues faced by global supply chains in airline industry
Airline industry is a very competitive industry and therefore the players within the
industry have to focus on every aspects of the business in an effective manner. Any mistake in
frontline and backline business issues can lead to serious damage in overall growth rate and may
hider profitability of these companies in an effective way. Supply Chain Management simply
refers to handling of stock in a better way (Ghosh & Shah, 2015). The Airline Industry is highly
focused towards reducing their maintenance costs, maintaining a high level of inventory
accuracy & deliver high quality service. SCM is the crucial tool to grab this.
5

6
The supply chain in aviation sector in not an easy task, the industry deals in items which
are capital intensive in nature and therefore it requires efforts for its effective and efficient
management in the longer run. The items likewise cover numerous components. Various
components are moving which faces challenges in order to identify inventory. These challenges
make SCM more challenging for the aviation industry:
 Benchmarking as well as planning of supply chain for aviation. It includes forecasting of
customer requirements, management of capacity, effective analysis of the demand
patterns, addressing other issues related to the same like hangar space, logistics etc. The
current industry players need to spend additional amount on proper and effective
planning within the industry (Tako & Robinson, 2012).
 Oversee Material Request Cycle with complete examination of solicitations, days to
satisfy the request, delays in preparing, distribution centre measurements and need levels
and so on. The total lifecycle the board can be advanced utilizing SCM instruments.
Aviation companies need to recheck their material request cycle to ensure there is no gap
in requisition and delivery of orders in the longer run. Flysafe is facing difficulties in
effectively managing the whole process, thereby leading to mounting losses overtime.
 The SCM is complex process which knows global vendor management. The integration
of components, material and framework are required to have desired outcome for
attaining operational success (Seuring & Gold, 2012). The current issues faced by the
industry is in dealing with global suppliers, Flysafe had foreign vendors which were
delaying the process of sending aircrafts to the company on time, which has lead to
stoppage of certain flights due to non operation of certain planes for maintenance, this is
one of the issue for company’s mounting losses.
Due to the volatile nature of aviation industry, they are facing higher cost of insurance and their
access in the loan due to recession. This is likewise compounded by lowering in air traffic
volumes (Tako & Robinson, 2012). Though some of the developing countries in the region of
Asia and China are responsible for a reason for higher level of traffic volumes, but at the same
time the prices which they are ready to pay are not sufficient enough to make the sales as well as
profits of the company to grow as well as prosper in the longer run. It is essential that FlySafe
must implement specify geographical strategy for each region, in order to make the business
more cost effective and profitable in the longer run over period of time.
6

7
 Raw material Sourcing is also a major issues faced by aviation companies. Materials like
steel, copper, titanium, nickel, chromium, magnesium, Aluminium and many others,
these are primary material that used for the manufacturing of aircrafts. No one country
has a monopoly of the supply and all these metal needs to be occupied from different
countries and different regions in the world (Agus & Shukri Hajinoor, 2012). These all
depend on the location distance and qualities of the manufacturing aircraft, and there are
other non metal raw material like plastic, wood, rubber, textile, and other quality of
component that need to be procured effectively by procurement managers.
 Supply disruption risk, There is always a risk in supply chain management, because of
limited prediction of future demand and supply. Inaccurate pricing, projection, political
disruption and many other environmental issues like climate change and natural disasters
are turning out difficult for companies like Flysafe in the longer run. In supply chain
there are two type of approach. The short term approach such as monthly, quarterly,
annually basis. The long term approach consider suppliers on contract basis and other one
considers them for long years like five to ten years both of primary and secondary
suppliers (Zu & Kaynak, 2012). So, Understanding the suppliers business is very
important to help aircraft companies understand the supplier relationships. Companies
need to work honestly and understand the market trends; this can be achieved by knowing
about the supply index and other raw material procurement efficiently.
Macro factors affecting the airline industry
Airline industry gets affected by the macro factors that prevail within the external
environment of the industry. Aviation companies have to manage their business operations
keeping in mind that aviation is a huge industry. Henceforth, there is a need of effective
management and understanding of global business policies for the company to achieve
substantial growth and prosperity overtime (Pagell & Shevchenko, 2014). Some of the macro
factors that affect the airline industry directly include, social change, economy, political changes
and legal as well as environmental changes. These factors are discussed in detail as follows:
 Political: It refers to the policies and procedures made by the concerned government of
that particular region. Any changes within the same can affect the growth of airline
industry and its players in the longer run. Government regulation on the sector plays a
very crucial role in the growth and development in an effective way. If the regulations are
7

8
high, it will lead to constrained pricing decisions and thus overall structure of the
business will change (Aung & Chang, 2014). Profits will squeeze in longer run, making
the industry less competitive. Currently, the aviation market is growing rapidly around
the world, leading to deregulation of the sector in major economies.
 Economical: Monetary factors affect the aviation business. The ongoing financial
recession made the travelling market to see its least period. Both economy and premium
voyaging declined. Furthermore, carriers were likewise under the strain to adapt up to the
expanding fuel costs (Wang & Cullinane, 2015). These components made it hard to
create benefits. Additionally, carriers likewise battled with expanding salaries from
certain group of employees. All these financial components brought about expanded
insolvencies of real aircraft organizations.
 Social: Aircrafts additionally make social qualities like some other business as the
shopper of today has changed. So as to fulfil the changing needs of shoppers, aircrafts are
required to consolidate changes (Christopher, 2016). Presently travellers incline toward
those carriers which are giving broadened administrations at low fares. In the previous
couple of years, there has been a decrease in business class voyaging which is a gigantic
misfortune for the organizations. Automation is one more factor influencing the carrier
business as individuals utilize Skype features or conference call as opposed to travelling.
Flysafe needs to consider this model in an efficient manner for growing as well as
developing the business overtime.
 Legal: Just like financial or political elements, legal factors additionally hold exceptional
significance in analysis of the outside condition of the airline business. There are
numerous laws contrived for air traffic and the wellbeing and security of travellers. There
are numerous guidelines which expect aircrafts to offer safe travel alongside top notch
administrations (Golicic & Smith, 2013). Aircrafts are made in charge of air crashes or
some other sort of harm or debacle. Numerous laws have been proposed which manages
how the carriers treat its travellers, any discrepancies within the same is dealt with strong
actions against the firms.
Industry related data
Airline industry is one of the fastest developing industries, lot of innovation and
technological changes are taking place within this industry in an effective manner. The industry
8

9
has revenue of around 600 billion dollars worldwide; however, the industry offers fairly low
margins and operates on a profit margin of 3 to 4% worldwide. The net profit of the whole
industry stands at around 36 billion dollars (Zhu, Sarkis & Lai, 2013). Flysafe needs to focus on
improving its supply chain management through dedicated policies for these particular business
operations. This will enhance efficiency in business operation and will help in generating profits
in the longer run.
(Net profit of commercial airlines)
Source: (ICAO, Statistics,2018)
Flysafe is facing losses, however it is not only company which is facing losses within the
aviation or airline industry, almost all the companies in the industry is operating on low margin
or less profits. The above chart clearly depicts that net profits of commercial airlines around the
world is very low (Bichou, 2015). The profits of all the players around the world are not even
$35 billion, which is very less as compared to other industries which offer lucrative profits. The
industry as can be seen are going through a phase of consolidation and most of the companies
which are either small or are not having adequate resources have not been able to survive. There
is lack of profit and revenue growth in some of the region, but still governments are operating air
9

10
carriers in those regions due to lack private carriers in the sector. Existence of government in the
sector is killing the completion and taking down the level of pricing in the sector to a low level.
(Financial results of commercial airlines)
Source: (ICAO, Statistics,2018)
The above chart shows the EBIT margin of commercial airlines companies across the
globe. It is an effective and efficient depiction of squeezed profits and lower EBIT margins that
this industry offers to its players in the longer run (Fernie & Sparks, (Eds.). 2018). The highest
EBIT margin and highest profits has come from North America region, afterwards its Asia
pacific which offers fair amount of profits to the companies.
(Traffic results of airline industry)
10

11
Source: (ICAO, Statistics, 2018)
The above data depicts the traffic results of the airline industry. The growth in traffic of
commercial airlines is highest in the region of Asia; thereafter it is highest in North America.
Therefore, if Flysafe has to become profitable again, it should focus on Asia and North American
regions (Sarkis, 2012). The company should focus on operating more flights in those regions, as
consumers in these countries are ready to pay more and the air traffic is also very high in these
regions.
(b) Current outsourcing strategy and potential outsourcing strategy for Flysafe
The dimension of re-appropriating has expanded all through the carrier business since
deregulation. Be that as it may, the development of redistributing has been inconsistent. Amid
poor financial periods, redistributing has developed quickly. In any case, the inverse has not been
valid (Wang & Cullinane, 2015). Amid great monetary periods, there has not been a sensational
move towards in sourcing. Given this pattern, it seems likely that throughout the following
twenty years, the dimension of re-appropriating will keep on developing in the airline business.
This has emotional ramifications for both administration and work.
Current outsourcing strategy Flysafe
The current outsourcing strategy suggests that catering contracts outsources have led to
operational delays and the food offered was also bad in quality. The relationships with suppliers
have not been very good. There were IT systems which were not supporting relationships with
suppliers. It is essential to make sure that right kind of focus is shown towards managing
suppliers in an efficient manner over period of time. There was lack of vendor support or
cooperation.
Potential outsourcing strategy for Flysafe
Ina better and effective outsourcing strategy, the company will aim to focus on improving
the relationship with its suppliers in an effective way, while at the same time, focus on improving
the business processes through in sourcing most of the catering work, this will be much cheaper
for the company as compared to buying the same from an external player. Company can develop
effective strategies for buying expensive parts at a much cheaper rate from different countries
around the world (Waters & Rinsler, 2014). Outsourcing strategy is long term plan and it
requires lot of efforts as well as planning from the side of management. Some other changes in
11

12
outsourcing strategy could be installation of supplier friendly IT system in place, whoich will
develop healthy relationship with supplier in the longer run.
TASK 2
Supplier relationship Management
It is a process in a business under which an organization interacts personally with
suppliers and organizes the dealing of raw material of goods and services (Waters & Rinsler,
2014). It is a systematic approach of evaluating suppliers’ contribution and impact on success,
determining strategies to maximize suppliers’ performance and also develop strategic approach
for executing on these determinations. It can be appliance by software, developing and
maintaining it possible for organizations to perform businesses, goods, transactions and entire
procedure of the organization and its suppliers in an effective manner.
Supplier relationship management is a long process strategy, which can benefit the whole
firm and will help in implementation (Tako & Robinson, 2012). It is used by supply chain
professionals which covers in areas like procurement, project management and operations where
these experts regularly deal with suppliers. Organization focus on the supplier relations, there are
many type of supplier relationship management strategy, these are discussed as follows:
 Increased Efficiency: This improves communications, better relation and understanding
of their clients, suppliers understanding business goals easily. When problems and issues
come then the same has to be dealt with effectively. Identification of supplier problems
and control supplier relationship with effective management program.
 Revenue Growth: In supplier relationship management both party supplier and buyer
want to increase their revenue and want a increased relationship between each other.
Working in closed relation by a joint venture, supplier and buyer in a supplier
relationship management can have new opportunities like sharing market risks and
potential growth (Huemer, 2012). If one is thinking about the growth of business, it is
possible but he must make a good relation with clients. Focus on implement consistent, If
Flysafe want to increase revenue and growth of business, focus on marketing strategy
inbound marketing and outbound marketing these tools are very important to generating
consistency. Customer satisfaction, better quality, on-time delivery and innovation are
more important to increase performance.
12