Service Operations Management Report Mccarran Term Paper

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While this paper focuses on process-centric improvements to McCarran, the research completed for this paper highlights the critical need for an all-encompassing IT architecture that allows for data to support both processes as thoroughly as possible.

Figure 3: Combining the Check-in and retailing processes for greater efficiency

Luggage and Baggage Process Improvements

Another major area of process improvement McCarran needed to focus on was luggage and baggage handling. The airport had been losing between 10% to 30% of all bags, leading to high levels of customer dissatisfaction and many manual processes attempting to compensate for the confusion around this broken process. Relying on Radio Frequency Identification Devices (RFID) McCarran piloted several programs for baggage tagging, management and retrieval using the RFID standard. In the retail industry, Wal-Mart has been a pioneer in establishing higher levels of performance in logistics and supply chain performance using RFID, and McCarran's many efforts have lead to best practices for the U.S. being defined by their efforts. Figure 4 shows a comparable business case McCarran's management used for defining the ROI of implementing RFID systems with 52% of bags tagged as of January 2007 and read rates of 99%. These results combine for best practices in the context of RFID being used to overcome the queuing problems McCarran has with freight and luggage.

Figure 4: RFID Analysis Based on Queuing Theory

Using EOQ Modeling theory combining RFID illustrate the implications of queuing optimization on orthogonally-defined processes including luggage and freight management. McCarran's approach to RFID pilots and implementation has been very rapid due to the reliance on queuing approaches as defined by Lui and Wang. RFID's implementation at McCarran would have failed if it had not been for taking a more process-centric view of queuing and EOQ strategy definition relating to both freight and luggage. The results of re-defining processes first has been an impressive 30% reduction in lost luggage and a more efficient luggage and freight handling process measured by a reduction in cost per bag handled.

Service-oriented Architectures Synchronize Service

Airports are starting to see the positive ROIs possible due to tight integration of systems across functional boundaries. Without strong integration built on an agile and intelligent IT platform, no service provider within an airport can hope to survive in the turbulent, unpredictable, and accelerating competitive environments that typify airport operations today.

What's needed is an agile IT architecture that can align on the core supplier, buyer, and customer-facing processes and re-align not only IT resources, but serve as a catalyst for capturing knowledge and repurposing it throughout an airport services operation enterprise. Clearly there is a strong need for SOAs as a result of these dynamics.

What makes SOA highly differentiated as an IT strategy is the potential it provides to turn what had been exclusively a cost center into a business center, where P&L can be determined by the contribution of information to decisions. To look at SOA as purely a cost reduction strategy is short-sighted, myopic, and will lead many manufacturing companies to mistakenly move towards database and master records consolidation in the hopes SOA can answer the shortfall. SOA is clearly not a cost reduction strategy, yet the business benefits it provides of making manufacturing more attuned to customers and suppliers, in short becoming more attuned to its own value chain, are where the true ROI of SOA is today according to Study in Contrasts (2006).

The bottom line is that SOA delivers competitive advantages by synchronizing supply chains, service organizations and service functions to better align with customer demands. SOA is a new competitive weapon that services organizations are discovering that uses information assets not as historical mile markers, but as the fuel to propel their companies into more precisely aligned strategies for sensing and responding to demand. SOAs are serving also as the foundation for furthering airport operations by also including a series of analytical applications for tracking and reporting back key performance indicator's trending over time. The use of these indicators in the form of a scorecard is also critical to best practices in services re-definition.

Conclusions

The use of queuing specifically and the broader field of insights from operations management provide the following conclusions relating to the performance of McCarran International Airport:

The consolidation of businesses processes, when governed by queuing strategies as defined by Joustra & Dijik, is having significant impact on the overall performance of McCarran's financial and operational efficiencies.

This is leading to the growth of higher per passenger spending in the airport.

Leading the U.S. with their approach to Common User Self-Service (CUSS) and resulting integration of real-time Operations Management Systems to enable queuing reduction and best practices, McCarran's approach to pushing check-in points to hotels and the Convention Center is alleviating queues in the airport by 30% or more.

RFID-based initiatives to interject greater intelligence into the logistics of freight and baggage are also leading to significant gains in efficiency.

Recommendations

McCarran's approach to pursuing queuing and operations management best practices across customer services areas needs to be first governed by Business Impact and their relative contribution to strategic objectives on the one hand and the technological readiness of McCarran's management and staffs to permanently make the change on the other. The following table plots the priorities for change across a grid of Business Impact vs. technology Readiness, showing the relative rankings of RFID< CUSS, Customer Data Management (CDM), and Open Source Initiatives.

The top recommendations are to continually apply queuing theory in conjunction with RFID to gain the greatest potential business impact, relying primarily on queuing methodologies to further increase performance. The use of CDM-based approaches and the build-out of a broader single version of the truth in terms of Customer Data Management need to be the second priority, followed by the growth of CUSS for PDAs and online check-in. It is imperative that the continued synchronization of services at McCarran be built on an IT infrastructure that can be agile enough to respond to the specific needs of services organizations' growth due to advances in queuing theories and demands of customers on the one hand, and the need for creating a sustainable analytics, reporting and CDM-based infrastructure on the other.

Las Vegas Chamber of Commerce and Visitor's Center Profiles, 2006.

Las Vegas Chamber of Commerce Survey of Airport Satisfaction, 2005

IATA (2006)- Common User Self-Service (CUSS)

http://www1.iata.org/Whip/Public/frmMain_Public.aspx?WgId=40

Odoni (2004) - Airside Congestion Lecture. T. Wilson Professor Aeronautics and Astronautics Civil and Environmental Engineering Massachusetts Institute of Technology From Dr. Odoni's lecture, Accessed from the Internet on January 12, 2007:

http://ocw.mit.edu/NR/rdonlyres/Civil-and-Environmental-Engineering/1-203JFall-2004/C49DA4FE-FCDC-426B-90EB-D26867B7FEF7/0/qlec1.pdf

Gatersleben and Simon W. van der Weij (1999) - ANALYSIS AND SIMULATION OF PASSENGER FLOWS IN AN AIRPORT TERMINAL Proceedings of the 1999 Winter Simulation Conference P.A. Farrington, H.B. Nembhard, D.T. Sturrock, and G.W. Evans, eds. http://delivery.acm.org.library3/10.1145/330000/325045/p1226-gatersleben.pdf?key1=325045&key2=3240578611&coll=portal&dl=ACM&CFID=11352431&CFTOKEN=77150947

Joustra & Dijik (2001) - Paul E. Joustra and Nico M. Van Dijk. SIMULATION OF CHECK-IN AT AIRPORTS. Presented Proceedings of the 2001 Winter Simulation Conference B.A. Peters, J.S. Smith, D.J. Medeiros, and M.W. Rohrer, eds. http://delivery.acm.org.l/10.1145/570000/564271/p1023joustra.pdf?key1=564271&key2=2390578611&coll=portal&dl=ACM&CFID=11352431&CFTOKEN=77150947

Liu and Wang (2006) - Integrated RFID Data Modeling: An Approach for Querying Physical Objects in Pervasive Computing IBM Silicon Valley Lab and Siemens Corporate Research Princeton, NJ, USA CIKM'06, November 5-11, 2006, Arlington, Virginia, USA.

Study in Contrasts (2006) - A Study in Contrasts: The Evolving SOA Strategies of IBM And Microsoft Thursday, October 05, 2006: Dennis Gaughan. AMR Research. Article.[continue]

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