Service Operations Management Report Mccarran

Service Operations Management Report

McCarran International Airport Las Vegas, Nevada

The contributions of queuing theory, Economic order Quantities (EOQ), and the redefining of core business processes based on the strategic objectives of McCarran International Airport in Las Vegas, Nevada form the basis of this report. Through several telephone interviews and visits to the airport, an analysis has been completed of how the airport was able to become the leading airport in the U, S, in Common User Self-Service (CUSS), RFID, and SOA-based implementations to unify the many systems that comprise the service component of the airport. This report analyses McCarran's strategic objectives and accomplishments as they relate to unifying and making more efficient services operations through the use of operations research techniques.

Introduction

The efficiency of airport service operations has a direct relationship to customer satisfaction and the ability to stay secure. The synchronization of all service functions in an airport must be aligned with a series of strategic objectives to be successful, whether the primary focus is on maximizing customer satisfaction or efficiency. In the case of the airport chosen for this study, McCarran International Airport of Las Vegas, Nevada, the strategic objective of significantly increasing customer satisfaction through greater efficiencies is the airports' primary strategic goal. The accomplishment of business process management and process re-engineering efforts however is exacerbated by the large influx and outflow of visitors the airport receives throughout the winter and spring month when conventions and association meetings plan their events in Las Vegas. While airport services operations can predict the highest and lowest weeks of travel during any given year, they cannot today define the magnitude of these swings in airport use. As a result, the airport authority in conjunction with the Clark County, Nevada local government agencies are using many of the same concepts that apply to queuing theory, Economic Order Quantities (EOQ), inventory analysis, fulfillment theories and best practices, and supply chain management and optimization best practices, and the evolving and highly effective use of Service Oriented Architectures (SOA) to synchronize these many efficiency strategies to align with the broader strategic objectives of the airport. This report will examine those areas where McCarran International Airport has achieved best practices, and those areas that need continual refinement and improvement to better align with the exponential growth in freight and passengers the airport is experiencing today. Specifically focusing on the synchronization of service operation practices, front and back office relationships, queuing systems, facility layout and design, capacity constraints, as well as quality issues, this report puts all these functional areas and strategies in the context of achieving the customer service goals the airport has defined.

Analysis

McCarran International Airport's ability to balance security concerns and efficiency of customer service is even more daunting than many other U.S. domestic airports due to the majority of visitors arriving via airlines vs. any other form of transportation, over 80% at last count according to the Las Vegas Chamber of Commerce and Visitor's Bureau. Figure 1, derived from Bureau's statistics on yearly total passengers vs. total rooms, graphically illustrates why services operations in the airport are critical to the overall growth of the cities' main business of tourism and conventions.

Figure 1: Comparing Total Rooms to Total Passengers - Illustrating the Strain on McCarran International Airport

Surveys completed by Clark County's Airport Authority show a high correlation of traveler satisfaction to their perceptions of the entire cities' attractiveness, service levels and overall satisfaction with their trip. In essence for Las Vegas the level of service delivered in the airport is the most memorable part of any trip for any traveler to their city. As a result of this finding, the airport's management teams and Clark County local government agencies have devised an aggressive series of goals to turn McCarran International Airport into one of the most efficient and highest in customer satisfaction throughout the world. Clark County government officials and McCarran International Airport managers have as a result set the following strategic objectives to guide fulfillment of the strategic plan for the airport:

Identify and implement revenue generation opportunities (revenue per passenger) by working to combine the retailing and check-in process workflows throughout the airport's terminals. This includes the introduction of free Wi-Fi Internet Access Service throughout the airport, which is another differentiating benefit for business travelers who like to check e-mail or the using the Internet while waiting for their flights.

Implement an internal quality assurance program focusing on service, cleanliness and operating mechanics. Define a series of key performance indicators and metrics of performance so that an analytical dashboard can be used for monitoring progress towards the goals defined.

Identify and implement the optimum customer parking rates to benefit the Airport and complete a comprehensive McCarran roadway signage review to facilitate passenger navigation in and out of the Airport. From surveys completed by the Las Vegas Chamber of Commerce the need for more visible and easier-to-understand signage both into and out of the airport is considered critical as an enhancement to total customer service.

Initiate Hotel Check-in Program and increase performance of queuing ticketing and gate utilization including more efficient use of queuing in optimizing the flow of security checkpoints.

Redefining Processes First, Systems Later For the objectives as defined by both Clark County and McCarran International Airport's managers to be achieved, a synchronized approach to re-defining processes was first needed. In analyzing how the airport can increase its services performance, McCarran International Airport's management team begins to de-construct the most core processes, beginning with the queues that airport's customers experience through the process of entering the airport and getting checked in for their flights, clearing security and potentially interacting with retailers and shops. Using both business process management (BPM) and Business Process Reengineering (BPR) in conjunction with queuing and forecasting of and responding to demand through the use of Operations Research techniques, the airport has the best chance of increasing customer service levels while monitoring them through the use of analytics applications.

The integration of IT functions to augment services strategies is defined in greater detail later in this report, as McCarran is pioneering the use of Service-Oriented Architectures as the integration point for its many customer-facing and operations-centric applications. Included in the proposed SOA platform, which will serve to synchronize the many front-office systems necessary for increasing customer satisfaction, is also a series of analytics applications useful for defining the scorecards of key performance indicators and metrics of performance. These scorecards will be used by McCarran International Airport's management team to measure progress towards specific objectives and goals. Using BPM and BPR techniques including Six Sigma, and queuing theories as the foundation for redefining processes that comprise the Operations Management System shown in Figure 2 creates more of a demand-driven framework over and above a series of disconnected processes.

Figure 2: An Example of an Airport Real-time Operations Management System

Using the Operations Management System as the basis for process re-definition provides a useful framework for defining how McCarran International Airport's management team can redefine the processes most in need of improvement. The next section deals with the first major process that McCarran's management focus on, which is automating the Common User Self-Service (CUSS) system.

Queuing Process Redefinition for Common User Self-Service (CUSS)

The first area of process redefinition is CUSS which according to IATA is expected to be growing at a 30% a year through 2008.

The CUSS implementation at McCarran includes all major airlines with the exception of Delta Airlines, is comprised of an integrated system of 106 kiosks, including 6 off-site kiosks. These 6 off site kiosks include the Convention Center, The Venetian Hotel, and four other locations which offer boarding passes only check-in now and soon to offer bag check (as of January 2007). The kiosks do not have ATB capability and are 2-D bar code capable.

McCarran International Airport managements' goal is to have 10% off-site check-in in 2007, and currently is accomplishing currently 30 to 40% of the overall passengers at LAS check-in at kiosks with 4M boarding passes issued or 150,000 a week. McCarran was the first airport globally to move as thoroughly to CUSS-based workflows based on the analysis completed by Odoni who is one of the leading experts in the field of queuing and operations research theory pertaining to airport services.

Combining Check-in and Retail Processes

Clark County and McCarran International Airport managers specifically defined the strategy of making check-in and retailing processes concurrent with one another. Odoni, Gatersleben and Simon W. van der Weij highlight throughout their research that queuing length is alleviated by the dynamic availability of check-in resources through a CUSS-based strategy. Researchers Joustra & Dijik have also shown in their work within the Amsterdam Airport Schiphol highlight the need to consolidate two processes that take an inordinate amount of queuing time for airport travelers, checking in and shopping. Figure 3 shows an example of how these two processes can be consolidated into a single process, relying on the use of a Service-Oriented Architecture (SOA) to create the synchronized IT architecture which allows for real-time sharing of information. 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.