Lean or agile principles in Ryanair’s operations
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This section of the report analyses to what extent lean or agile principles in Ryanair's operations have been applied, adhered to and how these principles have contributed to the company's successful performance.
According to Womack and Jones (2003), a company serves its customers for a certain purpose and fulfils a specific customer need. This is achieved through single processes which are in turn carried out by people - the company's employees.
The idea of lean operations derives from the notion that all these individual processes within a company's operations need to create value for the customer. If, however, a single process cannot be identified to add additional value, then, under a lean operations principle, this process can be considered as wasteful and should be cut out of operations. (Sutherland and Bennett, 2008; Womack and Jones, 2003)
Since a lean operations process aims to remove unnecessary and no value-adding activities, it has been argued by Aitken, Christopher and Towill (2002) that the lean operations principle might be more suitable for products and services with rather constant demand and a low degree in variation. Mason-Jones, Naylor and Towill (2000) go even one step further and argue that the lean principle should primarily be applied for commodity products or services.
Ryanair and the Lean Operations Principle
With the above definitions in mind, a clear line to Ryanair's operations can be drawn.The company has shaped the European air-travel market and has largely contributed to the fact that air travel has been viewed more as a commodity service in recent years. Especially at Ryanair, air travel is viewed as a means of transportation, bringing their customers from point A to point B without any additional service offerings - almost purely a commodity service. (Strategic Direction, 2004)
With its low-cost model and its definition of air travel as a commodity service in mind, Ryanair has deliberately been striving to remove all activities from their operations which do not add customer value in the light of this definition; such activities have been described as wasteful by Sutherland and Bennett (2008) and have been grouped into seven distinct categories. Based upon these different categories, an analysis of Ryanair's lean operations model follows:
In terms of Ryanair's business model, overproduction can be seen as any additional service offerings other than pure transportation. Ryanair succeeded in making its customers only demand for the pure transportation service from the company. It rigorously cuts out passenger service; food, drinks as well as baggage serviceare only available at extra cost while multi-class airplanes and inflight entertainment have been eliminated completely. (Strategic Direction 2004; Strategic Direction, 2006)
Delay/Waitingis time that is lost between two activities that do add value (Sutherland and Bennett, 2008). In order to remove waste resulting from waiting, Ryanair tries to keep an airplane's time on ground, that is its turnaround time, as short as possible. This is achieved by exclusively serving smaller, secondary airports with lower traffic. In addition, minimal catering activities need to be performed and baggage handling is simplified because there is no through checking to other flights. (McCormick, 2010; Strategic Direction, 2006)
Transportation/Conveyanceactivities can be sustained valuable by applying point-to-point operations in contrast to hub and spoke operations applied by many large national carriers. This system reinforces Ryanair's commitment to bring its passengers from A to B and not to intervene in their possible onward journeys. (McCormick, 2010; Strategic Direction, 2004)
Motionat Ryanair can be seen as unnecessary steps in the middle of an operating process; the company removed such a step by means of disintermediation in its ticket-selling process. At the beginning, flights were sold over the phone whiletoday the company almost exclusively sells its flights through its homepage, hence avoiding the involvement oftravel agencies completely. (McCormick, 2010; Strategic Direction, 2004)
Inventories are greatly reduced and more easily controlled by only using one aircraft type, the Boeing 737-800. Through such fleet standardisation, spare parts for maintenance can be acquired in bulk and used throughout the entire fleet (Strategic Direction, 2004). Furthermore, staff utilisation can be increased since all employees are able to operate on the entire fleet, increasing flexibility in operations.(Human Resource Management International Digest, 2007; McCormick, 2010)
Ryanair reduces wasted space by using its capacity on each flight efficiently. By selling seats for different prices, varying according to season, time of the day and time of booking the company strives to minimise the number of lost capacity in terms of empty seats (Human Resource Management International Digest, 2007). Furthermore, at the airport, Ryanair's check-in areas are reduced to a minimum since a large part of check-in can be performed over the internet by the customer. Despite their late popularity, self-service check-in machines are not used by Ryanair since they consume additional space and represent one additional unnecessary step in the company's operations. (McCormick, 2010)
Finally, the concept of reducingerrors in Ryanair's operations can be interpreted in two ways. Firstly, employee utilisation in the company is very high. Employees are responsible for carrying out a variety of different tasks; flight attendants not only sell refreshments on board, they are also required to assist in the cleaning and baggage handling process when necessary. This allows the company for more control over a variety of processes because employee involvement is higher. (McCormick, 2010) Secondly, processes that are not core to the company are outsourced and performed by specialists like check-in or baggage handling services. Using their expertise reduces the risk of errors and keeps the number of employees within the company low. (McCormick, 2010
This analysis shows that Ryanair clearly puts a lean operations strategy at the heart of its processes, resulting in 'doing more with less' (Aitken, Christopher and Towill, 2002, p.61) to achieve its goal for customers.
A Limitation to the Lean Approach
As the preceding discussion shows, Ryanair has succeeded in converting their service offer to a commodity applying a lean approach and exploiting its benefits. However, it has been argued by Polito and Watson (2006) that a lean approach might get to its limits as soon as customer demand is increasing since not enough resources are available in order to meet changing demand. In the case of Ryanair a standardised fleet might represent such a limit. If demand on a certain route increases sharply, Ryanair might find it difficult to react instantly with increased capacity; as larger aircrafts are not available, a simple aircraft change for a given flight in order to increase capacity is not possible. Instead, an additional flight on the given route might be considered which involves negotiating extra landing rights (Johnson, Scholes and Whittington, 2005).
Agility and Ryanair - A Conclusion
The previous example shows that Ryanair, with its high degree of leanness in process operations, might find it difficult to react to sudden, unforeseen changes in the environment instantly; such reactions require a company to be agile and have certain resources at hand that can be considered wasteful in a lean approach (Mason-Jones, Naylor and Towill, 2000). Agility is associated with higher flexibility and responsiveness to market changes (Aitken, Christopher and Towill, 2002) but as long as Ryanair is able to defend its concept of selling its service as a commodity, where flying is solely about transportation and highly valued by its customers, there might be no need for the company to incorporate aspects of agility into its lean operations processes.
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