The business model of a business displays the means by which the three management imperatives are achieved which means that business operations is the execution of the business model.
The term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.
While many different conceptualizations of a business model by many but the conceptualization by, Osterwalder proposes a synthesis of different conceptualizations into a single reference model based on the similarities of a large range of models, and constitutes a business model design template which allows enterprises to describe their business model.
Business model design template: Nine building blocks and their relationships, Osterwalder 2004.
Infrastructure comprises of
Core capabilities – are the capabilities and competencies necessary to execute a company’s business model. Which further needs a:
Partner Network – which is the business alliance with are needed for the proper execution of this business.
Value configuration – is the aspect which makes the business mutually beneficial to both business and the customers.
This is the Value proposition the products and services a business offers. Quoting Osterwalder (2004), a value proposition “is an overall view of products and services that together represent value for a specific customer segment. It describes the way a firm differentiates itself from its competitors and is the reason why customers buy from a certain firm and not from another.”
Customers comprise of
Target customer – is the right kind of customers who would benefit by the product and the services.
Distribution channel – is the route the company takes to delivers products and services to customers. This will include the company’s marketing and distribution strategy. These two leading to:
Customer relationship which is the link company establishes between itself and its different customer segments to understand the customer needs and preferences. The process of managing customer relationships is referred to as CRM, customer relationship management.
Finances comprises of
Cost Structure – This is the monetary result of the means employed in the business model.
Revenue – Is the revenue generated by the company through its various activities. This is the company’s income.
Operations management is a field of business related with the manufacturing of the goods and the services related to that post manufacturing. This also include the responsibility of ensuring that business operations is made efficient by using the minimum resources and making it effective in terms of meeting the customer requirements. This is also called the management of converting the inputs in the forms of materials, labour and energy) into outputs (in form of finished products)
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Operations traditionally means the production of goods and services separately, although the differentiation between these two types of operations is difficult the manufacturers tend to merge the product and the services as a packaged product. More generally, Operations Management aims to increase the content of value-added activities in any given process. These value-adding creative activities should be aligned with market opportunity for optimal enterprise performance.
Gate Gourmet – Operations Management Case study
Leading The Aviation Service and Catering
Gate Gourmet is the world’s second largest airline catering company with its headquarters at the Zurich Airport, Switzerland and Reston, VA, USA. It provides catering services to many of the world’s major airlines
Their worldwide teams of talented, accredited chefs combine innovation and inspiration in the meals they will bring to their customers, while meeting their budget criteria.
Aircraft Provisioning and Logistics
Gate Gourmet has the expertise to meet the provisioning needs in stations small and large. They manage the complex gateway hub logistics for many of the best-known airlines in the world.
In an industry which is very competitive and works on low margin this company provides 534 thousand meals a day world over and on average 195 million meals every year. . It has 115 flight kitchens in 30 different countries, in different locations such as Hawaii, Los Angeles, Buenos Aires, New York, Madrid, London, Bangkok, Sydney and Tokyo.
Gate Gourmet Customers
With its comprehensive portfolio of aviation-related services, gategroup’s member companies count airlines large and small across the globe among their customers. It provides catering services to more than 270 world’s major airlines on daily basis.
The group’s top customers with whom their relationship extents to over 30 years are:
Air Berlin, American Airlines, British Airways, Continental Airlines, Delta Air Lines, Emirates Airlines, Iberia, Jetstar Airways, LAN Airlines, Northwest Airlines, QantasAirways, Scandinavian Airlines System (SAS), Swiss International Air Lines, Thai Airways, Thomas Cook Airlines of Scandinavia and United Airlines.
Gate Gourmet Business Operations
Most of its other activities involve organizing all on-board services, equipment, food and drinks, newspapers, towels, earphones and so on.
That’s not all, Gate Gourmet also unloads from the aircraft, disposes of waste, cleans the cutlery, trays, and trolleys, stores all these customer-specific accessories for each airline, and makes everything ready for the next time it’s needed at the required location.
In short they are a specialist logistics operation for the aviation industry.
Importance of the Operations for Gate Gourmet
Gate Gourmet gives lots of emphasis on working in coordination with cleaning staff, baggage handlers and maintenance crews to ensure that the aircraft are prepared quickly for departure.
Normally on 40 minutes is allowed for all the activities inside the secured aircraft cabin and the hold. For this reason the processes has to be well organized with a planned sequence of working.
Eric van den Berg, Director of Business Applications at Gate Gourmet gives a practical example of the complexity that is involved in servicing an aircraft in a tight schedule;
“For example, a long haul flight from Asia may stop at Zurich-Airport for only two to three hours before it returns. In this timeslot, beside un-boarding and re-boarding passengers plus cabin cleaning, we are scheduled to unload the plane of used cutlery and rubbish, and prepare and load about 5 tons of new food, drinks and equipment for the return flight,” explains Eric.
The operations are completed within a time limit.
No over-producing and over-catering is practiced.
Meals are prepared and served hygienically and with best of its quality.
Supplies are ordered on time and delivered on time.
Staff is available and present to handle all the operations in given short notices.
Eric van den Berg, Director of Business Applications at Gate Gourmet states “The process is further complicated by the fact that last-minute passengers can show up shortly before departure and also would like a meal according to the airline’s specification. Then there are the passengers that require special meals and at the same time we try to avoid producing and loading more meals than actual passengers (so-called “over-catering”) as this is a loss for the airline and us. People often talk about ‘just-in-time’ delivery, but for us, just-in-time delivery is literally down to minutes.”
These requirements for perfection speed and total dependability is difficult even in a totally stable environment but in such situations when there are so many uncertainties that have to be managed so the job becomes much more difficult than one could expect. Although Gate Gourmet is always advised of the probable numbers of passengers for each flight, the actual number of passengers for each flight is only fixed 6 hours before take-off but still the numbers can still be increased after this, due to late sales. Normally the menus are fixed for a period of six months but the actual requirements for each flight depend on the destination, the type of aircraft and the mix of passengers by ticket class. Then if the fights are delayed for some reason or the other it puts pressure on everyone to reduce the turnaround time, and upsetting work schedules.
The other strategies or methods that help Gate Gourmet Operations Management: Just-in-time (JIT) is one of them.
Just – in – Time (JIT)
Just-in-time or JIT is a tool which has a set of activities designed to achieve high-volume production using minimal inventories of raw materials, work in process, and finished goods. Parts arrive at the next workstation “just in time” and are completed and move through the operation quickly. Nothing is produced until it is needed later in the assembly line. The consumer expresses a need for a product, and “pulls” demand through the production system.
In different parts of the world JIT has been defined in different manner but the job of this tool is to deliver the same result.
In Kaizen, JIT is a collection of concepts and techniques for improving productivity.
In Japan, JIT has been used to isolate the elements of waste in an organization.
Just-in-time manufacturing means producing the necessary items in necessary quantities at the necessary time. It is a philosophy of continuous improvement in which the wastes are identified and removed.
JIT practices have been involved in several key operations of the Gate Gourmet which includes production and supply scheduling.
It reduces the operating costs
It gives greater performance and optimum output
It gives higher quality
It helps in improving delivery scheduling
It increases flexibility and innovativeness
Kamban (label or signboard) system
Small Lot Production
Setup Time Reduction
Total Preventive Maintenance (TPM)
Total Quality Control (TQC)
Small-group Activities (SGA)
Kaman (or Kanban) – a Communication Tool in JIT Production System.
As this is the very important tool of JIT kamban has become the synonyms of JIT production system.
Kamban, meaning label or signboard, is used as a communication tool in JIT system. A kamban is attached to each box of parts as they go to the assembly line. A worker from the following process goes to collect parts from the previous process leaving a kamban signifying the delivery of a given quantity of specific parts. Once all the parts have been used as required, the same kamban is returned back to as a record of work done and an order for new parts. In this way kamban coordinates the inflow of parts and components to the assembly line, minimizing the processes.
To obtain best results and in achieving the objectives, Gate Gourmet uses the Six Sigma Process and techniques in its operations.
What is Six Sigma?
Six Sigma is a rigorous, focused and highly effective implementation of proven quality principles and techniques. Incorporating elements from the work of many quality pioneers, Six Sigma aims for virtually error free business performance. Sigma, s, is a letter in the Greek alphabet used by statisticians to measure the variability in any process. A company’s performance is measured by the sigma level of their business processes.
The most powerful feature of Six Sigma is the creation of an infrastructure to make sure that performance improvement activities have the necessary resources. Six Sigma involves changing major business value streams that cut across organizational barriers.
Tools are applied within a simple performance improvement model known as DMAIC, (Define-Measure-Analyze-Improve-Control.)
DMAIC can be described as follows:
D -Define the goals of the improvement activity. At different levels of a business model the goals might be different for different roles. So apply data mining methods to identify potential improvement opportunities.
M -Measure the existing system. Put in place a valid and reliable metrics to help monitor progress towards the goal(s) defined at the previous step. To start with begin by determining the current baseline.
A -Analyze the system to identify ways to eliminate the gap between the current performance of the system or process and the desired goal.
I -Improve the system. Be creative in finding new ways to do things better, cheaper, or faster. Use project management and other planning and management tools to implement the new approach.
C -Control the new system. Institutionalize the improved system by encouraging the people by bringing a change in the compensation and incentive systems, policies, procedures, MRP, budgets, operating instructions and other management systems.
SIX SIGMA IMPLEMENTATION
Implementation of Six Sigma begins with education and training within an organization. Routine education and training classes and seminars are desired for a company to attain the expert status in implementing these practices. The Six Sigma implementation can be done by following the steps in the given model: –
To make Six sigma successful it is imperative that the top level management and everyone below them must fundamentally believe in the strength of this tool. Managers need to support all individuals and teams involved in improving the quality of the product or service or process.
In this step the process is to gather the maximum information through intensive communication with customers, suppliers, and employees takes place. Information about the conditions of the processes, products and services that can be improved, are found and analyzed.
This is the step that undertakes training. Training this is the most important step and the organizations should do all that it takes to have all of its employees trained on Six Sigma on various levels.
In this step a monitoring system is to be developed that can be both internal and external. Internal like the amount of wastages and external like the customer satisfaction.
In this step the business processes that are to be improved are chosen the problems that were identified are removed and valueless activities and sub processes are terminated. Here the Six Sigma project is at a critical stage because bfore improvements it is necessary that a plan is made and the changes are communicated throughout the organization. Documentation of the improvements is very necessary so that these improvements can be replicated everywhere in the organization.
In this step the Six Sigma project is at its final stage and the changes and improvements that were made are analyzed by simulations and statistical methods. If any discrepancies are found then again the cycle is repeated.
Gate Gourmet is in a continuous process of hiring Six Sigma Champions to bring its services to a very professional stage with utmost technology usage and implementation of latest processes.
In the presence of SIX Sigma, we further suggest to implement any of the following methodologies to improve the effectiveness of the operations of the Company.
Lean Six Sigma and TPS-Lean Six Sigma are the modified and latest methodologies that have to be considered to further improve Company operations management systems. These systems have some more options to be considered while suggesting and forecasting the routine operation systems. 2479
LEAN SIX SIGMA
LEAN SIX SIGMA is a business improvement methodology which combines tools from both Lean Manufacturing and Six Sigma. Lean manufacturing focuses on speed and Six Sigma focuses on quality. By combining the two, the result is better quality faster.
Lean Six Sigma is a business improvement methodology that maximizes shareholder value by achieving the fastest rate of improvement in safety, customer satisfaction (quality), delivery, cost reduction, process speed, and invested capital.
The conclusion of that fact that what sets Lean Six Sigma apart from its individual components is the recognition that one cannot do “just quality” or “just speed,” one needs a balanced process that can help an organization to focus on improving service quality as defined by the customer within a set time frame.
A ‘Turbo-charged’ Lean Six Sigma Program
TPS combined with Lean Six Sigma is like a ‘turbo-charged’ Lean Six Sigma program.
TPS-Lean Six Sigma helps to design, develop, and implement the most powerful Lean Six Sigma program in the world. It combines all the powerful tools and methodologies of Lean and Six Sigma with personal power optimization of the Total Performance Scorecard. The result of this deadly combination is the program that increases speed, reduces waste, motivates the workforce, satisfies customers, and drives up profit.
Fundamental elements of TPS-Lean Six Sigma Cycle
Formulating-This phase involves the formulation of the Organizational, Project, and Personal Balanced Scorecard with regards to the examination of the four perspectives; Financial, External, Internal, and Developing and Learning.
Deploying- Here, all stakeholders participate in the business strategy by communicating and cascading the corporate scorecard to the scorecards of all the underlying business units and teams, and finally linking the team scorecard to the individual performance plan of the employees.
Improving- This means continuously improving both the business system processes, and the talent. The focus here is on correcting mistakes, improving existing capabilities, doing things right the first time, and acquiring new skills and capabilities through gradual improvement.
Developing and Learning- Here, the emphasis is on job-related talent management, business process learning, and to manage and use the talents within the organization effectively.
Design Simple Manufacturing System
A fundamental principle of lean manufacturing is demand-based flow manufacturing. In this type of production setting, inventory is only pulled through each production center when it is needed to meet a customer’s requirement. The benefits of this goal include:
decreased cycle time
increased capital equipment utilization
By implementing above stated manufacturing systems, the Company has identified the importance of these systems. Food is prepared at the very last time to decrease the time cycle and eliminate the waste.
The meals being made ready only at the final customer order. Final confirmation is sought in all the cases from customers through implementation of special IT technologies where the customers can easily contact and order their required items as per agreed menu or in case if any change is compulsory.
These systems decrease the pressure on the company because the orders are only made prepared when there is final confirmation from the client and that’s within a period of 4-5 hours. The risk of over-catering is reduced. In case if the flight gets cancelled, in the presence of these manufacturing systems, no actions is been taken until the final confirmation from the client.
Supply Chain Management
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply Chain Management controls all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.
In the 21st century, changes in the business environment have contributed to the development of supply chain networks. Firstly as an outcome of globalization and the entry of multinational companies, joint ventures, strategic alliances and business partnerships came out as significant success factors, following the earlier “Just-In-Time”, “Lean Manufacturing” and “Agile Manufacturing” practices which were put in place. Secondly the technological changes, particularly the dramatic resuction in the information communication costs, which is an important component of transaction costs, have led to changes in coordination among the members of the supply chain network .
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The success to the supply chain business process involves a strong co-ordination between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) are:
Customer relationship management
Customer service management
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Supply Chain Challenges for Gate Gourmet
Because of very tight schedules and sometimes instant orders, It’s not an easy task for Gate Gourmet to keep running it’s operations with full potential. Shortage of supplies or delay in supplies can cause serious harm to the overall business operations of the firm.
Following challenges are obviously faced while running its operations on routine basis:
On-time delivery of supplies from suppliers
Online delivery of the produced items to the customers
Product production and development
Resource Utilization with Fluctuating Demands
Today’s business scenario is getting into more globalization than localization. The markets are getting demanding, shrinking & competitive. Organizations fighting for a market share try to give more to their customers in process of achieving a greater market share which are countered by the competitors in a similar manner. So the major difference lies in the refining processes accompanied by increased or rather maximum usage of the available resources. Organizations are adopting Dynamic nature in their operational activities so that they are competitive, address day to day challenges and facilitate better customer response.
In this business critical process, the Gate Gourmet Company has decided to get help of Information Technology technologies to define the needs and to address the fluctuating demands of the customers.
Company has started
Using IT to assist in the scheduling of food and ancillary goods
The system, called Scala, covers almost all business processes for the company’s catering operation
To make sure that all the meals and all their accessories are delivered at the right time, at the right place and in the right quantities using the inbuilt functions of the IT systems.
Has invested a great deal of time and money in integrating its supply base into the systems that provide real-time data into the Scala system.
‘e-gatematrix’ is a series of web-enabled systems capture schedule data from Gate Gourmet’s airline customers using it to schedule meal deliveries, procure and synchronize deliveries from suppliers.
Food cannot be produced too early in advance as it has to be freshly prepared to be served fresh. The preparation of the food for a flight usually starts 12 to 24 hours before departure. Also to be noted, that in this period the passenger numbers for the flight often change both up and down.
The primary job of Scala & e-gatematrix is to make sure that all the meals and all their accessories are delivered at the right time, at the right place and in the right quantities. The flight kitchen’s control area monitors all flight operations and responds to any last-minute changes. This information and control is very important because every delay, every cancellation, every rebooking and every aircraft reassignment will have a direct and immediate impact on the catering process. Every minute can often be very crucial; and Gate Gourmet’s dedicated teams need to respond with the utmost flexibility and perfection. For this a very close contact is constantly maintained between the purchasing, kitchen and logistics units.
Gate Gourmet uses Scala & e-gatematrix in practice for its internal processes also. The service contracts that Gate Gourmet has with the airlines include flight schedules and meal specifications (Bill of Material), which are pre-set into Scala. In the days leading up to a flight, the company is kept updated with the latest passenger numbers by the airline. These numbers are either entered or electronically uploaded into Scala where, corresponding to the flight schedule and Bill of Material, the daily demand for meals is calculated, and a timetable for production is worked out. Using Scala & e-gatematrix and additional fax software, the chefs in the kitchen can directly send daily purchase orders for, e.g., vegetables to the suppliers. The Scala & e-gatematrix terminals are provided everywhere on the shop floor of the flight kitchens.
Once the food for the ready to be boarded, the last quality check is made and trolley-labels and delivery notes are printed from terminals. Once the goods shipped and confirmed in Scala & e-gatematrix, invoices are printed either on paper or in electronic form and sent to the airline. Scala & e-gatematrix depends heavily on vast databases that store thousands of detailed recipes to ensure consistent ingredients, presentation and taste, even on the largest of scales and stowing modules in which the layout for each aircraft is captured.
In the absence of these critical supply chain resources and IT systems, over-catering would have acted as a serious threat to the company’s overall profits as these once prepared menus and products have limited life.
It’s obvious that Gate Gourmet is keen in opting the latest emerging technologies to make its operations more profitable. The changes were created and managed using the e-gatematrix system, providing the supply chain with real-time communication of those changes. The final result of quickly implementing all of these changes was Gate Gourmet’s airline customers realized significant savings and cost avoidances, quickly adapting to the changes in the industry’s economic environment.
We suggest here that company should think about the TPL Lean Six Sigma methodologies to further address the related issues addressed in more details in these methodologies. This will help further to give ease of operations and to reduce the cost of operations of the Company.
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