OPS 574 Week 6 Strategic Operations Recommendation Example

Keep the Checks, Change the Base: A Strategic Operations Recommendation for a Regional Airline's Heavy Maintenance

[Student Name]

University of Phoenix

OPS/574: Creating Value Through Operations

Week 6 Assignment

[Instructor Name]

[Date]

Blue Ridge Regional Airlines, its options, results and figures are composites written for a model paper.

The imaginary regional carrier in this course, flying 54 jets for two partner airlines, faces a decision about its Knoxville heavy maintenance base. Checks have run more than three days past plan on average, costing about $5.2 million a year in lost value. One partner has asked whether an independent provider promising 11-day turnarounds would serve better. Five weeks of analysis inform the answer.

The Recommendation

Keep heavy checks in house, implement the improvements tested in the Week 5 pilot across all bays, add certified technician buy-backs and an engineer, adopt zone kits, manufacturer consignment and repair turnaround contracts and buy outside capacity for about four checks a year during peak seasons. The plan costs about $1.6 million a year in added operating cost and about $0.4 million in one-time spending. It is expected to cut average overrun from 3.4 to about 1.2 days, recovering about $3.8 million a year in avoided delay as checks grow to 46 a year, roughly $2.2 million net of the added operating cost.

What the Evidence Shows

Week 1 showed that value lies in turnaround dependability, not labor efficiency: each late day costs about $38,000. Week 2 traced most delay to cards sitting idle at the inspection and engineering steps rather than to slow technicians. Week 3 showed that inspectors and engineers run above 90 percent utilization, where queuing theory predicts long waits, and that demand will grow about 15 percent. Week 4 traced about 1.4 days of delay to parts and repair workflows. Week 5 tested the main countermeasures on two pilot checks: overrun averaged 1.2 days against 3.3 days on the two control checks, with no rise in repeat defects and inspector overtime about 8 percent lower than before.

Three Options

Improve in house: keep all checks, invest as above. Strengths: control of slots and quality, fleet knowledge retained, evidence from the pilot. Weaknesses: execution risk and dependence on union agreement for weekend shifts.

Outsource: send heavy checks to an independent provider at about $520,000 per check. Strengths: provider's stated 11-day turnaround and penalties. Weaknesses: about 30 percent higher cost per check than in house, ferry flights to the provider's hangar of about one day each way, loss of slot control when the provider serves larger customers first and loss of the technicians' knowledge of the fleet's history.

Hybrid: improve in house and contract about four peak-season checks a year to the provider. Strengths: the in-house gains plus flexibility for peaks without hiring for the highest demand. Weaknesses: managing two quality systems.

An outside provider's eleven days begin when its hangar door opens, not when the jet leaves Knoxville.

Weighing Efficiency and Effectiveness

Hayes and Pisano (1994) argued that operations strategy should focus on building capabilities that are hard for competitors to copy, rather than adopting the latest programs or minimizing cost alone. Heavy maintenance knowledge of an aging fleet is such a capability for Blue Ridge, and it supports the dependability its partners pay for. Outsourcing research cautions against giving up activities tied to critical knowledge; Quinn and Hilmer (1994) recommended concentrating on a few core competencies and outsourcing activities where the firm has no special capability or need for control. Heavy checks sit close to Blue Ridge's operational core, but peak overflow does not, which supports the hybrid.

Why Not Simply Outsource Everything

The provider's lower turnaround is real, but it is not the whole comparison. Ferry flights add about two days, one each way, on a regional jet that cannot be dispatched for revenue on those legs. The provider serves larger airlines and has said that its peak-season slots would be confirmed only six months ahead, so Blue Ridge could not move a check forward when a finding during line maintenance calls for it. The provider's price includes routine work but bills non-routine findings at hourly rates, and an aging fleet generates more of them each year. Taken together, outsourcing all checks would cost about 30 percent more per check and would not clearly return aircraft sooner door to door.

Lessons for the Airline's Leadership

The base's lateness was not caused by poor workers or bad managers but by measuring the wrong thing. Labor efficiency looked good while the airline lost millions in hangar days. The broader lesson is that any internal operation should be measured by the value it delivers to its internal customer, which for maintenance is aircraft availability.

Implementation Plan

Months 1 to 3: roll out the pilot countermeasures to all four bays; hire the engineer; start technician buy-back certification under the approved program.

Months 3 to 6: sign the manufacturer consignment agreement and repair vendor turnaround contracts; begin zone kits for aircraft past the age threshold.

Months 4 to 8: negotiate weekend schedule changes with the technicians' union.

Months 6 to 12: contract peak-season overflow with the independent provider; add two inspectors as demand rises.

Owners: the vice president of maintenance for the program, the base manager for daily operations, the supply chain director for supplier agreements.

Measures and Decision Point

The scorecard tracks average days late against plan, aircraft availability days lost, repeat defects within 30 days, a full cost per check that adds the delay value to labor and parts, and supplier turnaround and fill rates. Targets for month 12: average overrun at or below 1.5 days and repeat defects at or below 1.4 per aircraft. Kaplan and Norton's balanced view of performance (Kaplan & Norton, 1996) suggests pairing financial and operational measures so that savings in one do not hide losses in another; the cost per check measure includes delay value for that reason. At month 12, if average overrun exceeds 2.5 days, leadership will reopen the outsourcing option for a larger share of checks.

What the Partner Airlines Will See

The partner that raised outsourcing will receive a quarterly report on heavy check turnaround, aircraft availability and repeat defects, the measures it cares about. The first report, three months into the rollout, will show the pilot results and the early full-base numbers. Sharing these openly matters: the partner's confidence in Blue Ridge's maintenance affects its willingness to renew the capacity agreement, which is worth far more than any savings in the base.

People and Culture

The plan asks the base to judge itself differently. Supervisors who were praised for low labor hours per check will now be judged on days late and repeat defects. Leadership will explain the change at an all-hands meeting, show the value of a hangar day and recognize the pilot team publicly. Technicians and inspectors who designed the pilot's dispatch board will help train the other bays.

Risks

Union negotiations could stall weekend changes; without them the plan still recovers about $3.1 million a year in avoided delay. Demand growth could exceed forecast; the hybrid's outside capacity can expand. The pilot's two checks are a small sample; the staged rollout will confirm results before full commitment of later spending.

Conclusion

The evidence points to keeping heavy checks in house and changing how the base works: measure turnaround, relieve the inspection and engineering constraint, fix parts workflows and buy peak capacity outside. The hybrid creates about $2 million a year in net value after its costs, retains fleet knowledge and slot control and includes a clear point at which leadership would reconsider outsourcing if the gains do not hold.

References

Hayes, R. H., & Pisano, G. P. (1994). Beyond world-class: The new manufacturing strategy. Harvard Business Review, 72(1), 77-86.

Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business School Press.

Quinn, J. B., & Hilmer, F. G. (1994). Strategic outsourcing. Sloan Management Review, 35(4), 43-55.