Solving The Problem Of Inflated Costs At Virgin Australia: An Essay.

Identify a specific problem, generate and evaluate solutions and devise an implementation plan.

Identify a problem suitable for this assignment. This may have been, say, a past problem you’ve encountered at work,Your task is to address this problem in a new way by application of tools and methods starting with those enunciated by Wood et al.

1. Problem background
2. Problem definition
3. Solution generation
4. Solution evaluation
5. Implementation and action plan

Virgin Atlantic started operations in Australia in the year 2000. It operates in the nation under the great umbrella of the Virgin Group of Richard Branson. At that time competition in the leisure, flight market was less developed like today. Operations as the Virgin Group continued until the May of 2011 branded the local company as Virgin Australia. The repositioning made the company reap the national benefits as an airline of choice in the country. The company’s executives have been instrumental in making short term and long term decisions that have propelled the company to its present position. The company is faced with a problem of inflated costs through the past year leading to a drastic reduction in revenue for the fiscal cycle. The company needs to solve this puzzle promptly to avoid a repeat in reduced incomes for a consecutive year (Virgin Australia, 2017).

5Ws’

The 5Ws' of defining the problem in Virgin Australia as shown below (Walinga, 2017).

1. Who?

The people causing the extra costs in the organization are the operational staff.

1. What?

Virgin Australia has experience escalated prices.

1. Where?

The company carries its operations of flights from several airports in Australia with both local and global flights.

1. When?

Virgin Australia started experiencing escalation since the rebranding of 2011.

1. Why?

The root problem of costs is the expansion of the business. The challenge of costs has escalated since the rebranding of the company to Virgin Australia. The cost drivers in the organization are the operational activities which have increased because of the rise in the level of operations.

Costs are relevant in business operations. Expansion of business of Virgin Australia led to the need to employ more crew members. More people were needed to work in all sectors created. The expansion was not proportionate because support technology was not enhanced probably leading to higher costs than it was expected. Laying off of some workers to reduce costs was undertaken, but this move only left the current workers being overworked.

The industry has some competitors that threats its fortunes of the market. Operations impose a big push on costs that cannot be avoided. There are 10,000 crew members in the airline, and this is three more times over the number of employees back when the local business started. Expansion cannot have been limited by fear of costs. Anyway, the business had to grow. An increase in demand has raised monthly flights to an incredible estimate of 100,000 in a month. The passengers go up to several tens of millions in a year (Song, 2017).

The Root Causes of Inflated Costs at Virgin Australia

The technological environment is changing fast. The size of the firm makes the business processes to be even more complex. There are a lot of gaps in adapting the information system of the current trend in the market. Flight scheduled and aircraft allocation are being done in systems which are capable of handling smaller operations (Wendill, 2016). The company can be said to have failed in use the available technology to support the delivery of services.

 Costs are an essential part of any business. Expenses are incurred to ensure that activities and operations which generate profits are done. The environmental factors should be controlled to control costs. The air transportation system is undeniably complex. The problem can be analyzed at its cause through an accurate and detailed description. The airline environment keeps on changing continuously (Smith, 2012). Flight schedules and agreements and plans can be respectively modified and disrupted. The size of the company and the quantity of data and information impact the profitability. Implementation of a new program requires lots of time. Scheduling of time, aircraft allocation will necessitate the determination of the right size and type of aircraft. The process must meet the requirements of maintenance and the operational constraints.

The resource areas in the airline are not being controlled at the required levels despite the recent expansion of the company. Managing of crew members will also involve staff development and training to the present necessities of the airline industry. The role of team members mostly involves contact with the customers creating a high need for human factors of emotions, feelings, honesty, reliability, and others. Recent research on the prevalent gap to excellence has unanimously linked the reduction in profits to the above factors in the delivery of services. The unreliability of the staff causes unnecessary disruptions in flight schedules (Reiter, 2004).

Definition of the problem separates of the problem and the solution. Precise modeling systems are available for optimization. The identification of the nature of the problem to inefficiencies in individual airline workers and the tracking of costs have enabled a transparent process for all the stakeholders. The development is a strategic opportunity to be capitalized on so that the business will not increase costs when trying to solve the cost problem. It is a great need to combine massive optimization of processes to the modeling power of prototyping (Oh, 2014).

The problem in Virgin Australia should be broken down into smaller units that will be easier to define and formulate appropriate solutions. The cost variable is part and parcel of the operations of the firm. As a dependent variable, increase in operational levels because of expansion of the airline as a result of increased customers is a valid proposition that must be accompanied by any form of business development. According to (Erfaisalsyah, 2015), the specification of the problem in context did not exist at first. In (Germainb, 2017), the general business environment and the particular Virgin airline should support fast iteration to the actual problem and successively fix solutions that will avoid a repeat of the problem afterward. The most common tactic in formulating an answer is the definition perspective.

Proposed Solutions

The particular standard aspect of crew workers is expertise and knowledge to of customer solutions (Gerrits, 2017). Every member of staff from the casual workers to executive staff have to some point come to deal with their clients. Specialized customer care individuals are not necessarily needed to handle all the requirements of customers. In this perspective, it is a necessity that all workers have basic knowledge of dealing with the customers. The flight environment filled with their clients. There is a need for non-stop efforts over time (Hu, 2017). Customer needs may change with time but most appropriately should the staff be trained the new changes to adapt to the ever changing environment. The industry has developed a lot of information system applications to provide support services. The system is currently used in the firm was acquired at the period of the rebranding of the enterprise to Virgin Australia from the founding Virgin Group (Virgin Australia, 2017).

Training has been overlooked as a result of the expansion of business operations. Inefficient technology has also not been developed appropriately to manage the expanded business operations.

A sequential improvement in technology was ignored while it was required that every part of business be developed proportionately. The technology in use was neither flexible to adapt to the current situation.

Unplanned investments

The investment could have been deemed to be planned if every part of the business were expanded. The left out sections contribute to inefficiency.

High costs

The costs of funding the losses caused by operational inefficiency have reduced profits by $30 million in the last fiscal year.

Elimination

The unplanned change is not defined as a problem because it is described by all the other issues.

Variable	Sub-divisions	field	duration	Expenditure levels	Availability of finance
Employee training	Technology use	Technology	8 months	Moderate $10,000	Available
	Customer services	operations	8 months	Moderate $10,000	Available
Inefficient technology	New technology	technology	7 months	Moderate $10,000	Available
	flexibility	Technical	N/A	Minimal $,5,000	Available

Staff Training	Customer care	Safety	Security	General workers	Engineers
Period (Months)	3	1	1	2	1
Priority	High (2)	High (2)	High (2)	Low (1)	Low (1)
Necessary	Yes (2)	Yes (2)	No (1)	No (1)	No (1)
Rankings	7	5	4	4	3

Information system	Information	Development	Implementation	Maintenance
Period (months)	1	5	1	N/A
Cost	Moderate(3)	Moderate(3)	High (5)	Moderate (3)
Rating	6	8	6	2
Ranking	1	2	3	4

The ranking of technology follows the order of development from the gathering of information to maintenance.

Elimination

The problem of unplanned investment is ignored because it is a sum of the other problems.

The How-How diagram

Training of employees is set to take more time, 8 months, while implementation of technology will take 7 months.

As identified earlier, two solutions need to be implemented to solve the problem of unnecessary costs. Firstly, training should be offered to staff on handling the customers. All employees should be included in this solution. Secondly, the information system supporting both customers and the organization must be an integrated into all operations and up to date (Mumford, 2001). Technological systems evolve, and older systems become obsolete within months.

Conclusion

Amount up to AU$35 million stands to be saved on costs on the redundant challenge in the airline. The old regime has been reported to fail to give right directories a several making clients to miss flights. Consequently, almost three airplanes in a year are rescheduled without any substantial reason (Nurgozhin, 2017). The problem of rescheduling is present probably due to its outdated specifications. The functionality of the system was created according to the requirements of the developer and is not in line with the demands of the airline industry in a general perspective. The needs of the Virgin Australia airline were also neglected. The biggest mistake here is that the system should have been at least flexible with all the airline's requirements (Dupláková, 2015). A flexible system will allow customization according to the demands of the company. Another way to solve the problem of an efficient information system is to develop an exclusive system that will take into consideration the requirements of the business.

Training of staff in customer relations should be done immediately. It is required that training should be done in small bits of around 50 employees to shun the work stoppage. Distant of onsite training programs will be the most preferred as it will not interfere with work processes. The first people to be trained should be those who have a primary role in handling the customers to bring about the highest benefits faster (Artikis, 2017).

The action plan will take 8 months, and the step-by-step process is highlighted as follows (in groups of 50).

Customer handlers	3 months
Safety personnel	1 month
Security staff	1 month
General workers	2 month
Engineers	1 month

The developer should be given all the necessary information relating to the airline that must be included in the system. The system should allow for flexibility into the future needs of the airline. Information system acquisition is a one off expenditure with little maintenance needs (Cropley, 2006). The action plan is highlighted below.

Information gathering	1 week
Development	5 months
Implementation	1 month
Maintenance	N/A

Conclusion

In inference, we have defined the problem of cost escalation in Virgin Australia. The company viewed expansion in operations in the perspective of profits. Without a proper plan, the company’s management left the areas of investment in technology. It is necessary to invest in technological applications to support the big business. The revisiting of technology should consider flexibility because the field is always changing. The new employees who came in to fill the new opportunities also need to be revisited by providing appropriate training.

References

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Virgin Australia. (2017, August 26). Company Overview. Retrieved from www.virginaustralia.com: https://www.virginaustralia.com/ae/en/about-us/company-overview/

Walinga, J. (2017). Leading Others Past Wicked Problems to Inclusive Practice Using Integrated Focus; Breaking the Zero-Sum Game. Inclusive Leadership, 395-417.

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