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Evaluation Plan Involving TCO and VFM

Discuss about the Supplied Evaluation Plan and Evaluation Criteria.

This report is designed to develop an evaluation plan and criteria to support the supplier selection among three airlines. In this view, Qanta, Virgin, and Jet star airlines of Australia are chosen and an analysis of Regular Passenger Transport Services (RPT flights) for personnel. The evaluation has been made by using Total Cost of Ownership (TCO) and Value for Money (VfM) principles. Also, a score against each of the qualitative evaluation criteria has been given in the report along with the justification statement.

Evaluation plan is a road map that identifies the goals and ways through which data is collected and analyzed. Along with this, evaluation is an effective process that critically examines a project. It involves in collecting and analyzing information regarding the project’s activities, features and outcomes. The main objective of an evaluation plan is to make decision about a project as whether to select it or not on the basis of various specified criteria.

An effective evaluation plan helps to identify the best possible methods and strategies for getting the required information about a project.  It also effectively identifies and leverages strength of a project along with identifying ineffective practices. This helps to select a particular project among various available on the basis of various different aspects including price, quality and convenience.

Total cost of ownership (TCO) can be defined as an estimate of total cost of goods and services over the whole of their life. Along with this, it is the combination of purchase price plus all other costs less received income.  It involves both direct and indirect costs related to a project (Weil, and Maher, 2010). The purpose of TCO is to help a customer to choose a particular vendor among various competing proposals. Moreover, TCO principles help a person to make effective and profitable purchasing decisions. It also helps to assess the cost, benefits and risks associated with a particular investment.

Value for money (VFM) can be defined as an optimum combination of whole life cost and quality to meet the customers’ requirement.  It involves the consideration of cost and non- cost factors and helps to make value decision about the best outcome. It also varies in complexity based on the nature of procurement.  Non-cost factors include technical and financial issues, sustainability, risk exposures, compliance with specifications and availability of service and support. On the other hand, cost factors include cost of holding, maintaining, using and disposing.  Moreover, price quality is an effective supplier selection method (NZTA, 2013). As per this method, the organizations determine that the best value for money can be obtained by evaluating the supplier which competes on the basis of both quality and price. The supplier will be selected by organization that offers the best combination of both quality and price.

Evaluation Criteria and Weightings

The object of the evaluation plan for the project is to select an airline service that successfully meets out the following criteria’s:

Price
It can be considered as one of the main criteria for selecting an airline. Each and every customer wants services which they can afford within their budget limit. The customer compares various airlines on the basis of price offerings and the most suitable one (Hoffman, and Bateson, 2016). Along with this, airlines are also compared on the basis of discount available on their fare.

Service Quality: The second airline’s characteristic is that it focuses mainly on its service quality. It is an important aspect that every customer considers significantly. There are various aspects of service quality, which impact the choice of a particular airline. These aspects include on-time departure and arrival, availability of good quality food and beverages and effective ground services like check-in, baggage handling and boarding. Along with this, it also includes in- flight services such as food and drink services, personnel behaviour and comfort.

Airline reputation: It is also an important aspect that is required to consider while selecting an airline services. As Company’s reputation can be defined as the perception of the consumer about the airline’s general operation, safety, and other factors. This reflects that reputation of a company also significantly impact their purchasing decision.

Airline safety:  It is also an important aspect that every customer considers while selecting a particular airline services. Every customer used to prefer services of that particular airline which involves providing required amount of safety to each class of customers.

Route availability and convenience:  It is also considered as one of the important aspects for selecting an airline services as customer do not prefer to travel through the airline which operates in limited routes. Moreover, departure time, origin and destination pairs and transfer requirements are the main factors for selecting an airline. Additionally, schedule convenience is also effectively considered by every customer.

Criteria’s

Weights (out of 100)

Price

40%

Quality-: 60%

Service quality

20%

Airline reputation

5%

Airline safety

25%

Route availability and convenience

10%

In the above table, price and quality is given appropriate weightings on the basis of their relevance for making effective and profitable selection of an airline services. Price is given 40% weighting out of 100 as it is an important factor that a customer or an organization takes into consideration. Along with this, it is an effective criterion to compare various available suppliers and helps to select the most appropriate one.  Moreover, Quality is given 60% weighting as it is a most important aspect at the time of evaluation various suppliers available. Out of 60% airline safety is given highest weighting as every customer wants required amount of safety first at the time of travelling and they use to select the services of that company which involves in safety regarding accidental conditions.  Moreover, service quality is given 20% weighting as each and every customer want effective service quality regarding various aspects including on-time departure and arrival, good quality food and beverages and ground services.  It is an important factor as it helps to attain competitive advantage over competitors (Mok et al., 2013). This reflects that an adequate service quality effectively involves providing a greater level of customer satisfaction. Furthermore, 10% weighting is given to the availability of airline service to different route and convenience as every customer used to make their purchasing decision on the basis of availability of services of airline among various different routes.  The customers use to prefer the services of airline that operates among various routes. Finally, the reputation or image of a particular airline service is given 5% weighting as the image of a particular organization significantly impact the purchasing decision of an individual or group. So, there are different class of customers that used to make their purchasing decisions on the basis of different aspects.

Justification of the Weightings

It is Australia’s second largest airline after Qantas and also, it is Australia’s first successful and major low cost airline. It operates at domestic, regional and international level. This airline company holds good and effective reputation in terms of staff and services. It airfares remain competitive despite upgrade in products. It also involves in providing passengers seamless connection to global networks (Airline Ratings, 2016). Moreover, it involves in providing effective services to and level of comfort to its passengers. In case, if the flight of a customer is cancelled, Virgin Australia offers an alternative flight on its own services to get passenger to its destination at no additional cost. Along with this, in case if flight of passenger is delayed then passengers are entitled to get refreshment vouchers at 2 hours intervals. VA involves in providing excellent in flight entertainment through on board Wi-Fi along with availability of blanket, pillow and amenity kit according to the class and fare package of passenger (Domestic or Business Class).

Virgin Australia also provides reasonable and affordable fare price to its customers along with smooth check-in and efficient boarding. It also involves in providing clean services and comfortable seats (Virgin Australia, 2016).  But it lack in on time delivery of service and sometime quality of service may also suffers. Moreover, VA also involves availability of good quality food and beverages along with effective baggage allowance depending on the class of passengers either domestic or business class.

Qantas is one of the Australia’s leading and oldest airlines in the world, founded in the Queensland outback in 1920.  The airline is based in Sydney and it operates in regional, domestic, and international destinations. The brand is recognized for its pioneered services from Australia to Europe and North America (Robbins et al., 2014). The long-term vision of the company is to function as the best premium airlines and best low fares carrier in the world. It offers various benefits to its passengers such as global network along with excellent services. 

Customer safety and their comfort are the main elements on which Qantas mainly focuses. Timely arrival and departure of the flight is another feature of the brand. The seats of the passengers are designed to provide great comfort to the people during the journey. Also, fullyflat seats with a blanket and pillow are also offered to take care of customers’ privacy. In order to ensure passengers’ entertainment, a large IFE screen is provided during the flight duration. Moreover, a three course meal with five choices for main course is served which is delicious and healthy (Taneja, 2016). A high quality wine is also made available for the customers on their demand. Everything offered in the flight well worth the passengers’ expenses and gives a pleasant experience to them.

Evaluation of Services on Three Airlines and Score Allocation

Jetstar Airlines is a low-cost airline of Australia. It is a part of two brand strategy of Qantas, which carries 8.5% of all passengers travelling in and out of Australia. The airline provides an extensive services from regional to international destinations using a mixed fleet of the Airbus A320 family and the Boeing 787 Dreamliner. The brand offers good services to its passengers during the flight journey but lack in providing timely arrival and departure to and from the destinations, respectively.  Also, the seats are small, which make the passengers’ flight duration uncomfortable during long international journeys (Postorino, 2010). The flights are modern and well-maintained inside. However, the crew members do not seem to be happy bunch of vegemite as they rarely smile and rarely seen when needed.

Quality weighting: 60%                 Price weighting: 40%

Firm

Total weighted score

Quality Criteria (Max. 100)

Price (AU $)

Price Score

Overall Quality

Overall Price

Overall Score

Rank

Virgin Australia Airlines

80

310

52

80*60%=48

52*40%=20.8

68.8

1

Qantas Airways

70

400

30

70*60%=42

30*40%=12

54

3

Jetstar Airways

50

260

65

50*60%=30

65*40%=26

56

2

The price fares are taken as average of three months fare from January 2017 to March 2017 for each of the airlines.

Price score and quality score is calculated as follows:

Mean price= $260+$400+$310/3

= $320

Minimum threshold limit is assumed as 50 and on the basis of threshold limit 1 point is deducted from score for each percentage point that is above mean price. Along with this, 1 point is added for each percentage point that is below mean price.

From the above table it is evaluated that Virgin Australia Airlines is the most effective and appropriate airline that involves in providing good quality airline services at better price. So the organization can choose the services of this airline as compared to Qantas Airways and Jetstar airways. As Virgin airlines involves providing smooth and efficient check-in and boarding services along with comfortable seats and excellent in-flight entertainment services. Its price is average ($310) on the basis of comparison of three airlines and it is given ranking 1 as per the overall quality and price aspect. So on the basis of above table, it can be said that Virgin Airlines is providing effective quality airline services at affordable price along with effective airline safety.

On the other hand, Qantas airlines, in spite of providing global networks benefits and excellent quality services, is attained at rank 3 because its fare price is comparatively higher than both the airlines. If an organization takes into consideration the price aspect then it will not be affordable to take this airline services as it consists of high fare price.  But on the basis of quality this airline involves in providing outstanding quality services to all its passengers. Along with this, the service staff of Qantas is very customer-friendly and is available whenever needed. Although it is expensive, it provides a good value for money and also gives an exclusive, private and personal experience to its customers. Furthermore, Jetstar has attained 2 ranking on the basis of above table. Although costing at a low budget, Jetstar Airways is not good enough in terms of service provided and comfort ability for the passengers. It also lacks in term of on-time departure and arrival factor.  In addition to this, no entertainment facility is available for the passengers during their journey and the food and beverage quality is also not good enough.

Conclusion

From the above evaluation process, it can be concluded that supplier selection is an important task for availing better services. The three airlines, discussed in the report, offer more or less similar services for the economy class at affordable prices. However, it is also reflected that Qantas and Virgin are flying the highest among these airlines when it comes to market share and overall customer satisfaction. Whereas, Jetstar is trailing behind the competition on cost and delays, hidden fees and poor service remain part of the flying experience.

References

NZTA, Supplier selection methods. Last modified: 1 November, 2013, https://www.nzta.govt.nz/assets/resources/procurement-manual/docs/appendix-c-supplier.pdf 

Weil, R. and Maher, M. Handbook of Cost Management. UK: John Wiley & Sons, 2010.    TCO

Mok, C., Sparks, B. and Kadampully, J. Service Quality Management in Hospitality, Tourism, and Leisure. UK: Routledge, 2013.

Hoffman, D. and Bateson, J. Services Marketing: Concepts, Strategies, & Cases. UK: Cengage Learning, 2016.

Airline Ratings, Virgin Australia. Last modified: 2016, https://www.airlineratings.com/ratings/77/virgin-australia

Virgin Australia, Our Promise. Last modified: 2016, https://www.virginaustralia.com/au/en/experience/on-board-the-flight/seat-selection/

Robbins, S., Bergman, R., Stagg, I. and Coulter, M. Management. Australia: Pearson, 2014.

Taneja, N. Designing Future-Oriented Airline Businesses. UK: Routledge, 2016.

Postorino, M. Development of Regional Airports: Theoretical Analyses and Case Studies

Volume 47 of Topics in Engineering Series. UK: WIT Press, 2010.

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