All businesses in this case study are fictional and any resemblance to real businesses is coincidental and unintentional. However, you are encouraged to examine academic literature and other sources to learn more about the industry as a whole.

Introduction

Two small airlines, Seren Airways and Coriolis Air, have merged and there is a desire to rationalise their operations to achieve greater efficiency. The remainder of this document provides background information about the organisations, including their procurement and supply management operations.

Seren Airways: Overview

Based at Cambridge International Airport, Seren Airways describes itself as "an airline that offers affordable quality". It does not offer the lowest prices, but flights are typically less expensive than with a full service airline, such as British Airways. Where low-cost airlines charge for the refreshments they serve, Seen passengers do not need to pay for anything once on board, other than duty-free items.

Seren started in 1985 with a single aircraft. It makes good use of its location (which is "not too far from London"). Cambridge International Airport is not particularly busy, offering a more relaxing flying experience than from nearby Stansted, or other London airports. Seren operates daily flights to Brussels, Amsterdam and Copenhagen, plus a number of popular holiday destinations in Europe.

Seren does not perform maintenance, repair and overhaul (MRO) itself. Instead, when necessary, it flies its aircraft to a major airport and pays for the required work - inspections, engine swaps, repainting, etc. Although expensive, it was felt that aircraft maintenance was not a core business activity and was best outsourced.

Coriolis Air: Overview

Coriolis Air UK was based at Blackpool Airport, operating since 1992. Last May it had cash flow problems and was unable to obtain further credit. As a result, it was bought out by Seren Airways. Coriolis flies to Belfast several times a day and operates daily flights to European holiday destinations in France, Spain and Portugal, plus others in the skiing season. It also flies weekly to Iceland, performs charter flights, and operates regular services to Aberdeen and Wick (typically carrying oil industry workers).

Coriolis described itself as a "no-frills" airline. It offered low prices and passengers paid for any additional services they required. Coriolis had its own maintenance hangar, with a spares inventory and a team of staff who worked to keep its planes in good condition. It also provided maintenance, repair and overhaul services for other clients.

Coriolis is now wholly-owned by Seren Airways, who is gradually replacing Coriolis branding with its own. It began by changing promotional materials and web pages; then it issued new uniforms to all flight crew and repainted the aircraft. Operations at Blackpool have been reduced in size since 'back office functions, such as human resources, are now managed in Cambridge.

In-flight Service Aspirations at Seren Airways

The "affordable quality" strategy of Seren Airways means it carries more items on each flight compared to its low-cost rivals. Every time a flight takes off, several thousand items go with it: blankets, pillows, paper towels, headphones etc, plus a choice of drinks, sandwiches and cakes for each passenger.

Seren buys items in bulk. It rents a warehouse on a business park (Milton Road, Cambridge), where it stores non-perishable items long-term until needed. It receives daily deliveries of sandwiches and cakes from a company called Avi-Eats Ltd., which are kept in refrigerated storage at the airport until they are loaded on board the aircraft. Seren considers food and drink to be a key feature of its value proposition: a reason why passengers choose to fly Seren. A free in-flight meal typically consists of a choice of three different sandwiches, a cake, and up to two drinks. (Early flights include a hot breakfast instead of sandwiches.)

On some flights, a Seren aircraft must carry additional supplies in the cargo hold because there are no catering arrangements in place at the European destination.

"Provisioning flights back from Europe is a mess," management admits. "The arrangements vary from city to city. In Brussels we have a good local partner based at the airport: its staff come on board and supply everything we need. In Berlin we have a small airside store where we can keep durable items like paper towels, cups and blankets until we need them.

In La Rochelle, we've got nothing, so we have to carry everything on the outbound journey.

In Copenhagen we have a good supplier for fresh food, but the arrangements for turning the aircraft round [cleaning it between flights] were very unsatisfactory, so for the last 18 months we've been bringing cleaning supplies along and having the cabin crew do the job.

Basically, it's different in every city we serve.

"Now we've added in the complications of operating out of a second UK hub, Blackpool, where we don't have a partner as good as Avi Eats. Some flights have been leaving without the right supplies on board - or at least, without enough for the return journey. Any failure to carry the right items damages our brand: that's why we want a complete reboot of our procurement and supply arrangements.'

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Management also recognises the "no frills" Coriolis Air was historically much better than

Seren at getting good deals from the companies who provided goods and services. This is a valuable facet of Coriolis Air that Seren would like to preserve, if possible: "Basically, we want to raise the standards in operations out of the Blackpool hub, but we also want to find economies, if possible."

Aircraft Operated

Seren owns six Boeing 737-500s, and leases two Embraer ERJ145s. Since the merger with Coriolis Air UK, it now owns five Avro RJ100s. It employs sufficient staff to operate all its aircraft, except the Embraer ERJ145s - flight crews for these are provided under the terms of the lease, although Seren provides the cabin crew. Leasing these aircraft was done in order to explore the potential to operate some new routes without the risk of buying additional aircraft outright, and it is judged to have been successful. Seren has found that some Scandinavian routes work well with a 50-seat aircraft, whereas a larger plane would always be flying with empty seats.

The management intends to re-examine its aircraft fleet within the next three years or so, but you do not have to offer advice about aircraft choice, since negotiations will be handled by the directors when they visit the Paris Airshow. For now, management can tell you it intends to phase out the Avro RJ100 type, which it believes to have been at the root of Coriolis Air's financial problems. Management summarise it thus: "It's a small aircraft with four engines: double the maintenance requirements and the fuel burn is high as well. The operating costs were simply too great."

Issues Observed

There are clearly some issues where Seren needs your help. When you made a visit to its sites, you noted the following issues:

Poor tracking of stock. A Microsoft Excel spreadsheet is used for ordering and inventory management rather than anything more specialised. It employs a series of macros to generate a daily list of requirements, plus a list of items to be dispatched to various stores in European destinations. The tool was developed by a student during her placement year in 2015. It is unable to cope with Seren's expanding and changing operations and needs to either be updated or replaced.

Procurement practices are highly reactive, with frequent issuing of urgent orders in small quantities due to stock-out. This is usuall but not exclusively related to operations at Blackpool Airport.

Transfer of items from the warehouse in Cambridge to Blackpool Airport is expensive. Stock is transferred by road, since there are no scheduled flights between Cambridge and Blackpool.

Storage space in Blackpool is plentiful - a corner of the MRO hangar is used for this purpose. However, it is not a real warehouse and the staff are not experts in warehousing. Items are sometimes lost for several days or found to be damaged when retrieved.

Since upgrading operations at Blackpool to the 'affordable quality' model, Seren has struggled to find a supplier that offers the same degree of flexibility and quality it enjoyed with Avi-Eats Ltd. in Cambridge. Coriolis was supplied by Blackpool Air Provisioning Services, but the food quality was not considered sufficient.

Spare items sent out to European destinations for storage represent a problem, despite the use of spare capacity in the aircraft holds effectively allowing 'free' transportation. Poor accountability for stock management has resulted in overstocking. Items are sent out because there is space available, or because the items have been ordered in bulk: transfers of stock are not always for good operational reasons. This dispersed stock is far more likely to become waste as expiry dates are not monitored properly.

An accounting exercise last month suggested Seren holds inventory valued in excess of 2m at any given time, but frequently has to expedite orders. This suggests the right items are not in the right places at the right time.

Seren's upper management seems to think the ground-side operations of the business are less important than things more directly related to aeroplanes. The chief executive is a former pilot and it is hard to interest him in such details as the price of sandwiches. "I'm more worried about the 50 million dollar aeroplane," he likes to say.

Question: my findings to improve these two anilines