Regional Airlines Case Study

Case 2: Regional Airlines Case 2: Regional Airlines Case Introduction A+ for effort, Customer Service Pays for Itself In an extremely regulated and thus relatively uniform industry such as the commercial airline industry, the successful airline is the organization which sets itself apart from the competition. Within an industry that requires customer planning to interface with flight schedules and security measures, a major operational aspect which can aid an airline in gaining an edge on the competition is customer service.

The effective consumption of air travel (finding flights, buying tickets, getting through the airport, boarding a plane, and finally reaching the final destination) is not the same simple consumer –supplier relationship that the consumer experiences in a trip through the Wal-Mart checkout counter; the nature of air travel makes the interaction between the airline and the customer very complex.

Almost every facet of the complex relationship between the airline and customer can generate a large amount of stress for the consumer; consumers find poor customer service in the face of tight travel deadlines and paid for travel plans that did not necessarily go as intended extremely frustrating. Analysis Investigating Salient Case Issues To capitalize on offering a high level of effective customer service, an investment must be made.

The airline must ensure their customer service department not only understands that customer service is highly valued in the organizational environment but also must ensure that the customer service department has the tools and resources to offer effective customer service (Graham, 2012). Like any business investment, the organization must make smart decisions when providing customer service resources; for instance a call center of fifty employees which only answers two calls an hour is a humongous waste of resources that would be better allocated towards another goal.

The problem of understand that an investment towards more effective customer service is needed, but at what cost to make that investment, is the problem which faces Regional Airlines in the case study on page 539 of the 2012 Anderson, et al, text: An Introduction to Management Science Regional Airlines is expanding its customer service operation by setting up a new phone system for the purpose of providing ticketing services and customer assistance over the phone.

The airline is going ahead with the new phone system; however, two major decision points exist, how many agents to allocate to the line (one or two) and what complexity of system in which to invest (a system that provides a holding function versus one that does not). The expected call load for the new operation is one call every 3. 75 minutes, available metrics indicate that on each call a ticket agent spends 3 minutes with a customer; effectively this results that for every customer attended to, there will be 45 seconds of downtime (Anderson, et al, 2012).

Unfortunately for Regional Air, those figures are only averages, there will be an indeterminate amount of calls which meet or exceed the 3. 75 minute span in between calls. The decision between systems which provides a hold function versus the one that does not will determine will determine if that customer is placed on hold or if the call is just dropped. Placing an unanswered call on hold provides a buffer for the agent to end the call and then service the holding customer; however, for a customer that stays on hold for an inordinate amount of time will begin to feel less and less like a well-served customer.

The expected call load versus the time it takes for an agent to deal with each call is the basis of allocating only one agent to man the call system. The second option of allocating two or more agents is in effect, insurance that each call will be answered in a timely fashion and callers will not have to wait for extended periods of time. The decision of how many agents to allocate to the phone system is based upon the apparent cost for an extra agent sitting around not actively engaged in a call; however this view is relatively short sighted because it does not take into account the revenue lost from dropped calls and dissatisfied customers.

The salient issue of the case is determining what the appropriate level of investiture to make for the phone system to provide an expected (and beneficial) level of customer service Group Discussion Exploring Simulations Simulation is a quantitative technique developed for studying alternative courses of action by building a model of that system and then conducting a series of repeated trial and error experiments to predict the behavior of the system over a period of time (Srivastava, Shenoy, & Sharma, 1989, p. 753). Of all the simulations waiting line simulations are of the most important to the customer service industry.

In the airline industry long waiting times can lead to poor customer service scores and diminished sales. Regional Airlines is establishing a new telephone system for handling flight reservations (Anderson, Sweeney, Williams, Camm, & Martin, 2012). The airlines main goal is to decrease the wait time at its call centers and increase sales. Regional’s management team agrees that its goal should be to answer 85% of its incoming calls immediately. The following analyzes Regional Airline’s (RA) current reservation system and ways to improve it. Analysis of Current System

Currently RA is answering one call every 3. 75 minutes during 10:00 a. m. to 11:00 a. m. time period (? (average arrival time) = 60 minutes / 3. 75 minutes = 16 calls per hour). The average service time is 3 minutes per customer (µ (service rate) = 60 minutes / 3 minutes = 20 calls per hour). With only one reservation agent, the probability that a caller will be blocked because of a busy signal is P1 = . 4444 ? o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! = . 5556 ?1 = ( ? / ? ) 1/0! i=1k ? /? 1 /i! = ( 16 / 20 ) 1/0! (16/20)o / 0! + (16/20)1 /1! = . 444 With two reservation agents, the probability that a caller will be blocked because of a busy signal is P2 = . 1509. ?o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 4717 ? 1 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /1! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 3774 ? 2 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /2! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 1509 Regional Airlines’ current phone reservation system will answer an approximate of 85% of phone calls with two employed reservation agents.

However, the other 15% will be blocked because of a busy signal. Customers who do not get a hold of an agent may not call back and contribute to negative customer service reaction and adversely affect the business. Analysis of Agents Needed Proposed expanded system will allow callers to wait. Instead of being blocked when all lines are busy, customers can choose to stay on the line and calls will be answered in the order received. With only one reservation agent for Regional Airlines in the expanded system, 80% (Pw) of incoming calls will end up waiting. The average waiting time is also at 12 minutes (Wq).

Cited numbers above show a horrendous system that is both undesirable and a business model doomed for failure. So in order for RA to realize the benefits of the expanded system, it needs to employ two or more reservation agents. Po=1- ? /? = 1-1620=0. 20 Lq = ? 2 ? (? – ? ) = 16 2 20 (20 - 16) = 3. 2 L =Lq + ? / µ= 3. +1620=4 wq+Lq / ? =3. 216=0. 20 hours=12 minutes W = wq + 1/µ = 0. 20 + 1/20 = 0. 25 hours = 15 minutes Pw=?? =1620=0. 80=80% At the planning meeting, Regional Airlines’ management team agreed that answering at least 85% of the calls is an acceptable customer service goal.

This means that the probability of waiting will have to be 15% or less. Pw= 1k! ?? k k? k? - ? Po k = 2 agents Pw= 12! 16202 2 202 20- 16 0. 4286= 0. 2286 k = 3 agents Pw= 13! 16203 3 203 20- 16 0. 4472= 0. 0520 Po=0. 4472 Lq=0. 0189 L=0. 8189 Wq=0. 0012 hours=0. 07 minutes W=0. 0512 hours=3. 97 minutes Using three agents clearly meets the company’s goal. With three reservation agents, only 5% of the calls will be waiting, which is way below the 15% targeted cap in order to meet the goal of 85% answered calls. Average waiting time is also at a minimum, calculated at 0. 012 hours or 0. 07 minutes. System Recommendation The current telephone reservation system design does not allow callers to wait; callers instead must attempt to reach a reservation agent when all agents are not occupied. Should callers reach the service line when all agents are busy they will be met with a busy signal. The management at RA is seeking to switch to an expanded telephone system to combat this problem. Based on the calculations in the previous paragraphs, RA will need approximately 3 reservations agents to run an expanded phone system.

Group 3 recommends that the company employ the multiple channels waiting line which consists of two or more service channels that are assumed to be identical in terms of service capability (Anderson, et. al. , 2012). Regional airlines could support at least a two-channel operation to service the needs of its customers. MANAGERIAL REPORT ASSUMPTIONS: a. One call every 3. 75 minutes during 10:00 a. m. to 11:00 a. m. time period ? (average arrival time) = 60 minutes / 3. 75 minutes = 16 calls per hour b. Average service time of 3 minutes with each customer µ (service rate) = 60 minutes / 3 minutes = 20 calls per hour 1.

An analysis of the current reservation system that does not allow callers to wait. How many reservation agents are needed to meet the service goal? With only one reservation agent, the probability that a caller will be blocked because of a busy signal is P1 = . 4444 ? o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! = . 5556 ?1 = ( ? / ? ) 1/0! i=1k ? /? 1 /i! = ( 16 / 20 ) 1/0! (16/20)o / 0! + (16/20)1 /1! = . 4444 With two reservation agents, the probability that a caller will be blocked because of a busy signal is P2 = . 509. ?o = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /0! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 4717 ? 1 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /1! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 3774 ? 2 = ( ? / ? ) ? /0! i=0k ? /? i /i! = ( 16 / 20 ) ? /2! (16/20)o / 0! + (16/20)1 /1! + (16/20) 2 /2! = . 1509 Conclusion: Regional Airlines’ current phone reservation system will answer an approximate of 85% of phone calls with two employed reservation agents. However, the other 15% will be blocked because of a busy signal.

Customers who do not get a hold of an agent may not call back and contribute to negative customer service reaction and adversely affect the business. 2. An analysis of the expanded system proposed by the telephone company. How many agents are needed to meet the service goal? Proposed expanded system will allow callers to wait. Instead of being blocked when all lines are busy, customers can choose to stay on the line and calls will be answered in the order received. With only one reservation agent for Regional Airlines in the expanded system, 80% (Pw) of incoming calls will end up waiting. The average waiting time is also at 12 minutes (Wq).

Cited numbers above show a horrendous system that is both undesirable and a business model doomed for failure. So in order for Regional Airlines to realize the benefits of the expanded system, it needs to employ two or more reservation agents. Po=1- ? /? = 1-1620=0. 20 Lq = ? 2 ? (? – ? ) = 16 2 20 (20 - 16) = 3. 2 L =Lq + ? / µ= 3. +1620=4 wq+Lq / ? =3. 216=0. 20 hours=12 minutes W = wq + 1/µ = 0. 20 + 1/20 = 0. 25 hours = 15 minutes Pw=?? =1620=0. 80=80% At the planning meeting, Regional Airlines’ management team agreed that answering at least 85% of the calls is an acceptable customer service goal.

This means that the probability of waiting will have to be 15% or less. Pw= 1k! ?? k k? k? - ? Po k = 2 agents Pw= 12! 16202 2 202 20- 16 0. 4286= 0. 2286 k = 3 agents Pw= 13! 16203 3 203 20- 16 0. 4472= 0. 0520 Po=0. 4472 Lq=0. 0189 L=0. 8189 Wq=0. 0012 hours=0. 07 minutes W=0. 0512 hours=3. 97 minutes Using three agents clearly meets the company’s goal. With three reservation agents, only 5% of the calls will be waiting, which is way below the 15% targeted cap in order to meet the goal of 85% answered calls. Average waiting time is also at a minimum, calculated at 0. 012 hours or 0. 07 minutes. 3. An analysis of the expanded system proposal by the telephone company. A representative from the telephone company suggested that Regional Airlines consider an expanded system that accommodates waiting. In the expanded system, when a customer calls and all agents are busy, a recorded message tells the customer that the call is being held in the order received and that an agent will be available shortly. The customer can stay on the line and listen to background music while waiting for an agent.

Expanded System with waiting allowed Pw for 1 agent P0= (1-? /? ) 1-16/20=. 20 Lq= ? 2 =16(2)= 3. 2 ?(? - ? ) =20(20-16) L= Lq+( ? /? )=3. 2 +(16/20)=4 Wq =(Lq/ ? )=3. 2/16=. 20 (12 minutes) W=Wq+(1/ ? )=. 20+ (1/20)= . 25 (15 minutes) Pw= ? /? = 16/20=. 80 Expanded System with waiting allowed Pw for 2 agents Pw=1/k! ( ? /? )k k? / k? - ? P0 1/2! (16/20)2 2(20)/2(20)-16 . 4286= . 2286 Expanded System with waiting allowed Pw for 3 agents 1/3! (16/20)3 3(20)/3(20)-16 . 4472= . 520 In order to use this system, Regional Airlines would have to use three agents to keep the customer service of 85% of the calls being answered immediately. The telephone arrival rate of incoming calls is expected to change from hour to hour. Describe how your waiting line analysis could be used to develop a ticket staffing plan that would enable the company to provide different levels of staffing for the ticket reservation system at different times during the day. Indicate the information you would need to develop this staffing plan.

This analysis only covers the 10:00 AM – 11:00 AM time frame. As we have seen with the equations used, we have to have historical data for the other time frames. If the phone lines are open from 08:00AM – 08:00 PM, we could use the data from each hour. Keeping with the 85% rate of phone calls being answered immediately for good customer service and the use of the limited amount of call agents required to save Regional Airlines money, after further analysis, Regional Airlines will have the data need to make the best decisions for their company. 4. Staffing Plan

In order to develop a ticket agent staffing plan that would enable the company to provide different levels of staffing for the ticket reservation system at different times during the day, a similar simulation method and analysis used above are needed. By implementing the same application, the right number of reservation agents each hour can be determined. In addition to the number of agents used, it is also possible to use the same information to determine the full-time and part-time shift schedules that meet the company’s customer service goals.

But in order for RA to do this, it needs the hourly average arrival rate for the whole day. 5. References Anderson, D. , Sweeney, D. , Williams, T. , Camm, J. , & Martin, K. (2012). An Introduction to Management Science Quantitative Approaches to Decision Making. Mason, OH. South-Western Cengage Learning Graham, J. (2012). Think Like the Customer - Or Lose the Sale. American Salesman, 57(4), 18-23. Srivastava, U. K. , Shenoy, G. V. & Sharma, S. C. (2005). Quantitative techniques for managerial decisions (2nd Edition). New Age International Publishers: New Delhi.