Managing effective and efficient hub operations: a study of ground time management

This Logistics Design Project was carried out at KLM Aircraft Services (AS), from February 2008 - April 2009. The project focuses on ideal description of KLM operational controls for daily executions at the hub and within the AS processes. The daily execution at the hub is managed by the Hub Control Center (HCC). There are several services provided to all aircrafts during their ground time, including AS, Passenger Service (PS), Baggage Service (BS), and maintenance. In details, AS processes comprise the following services: towing, fueling, distribution, cleaning, security, water, toilet, towing, push-back and de-icing. In the last years, KLM operation has achieved its operational targets in terms of arrival and delay punctuality. However, AS management still views lots of operational inefficiency within their processes. Hence, there have been several steps developed by AS management. First, they have been developing the IT with real-time feedback system since 2006. Second, there has been a plan to centralize the operational controls. This issue will be the highlight of this project. The results of this project are expected to support the centralization planning from the conceptual point of view. AS processes entail high complexity. There are different characteristics and process interdependencies. During the daily operations, the key of an efficient process lies in the dispatch decision. Each process has its own regie (job dispatcher) who is responsible for making the best dispatch decision. There are different factors which influence this dispatch decision, including: (1) quality of coordination, (2) information reliability on the aircraft position, (3) quality of IT system, (4) quality of resources and (5) quality of capacity management. Further, the decision should be made within the standard norms, priorities and operational agreements, given the available resources at particular point of time. During our investigations, we found out that the success for making the dispatch decision also depends on the other hub processes. We saw the whole processes as a concept of Ground Time Management (GTM). Ideally, GTM function will monitor the status of all processes during the ground time and take necessary decisions when disruptions happen. The more information gathered, the better the decision will be, as long as the rules are properly defined. Currently, the needs of having the GTM are implicitly realized by several parties as they started to share data and information for their own processes. Further, the GTM can help the hub operations to manage the system dynamics, especially in giving feedback to KLM Operation Control (OC). Concerning the proposal, there are two designs which are proposed for introducing the GTM function at the hub. First, Design 1 brings the GTM function as an information broker without authority to manage the ground time. Second, Design 2 proposes GTM function with authority. Both designs have their own benefits and risks. We analyzed that Design 1 is simpler than Design 2 as it only requires information collection and sharing. In Design 1, each process still works to optimize its local resources. The decision making process remains the same as current situation. Coordination between the regies is required to solve the operational conflicts. It is important that all rules and operational agreements are developed to give clear decision making procedures. Failures to this provision might lead to opportunistic behaviors which can jeopardize the operations. Design 2 is more complex, as it needs to determine the allocation of available ground time. Implementation of Design 2 takes hub optimization as its objective. An advanced integrated IT system is required to speed-up the decision making process. Further, if human intervention is needed, the person should be highly skilled and understand the complexity of the hub operations. Seeing the analysis, we propose that implementation of Design 1+ (Design 1 with formal agreements and standards) can be taken as the first step to introduce the GTM concept. In the future, there might be evolution to Design 2 based on the reactions and developments of the other parties. The decision to implement the design depends on the readiness of the hub management. We believe that each design brings its own benefits. However, determining the most appropriate design is not such an easy task. There should be clear benefits-costs analysis. In this way, KLM management should be able to judge the following statement: "Does it pay-off to move from Design 1+ to Design 2?" Operational Excellence: "How can a Ground Time Manager improve hub performance (reduce delay while keeping all standards) which might lead to higher customer satisfaction?" Efficiency: "How can a Ground Time Manager improve hub performance (increase resources optimization) which might lead to less resource investment?" There are some practical steps that should be made to have successful introduction of either Design 1 or Design 2, which are: (1) design fitness to current operational structure, (2) design all rules and work procedures, (3) develop IT system and (4) develop performance measurements. At the last part of the report, we design a GTM framework for executing, monitoring and improving the hub system. All feedbacks should be recorded and the proper KPIs should be defined. The performance measurements are divided in three different areas, which are system performance, process performance and resource planning performance. Seeing all measurements as a whole will bring a fair judgment. In the future, this will help the management to focus on the problematic areas. From this project, we believe that GTM is a promising step to improve the performance of the hub operation. However, more quantitative analysis is required to estimate the expected pay-off. At the end, we hope that this project will enlighten KLM management to bring the GTM concept into practice.