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Assignment # 1 for Comm 105...

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Assignment 1 Introduction to Operations Management (COMM 205) – Winter 2021 Instructor: Mohsin Jat

Due: Sunday 24th January (11:59pm) – Submission through Canvas Please show calculations and copy your Excel work where applicable. There is no need to show each calculation step for the forecasting problems, but adequate working should be demonstrated for the marker to understand your solution approach. Upload your assignment on Canvas as one Word or PDF file. There will be only 2 submission attempts on Canvas. The latest submission will be marked. Student Name:

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NSID:

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[38 marks]

Task 1: WestJet’s Strategy – Mini Case (Pages 55 & 56 of the textbook) Page 1 of 4

WestJet is a fast-growing Canadian discount airline, headquartered in Calgary. It started in 1996 with three used aircraft targeting short trips in Western Canada (between Calgary, Edmonton, Kelowna, Winnipeg, and Vancouver). Clive Beddoe, one of the founders of WestJet, got the idea for WestJet after having to pay exorbitant fares to Air Canada for his frequent flights between Calgary (his hometown) and Edmonton and Vancouver, where he owned plastic manufacturing plants. According to Beddoe, “The key to expanding the market and luring masses of people who don’t travel and those who drive is to charge them bargain-basement fares.” He called this market the “visiting friends and relatives” market. In order to be able to offer low prices, WestJet needed to run low-cost operations. WestJet studied successful discount airlines in the United States such as Southwest Airlines, and copied most of their operations principles. How could WestJet have planned for an operating cost per available seat mile approximately half that of Air Canada? The main principles of WestJet’s plan were: • Short-distance flights. • Single class of passengers (no first or business class). • No seat assignment. • Use only one type of airplane: Boeing 737. • Fly to smaller cities. • Recruit young, enthusiastic employees whose salary is slightly lower than the industry average, but who receive profit-sharing bonuses and can participate in an employee share-purchase program. • Emphasize a “fun and friendly culture” and empower the employees. • Use equity financing and tight financial controls. • Use paperless tickets (WestJet was the first airline in North America to do so). • No connecting flights and no baggage transfers. • No frequent flyer program. WestJet gradually and carefully added to its flights. In 2000, WestJet expanded eastward to Hamilton, then to Windsor, Halifax, Montreal, Gander, and St. John’s, and, in 2002, to Toronto. Now, WestJet has flights to over 100 Canadian, U.S., Mexican, Caribbean, and European cities. The sun destinations flights (WestJet Vacations) are mainly seasonal, offered in the winter when travel inside Canada dips. In concert with increasing flights, WestJet has been gradually adding to its fleet of Boeing 737 planes, simultaneously replacing the old 737-200 (with 125 seats) with new next-generation 737s in three sizes: 737-600 (119 seats), 737-700 (136 seats), and 737-800 (166 seats). Now it has over 115 next-generation 737 planes, which are 30 percent more fuel efficient. New planes can be operated close to 12 hours a day, versus 10 hours for the old planes. Clearly, their maintenance cost is lower than the old planes had. The new planes have leather seats and individual live seat-back satellite TV (WestJet Connect) for each passenger. Recently, the legroom in the first three rows of seating (called premium economy) has been expanded. WestJet is not afraid to spend money on useful technology. An example is the installation of blended winglets on the end of the wings of new planes, which will increase lift and reduce drag, thus increasing fuel economy by 4 percent. The $600,000 investment per plane pays back in four years. WestJet has entered into 42 interline partnerships with international airlines, 16 of which involve code sharing. It has upgraded its online booking system at the cost of $40 million. WestJet has started a regional subsidiary called Encore that uses 34 Bombardier Q400 turboprops on over 200 daily flights across Canada. In addition, WestJet now flies internationally from St. John’s to Dublin, Ireland, and from Halifax to Glasgow, Scotland. With its four used Boeing 767s, it has daily flights from Calgary and Toronto to London, England. WestJet is planning to expand its long-distance flights—it has ordered 67 new Boeing 767s to be received over the next 10 years. The expansion strategy has resulted in many changes in its initial operations principles: WestJet is now flying some medium and long distance flights (e.g., to Hawaii and the United Kingdom), assigning seats, using three types of airplanes, flying to big cities, having connecting flights and baggage transfers, and having a frequent flyer reward program and a MasterCard. WestJet now employs over 10,000 employees (still non-unionized but mostly shareholders) and has approximately 35 percent of the air travel market in Canada. WestJet’s revenue-passenger-miles was 24 billion in 2016, whereas Air Canada’s was 76 billion (including overseas flights). WestJet has one of the best on-time (within 15 minutes of the scheduled time) arrival and departure performances, and is one of the

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most profitable airlines in North America. Its load factor (percentage of seats occupied) has been increasing from 70 percent in the late 1990s to 80–83 percent now, and its revenue is over $4.1 billion. Please do not copy answers from the case solution available on the Internet. The assignment will be marked ‘0’ if plagiarism is found.

1. What competitive priority did WestJet originally have? (0.5 Marks) 2. State the advantages of any three of the initial principles used by WestJet in 1996 to reduce its operating costs? (1.5 Marks) Example: 1) Short-distance flights -

Advantage: No need to carry food

Task 2: The wing production department of Boeing has recently inducted a new equipment that reduces the worker requirement for wing production. Prior to the induction, the department employed 40 workers, who (together) assembled an average of 6.5 wings per hour. Worker cost is $25 per hour per worker and the equipment operating cost (prior to the new induction) was $400 per hour. With the new equipment induction, it is possible to transfer 15 workers to another department. The equipment cost has increased by $80 per hour while the department’s output has increased by one wing per hour. (Round answers to 4 decimal places.) a. Calculate the labour productivity before and after the new equipment induction. Use wings per worker per hour as the measure for the labour productivity. (2 Marks)

b. Calculate the multi-factor productivity before and after the new equipment induction. Use wings per dollar (labour plus equipment cost) as the measure. (2 Marks) c. Calculate the changes (%) in productivity according to the two measures (labour and multifactor productivity). Which productivity measure do you consider more appropriate for this situation and why? (6 Marks)

Task 3: An operation has a 15% scrap rate. As a result, only 100 good pieces per hour are produced. What will be the increase in the productivity if the scrap is eliminated? (2 Marks)

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Task 4: Quarterly demand of a spare part for a certain aircraft engine during the last two years (in sequence) is 250, 200, 200, 210, 225, 285, 310, and 200. Determine the forecasts for periods 3 to 9 using 2 period moving averages (MA-2) and Exponential smoothing with α = 0.4 (ES (0.4)). For ES (0.4) calculations, assume naïve forecast for period 2. Compare MAD, MSE and MAPE of the MA-2 and ES(0.4) forecasts for periods 3 to 8. Which forecasting method has been more accurate? (Round the answers to 2 decimal places. No need to completely round the answers to units). Period

Demand 1 2 3 4 5 6 7 8 9

250 200 200 210 225 285 310 200

(12 Marks)

Task 5: The university bookshop is experiencing an increased student traffic near the start of a term. The shop is open 5 days a week. Typically, the number of students visiting the shop in a week varies from day to day. For example, the student traffic on Fridays is higher than on other days. Considering the following data, apply the appropriate method to estimate how many students will visit the shop on each working day of week 5.

Monday Tuesday Wednesday Thursday Friday (12 marks)

Number of students visiting the book shop Week 1 Week 2 Week 3 1720 1830 1860 1320 1250 1410 1520 1600 1650 1830 1860 1890 2350 2450 2490

Week 4 1910 1480 1690 1860 2530

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