A Critical Analysis of Ground Handling Service Benchmarking at European Hub Airports Essay

This paper will critically analyze a paper published in the International Journal of Production Economics in January 2009 (Volume 117, Issue 1) (Schmidberger, Bals, Hartmann, & Jahns, 2009) concerning the development and application of a Performance Management System (PMS) for air-side crews in some of the major European hub airports. This study is valuable in that the benchmarking principles established here are relevant to other industries since the same process for developing this holistic benchmarking process can be adapted and applied to generic business processes. See more: how to write an analysis This critique will focus on three major components of this discussion of the benchmarking process, first the conditions that increase the demand for benchmarking considerations prior to benchmarking, and the problems benchmarking can be used to fix. Second, this paper will analyze Schmidberger’s discussion of the development of the PMS including its integration with the business strategies of associated corporations. The third and final section of discussion will be concerning the discussion of the post-validation of the PMS and recognition of performance gaps and potentially under-emphasized sections of the study. The Under-Emphasized Demand for Benchmarking Performance in the aviation industry is extensively studied and evaluated on quite a routine basis. Due to the high levels of competition and often relatively slim profit margins enterprises in aviation are constantly seeking ways to cut costs and increase efficiency (SAS Group, 2005). Ways of increasing efficiency are often classified into two major categories, vertical and horizontal integration (Sitkin & Bowen, 2010). Horizontal integration involves taking a firm’s existing business processes to a new market to expand market share, this can be difficult for airlines, and often they will elect to enter into code-sharing agreements with competitors in the new markets rather than complete expansion into these potentially saturated areas. This leaves vertical integration as a very attractive option for expansion and efficiency improvements, the process for this integration involves the analysis of both upstream and downstream components of the value chain. This is where ground handling should be considered, however both airlines and airports tend to focus on other areas such as overall airport performance with very little emphasis on such a critical component of the airline industry (Francis, Humphreys, & Fry, 2002). Deregulation has also had a large effect on the demand for airport comparisons and benchmarking. Opening the market for airside ground services up to a wider range of firms is excellent in terms of encouraging healthy competition and an open market; however it also introduces choice to airlines and airport authorities. For these choices to be made effectively there must be more research done into the ability of firms to replace traditional ground handling service providers (such as government or airport supplied entities). The research currently done in the post-deregulation era of European aviation has focused on several key areas such as financial, qualitative, political, or ecological perspectives (Murillo-Melchor, 1999). While these studies are useful from an overall airport efficiency standpoint, they do not place sufficient focus on ground handling to allow entities to decide who should provide their services. This is a specific division of aviation that has a larger impact on overall efficiency than the majority of current studies indicate, Schmidberger’s critique does a good job of recognizing this and discussing developing benchmarking processes accordingly. Developing a Standardized PMS in a Non-Standardized Industry A difficulty with a standardized PMS of airside airport services stems from variations in the management and governance of ground services. While major airports often have several firms operating the ground services, others may use a department integrated with the airport authority itself. Still others may simply allow for airlines to establish their own corporate ground service bases to work independently of other generic airport services (Fuhr & Beckers, 2006). Applying any standardized measurement system to something so non-standardized presents quite a challenge, if the PMS is too flexible or broad it will not be able to adequately express enough detail to be useful, if it is too rigid it simply won’t apply to all of the airports and doesn’t allow for change in an inherently volatile industry. Schmidberger’s critique of the PMS established throughout European airports is very positive, though it does not place a very high emphasis on establishing this need for balance between detail and flexibility. Schmidberger’s report contrasts his proposed PMS with the usual methods of evaluation currently in use at several airports. Most of these measurement systems define airside ground services as subsets of other larger firms (such as airport authorities or airlines) (Chow, Heaver, & Henriksson, 1994), this is not necessarily an accurate representation of these ground service entities seeing as in many cases they are quite separate from associated parent companies or completely separate entities wherein logistics are a primary function. While the establishment of this contrast in Schmidberger’s report certainly has value, it fails to note that in some cases these logistics divisions are quite heavily influenced by and even directly run by airport authorities or other enterprises (Francis, Humphreys, & Fry, 2002). This results in the aforementioned problem concerning applying a standardized measuring system to a highly diverse environment. The study should certainly consider the potential for ground handling entities to operate as separate entities placing logistical goals as their highest priority, though it should also make allowances for those entities that rely on collective corporate resources and function as a division of a company with a non-logistic primary focus. Post-Validation of New Benchmarking Systems Schmidberger’s report transitions into the application and post-validation of the new benchmarking systems with an identification of performance gaps as a result of the measurement phase in accordance with a study by (Jarrar & Zairi, 2001). This section quickly becomes difficult to analyze as a whole seeing as the hub-based focus of these benchmarking tactics involved a diverse use of ground handling entities for loading various types of aircraft. Schmidberger begins by dividing the results according to general aircraft size: wide body, narrow body, or regional jets. While this is an effective way of summarizing results it contrasts to the FAA and ICAO methods of classifying aircraft according to weight and/or seating capacity. The gaps identified using the new benchmarking systems and analyzed by Schmidberger’s report are concerning labour costs, overhead structures, net-availability of employees, procurement quality, and process quality. These categories result in quite a holistic summary of the efficiency of these ground service entities, a point that Schmidberger explains early and often throughout the entirety of his report. This being said, certain areas studied such as overhead and labour costs are not appropriately weighted to offset the benefits of smaller operations working on lower weight and/or capacity aircraft, at the same time revenue differences resulting from working with larger aircraft are not discussed. An interesting analysis would be a discussion of the potential for larger scale operators to use increased revenues to offset costs of damaged unit load devices, as the number of devices damaged (another measured factor in the benchmark) is not a very accurate measurement statistic if greater revenues more than offset the cost of devices. This benchmarking process takes steps to increase the transparency of ramp service providers, whether they are affiliated with airlines, airports, or independent entities. This increased operational transparency could be considered a major threat to any competitive advantage that firms had established through proprietary practices. Schmidberger recognizes the potential for this problem and addresses it by stating that the entry of new market entities presents a greater threat than the sharing of information between existing airside ground handlers. While this may be true, Schmidberger presents it as a fact without any justification. This leads to a potential for further research into whether or not new entrants to the market have taken advantage of the results of this study or if previous leaders in efficient airside ground services are seeing practices they have developed being used by their competition. Unfortunately this study would depend on the integrity of studied entities to truthfully disclose whether they used this study to discover new competitive strategies or if they developed them in-house. Conclusion The report analyzed by this article presents a comprehensive, holistic perspective on the planning, development, and post-validation of new benchmarking processes in the major European airport hubs. Schmidberger accounts for several shortfalls of the benchmarking process, effectively emphasizes the importance of this benchmarking and discusses the implications benchmarking has upon the dynamic aviation industry. Another key strength of this paper is that it successfully synthesizes the results of the study and the literature review of existing summary quickly and clearly, allowing greater focus on why benchmarking is necessary, how it is established, and how well it performed. This analysis discusses a number of shortfalls of Schmidberger’s report, while these shortfalls do not detract from the value of his analysis; they leave room for improvement of future discussion. Firstly Schmidberger does not go into very significant detail concerning the level of detail the PMS should strive for; he mentions that the study may not be applicable to many airports due to the generalizability of the study, though doesn’t discuss ways of varying the weighting and specifics of the study to account for a more flexible range of variable resulting in more reproducible results at a wider range of airports. Secondly this report could factor in the level of integration airside ground handling units have with parent companies or larger non-logistic-based firms, or at least discuss that this level of involvement could greatly influence the results of the study by varying the amount of capital and resources available to the entities. Schmidberger defines the classification of aircraft in the study, though a more comprehensive study could have discussed further the reasoning behind these classifications, such as why a deviation from general ICAO and FAA classifications was chosen and how this selection benefits or detracts from the study. A final consideration for the improvement of future studies in this field would be to establish and cite original research that supports Schmidberger’s claim that the participants in the study were not negatively affected by the increased operational transparency associated with the benchmarking process. A concise, engaging, and well-informed piece, Schmidberger’s Ground handling services at European hub airports: Development of a performance measurement system for benchmarking discusses many general benchmarking and competitive advantage issues in a specific industry environment. This allows for direct application of the lessons learned in the studies analyzed to the aviation industry but also provokes thought of the application of these principles and considerations to other industries through a balanced and reflective approach.