Rethinking the organization of the fleet management of a B2B helicopter service company

Abstract

A recent decrease in the helicopter service sector and more demanding customers, led to higher levels of idle fleet of a helicopter service provider in comparison to the early days of the company. In an effort to become more agile and efficient, the company has responded by allowing more independency for the operational bases, thus evolving from a centralized to a decentralized organization. The helicopter fleet on the other hand, was not decentralized, resulting in an unclear ownership of the fleet -particularly of the idle fleet. The responsibility vacuum for idle helicopters led to neglected maintenance, and consequently the company incurred fines and extra maintenance costs. Moreover the idle fleet levels remained substantially high for a significant amount of time. Conclusively, the objectives of this project are to find a solution for the responsibility vacuum that exists for the idle fleet and to explore solutions to ensure a minimal level of idle fleet. To get a better understanding of the problem and to understand the daily business of the company, around 30 intensive interviews were conducted with people working for the company. The selected interviewees all had their unique view on the problem because of their position in a certain department or because of their geographical remoteness from the headquarters of the company, i.e. at the more operational helicopter bases abroad. The purpose of these interviews was to uncover the best practice and insights of the people who worked at this company for years. Subsequently, three different solutions have been considered, differing in the extent of responsibility given to the bases and thus in the degree of decentralization. The first option considers giving complete ownership of the helicopters to the bases in line with the decentralization strategy. The second option is to give complete ownership to the fleet management that will take solitary decisions concerning the fleet. Eventually, the third option, a hybrid model, has been chosen for reasons stated below to conciliate both models. In this solution, a central business unit leases out helicopters to bases and thus transfers the responsibility of helicopters to the bases. The business unit itself takes responsibility for the fleet that remains non-assigned and which is thus idle. The aforementioned new business unit is created from the current fleet department and has an expanded range of responsibilities in order to offer an appropriate solution for the idle fleet issues. To ensure adequate care for the idle fleet, an internal leasing system is established with all helicopters - including the idle ones - becoming the responsibility of the newly created business unit. Consequently, the unit is called the fleet leasing unit, or the FLU. If a base is in need for a helicopter for a project, it arranges an internal leasing contract with the FLU, after which it receives a helicopter. The contract is a simple internal document, stating the duration and the obligations of each party, and symbolizes the transfer of responsibility. Note that a base becomes completely responsible for elements such as maintenance, unexpected events, and idle time as long as this contract holds. To check if the bases uphold their part of the contract, the FLU would also do compliance reviews at appropriate times to see if all helicopters are managed properly at the bases. Moreover modifications and "de-modifications" of helicopters are also arranged by the FLU as the bases require different specifications for helicopters depending on the project and obtain the needed helicopters through the FLU. The fact that idle fleet becomes the responsibility of the FLU also signifies it has to arrange maintenance for the idle fleet. Either the FLU could contact third party maintenance providers, or it could look for maintenance internally, at the bases of NHV. For internal maintenance the distinction could be made between central or decentralized maintenance, respectively meaning idle fleet maintenance at a single base of NHV or at several bases. Below the consideration was also made for the FLU to own its own maintenance crew, however for reasons stated there this was deemed ill advised. Moreover after carefully weighing the different options, the decentralized option, with maintenance happening at several bases still remains the preferred option as it maximally uses the existing capacity. Another responsibility of the FLU is the sourcing of helicopters, possible through a financial lease, an operational lease, a bank loan, renting or own capital. As is currently the case, the FLU would conduct sourcing in cooperation and with approval of the Executive Committee and the Board of Directors after the presentation of a valid business case composed by the base manager and the commercial department. Next to sourcing the FLU must also look for ways to make the idle fleet useful again, by either leasing out, renting out, or by selling specific vessels. Therefore, this responsibility satisfies the second objective of this project by making sure the amount of idle fleet remains low. Note that if helicopters are interchanged between bases, so called cross base trading, the FLU will not intervene or coordinate. This is the responsibility of the bases and the operational department at the headquarters. However, the FLU should be informed if these practices occur. After a workload analysis the FLU was decided to consist of two different profiles. The first function is the sourcing manager, who mainly takes on the task of sourcing. This person would have a more commercial and senior profile to be able to negotiate and put demands on the table. Secondly there is the fleet coordinator, who takes care of the internal leasing system, the maintenance of the idle fleet and the (de)modifications, requiring experience and technical knowledge of the industry. The fleet coordinator incorporates a lot of the tasks of the current fleet manager, consequently the latter position would be redefined. The two newly created functions would cooperate in assigning fleet to the different bases and would keep oversight of the future demand for helicopters. Note that the FLU replaces the current fleet management department and would still be held accountable to the CTO. The validity of the concept of the FLU to was evaluated by composing a business case. The personnel cost of each function in the FLU is estimated around 80k, indicating the FLU only needs to bring in an equal amount of revenue by utilizing the idle fleet, or needs to prevent enough costs because of negligence of the idle fleet. Moreover by actively sourcing out helicopters, the sourcing manager could downgrade the ICP Vlerick Business School 2017-2018 v