Case Report 2: BAE Automated Systems (A) and (B)
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Case Report 2: BAE Automated Systems (A) and (B)Summary
BAE Automated System Inc. is an engineering company founded in 1968 as a branch of the Docutel Corporation. The company was contracted by United Airlines to build a modern, efficient baggage-handling system in the Denver International Airport. The system was designed to improve efficiency, reduce operations time, and decrease the time consuming manual baggage handling and sorting. As the project is advanced, BAE’s mandate for the handling system was extended to cover the entire airport. Nonetheless, some construction problems led to time and schedule overruns. Identifying the various issues and challenges the company faces on the Denver International Airport problem, the paper carries out a cause analysis with the view of finding the most viable solution to the identified challenges.
BAE Automated System Inc. faced multiple challenges arising from construction problems of the Denver International Airport. Following the July 1994 assessment by the German consultancy firm Logan, it was evident that BAE’s baggage system, although highly advanced, was only able to live up to its expectations theoretically. This indicated that the system was not only far behind schedule but faced significant challenges that made fully reliable operation highly improbable. BAE also faced problems arising from the City’s decision to slap a $12,000 a day penalty for delays in finishing the automated system by the preset October 1993 date (Applegate, Ramiro, Carin-Isabel, and Nelson 2). This was, in addition to the $50 million that the city of Denver’s mayor, Webb demanded that the company pay towards the construction of the conventional tug-and-cart baggage system.
Additional to the heavy financial penalties, BAE also faces significant logistic and construction dilemmas. The company is at a loss on whether to reduce the scope of the baggage handling system or to simply dedicate more resources to complete it to the original standard. The company also faces challenges from its clients, different airlines, commissioners, and the city officials. The delays have led to significant communication breakdown leading to rising hostilities, besides, the company finds it challenging to convince the core clients to accept the simplified system. The organization also faces challenges arising from the constant changes in the baggage systems design even through, as a requirement, the designs were to be unchanging (Applegate, Ramiro, Carin-Isabel, and Nelson 6).
Environmental and cause Analysis
The problems experienced by the company have multi-dimensional root causes. The problems can be categorized as either internal or external hence a PESTLE analysis can be used in analyzing the cause of the documented problems. PESTLE represents the Economic, Political, Legal, Social, Technological and Economic factors that affect the operation of a given organization (Henrie 2). Delays in approving the permits by the city of Denver were one of the key political causes of the problems faced by the organization. The Company’s inability to meet the preset deadlines also arose from the complexity of the project and its inability to appropriately assess the nature and expectations. Constant legal actions by the City of Denver also curtailed negotiations hence limiting the possibility of out of court agreement.
As evident from the 1994 Rocky Mountain News report, it was evident that the City of Denver was at a fault from the legal standpoint having violated certain previous agreement (Applegate, Ramiro and Carin-Isabel 1). Constant public pressure by the City residents was a social aspect that complicated the process. The general public, business leaders, City officials, and the different airlines with interest at the airport all piled pressure on the company to meet the 1994 deadline. BAE’s challenges also had significant technological root causes. Whereas the software designs, mechanical designs, and the permanent power requirement were to be unchanging, constant alterations made it difficult to follow through with the original plans. Besides, the three areas of expertise inclusive of mechanical engineering, software design, and industrial control were so massive that even the slightest changes could significantly interfere with the work progress (Applegate, Ramiro and Carin-Isabel 1).
BAE Automated System Inc. can consider different options to address the cost, time and schedule overruns and save its reputation. The first option is for BAE to cancel the contract and stop working on the project. From the various facts presented, it is evident that the Denver International Airport Project had multiple challenges that arose from poor planning and coordination that were not solely the faults of the company. By canceling the project, BAE is likely to cut further loses although this could soil its reputation as the best in manufacturing and engineering consultancy.
The second option that BAE Automated System Inc. has is to assume all the responsibility of design omissions, delays, and all the other problems. By assuming responsibility, the company will shoulder the extra cost needed to complete the project. Choosing the third option would imply that they pay both the 12,000 a day fine and the $50 million cost of implementing the conventional baggage system. Although this option would be costly for the company, it would maintain its reputation as a reliable company that takes responsibility for project delays (Peter, Zahir and David 72).
The third option that the company has is to continue working on the project but transfer liability to the City of Denver. Evidently, this is the option chosen by the company as evident by the September 7, 1994, $40 million claim against the City (Applegate, Ramiro, Carin-Isabel, and Nelson 2). The option is the most viable since, by the time BAE was starting the baggage-handling system, the problem was already behind schedule. Additionally, the city stood too long before approving the plans while also breaking contractual promises that BAE’s system would be a top priority.
Recommendation(s) and Implementation
Analyzing the three options presented above, the best option is to continue working on the project while holding the City of Denver responsible for the cost and schedule delays. Di Fonso notes that, whereas the city had promised unrestricted access, they did not even have reasonable access. From the statement, the City failed to honor its end of the bargain by ensuring BAE worked in an uninterrupted manner (Henrie 2). BAE should, therefore:
Seek financial compensation from the City to account for the losses they have incurred. The $40 million claim against the city is, therefore, in order since the company also incurred massive reputation and financial losses.
Continue working on the project until completion. This would lead to the creation of one of the most efficient baggage handling systems thereby improving the company’s standing.
Monitoring and Control
To achieve the specified outcome, BAE Automated System Inc. should undertake different steps. Key performance indicators would include
Defining standard expectation: By consulting with a team of project facilitators the company should specify standard expectation. Outcomes can be measured by checking progress on the scheduled time periods and carrying out periodic audits to ensure timely and systematic implementation project readjustments.
Creating a system for the development, analysis, implementation and review of the project. BAE should have an effective system that defines specific operating and maintenance procedures, and that audits the various issues to ensure the project is completed within the specified timeline.
To effectively measure procedures, the company should analyze results from audits, identify from the different audits the number of incidents that derail the projects and specify actions from the audits to ensure the smooth running of the project.
Put a monitoring change that manages both temporary and permanent changes. The system would identify the number of approved changes, review the quality of change, and specify actions from the different incidents to ensure the project is completed within the specified deadline.
Applegate, Lynda M., Carin-Isabel Knoop, Ramiro Montealegre, and H. James Nelson.
“BAE Automated Systems (A): Denver International Airport Baggage-Handling System.” Harvard Business School Case 396-311, April 1996.
Applegate, Lynda M., Ramiro Montealegre and Carin-Isabel Knoop, “BAE Automated
Systems (B): Denver International Airport Baggage-Handling System.” Harvard Business School Case 396-312, May 1996.
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Peter, Love, Zahir Irani and David Edwards. “A Seamless Supply Chain Management
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