The Dynamics of Service Delivery Management: An Investigation of the Impacts of Hiring Contracted Agents on Service Capacity and Cost.

The open sky policy has been imperatively forced airlines through out the world to reduce their operational cost. The previous studies econometrically analyzed cost and capacity of airline services on the basis of static scenario which is not corresponds to the real world which is dynamics one. Based on dynamics scenarios, System Dynamics Approach, this study aimed to examine: how hiring contracted agents affect service capacity and cost in passenger check-in? (2) How contracted hiring feedback impacts firm hiring policy? And (3) what is the optimum number of hiring contracted agent and permanent employment in passenger check-in?
To answer these questions the System Dynamics Models were formulated to encompass the complex systems of airline passenger services in to the models for integrating the multiple feedback loops: capacity, cost, in to the frameworks of this study. To test the effect of the hiring policy, the initial value was gathered from one international airline including: passenger flow in flow out per hour, passenger service staff per hour, service capacity per hour, agent training time, agent turnover rate per month, service staff leave rate, as well as service cost per head as input to the simulation models.
The results from 24 months simulation run found that hiring contracted agent to facilitate airline passenger services help reducing cost in the second quarter but start increasing at the end of the first year due to high agents turnover rate stem to staff over time working demand which is ten times higher labor cost than agent one.
For the airline policy makers, the alternative simulation runs suggested that minimal agent training time, agents turnover rate, and staff absent rate will help reducing cost and capacity fluctuations in the systems. For further research, the system boundary should expand to cover the other area of airline passenger such as ramp service and engineering service as well as administrative service.