Introduction
The use of information technology to improve business operations for profitability has significantly increased in the last few decades. Before this trend picked up, most organizations, particularly airline companies were either government-owned monopolies or operating in a highly regulated and non-competitive environment. It, therefore, follows that they were never subjected to any form of pressure to improve their services to meet the market demand. After all, profit was not their motive (Drury, 2008). Additionally, increasing the cost of product services would be predetermined by return on capital, and little attention was given to information technology, even in the cost systems that would have helped them measure the costs and profitability of individual service provided. However, the industry deregulation meant that the companies had to increase their efficiency through the help of information technology.
WestJet, a US-based airline that provides flight services to and from some American cities such as Los Angeles, San Francisco, Orlando, New York among many other small cities recently upgraded their information technology to improve their operations and services to their customers for competitive advantage. The company adopted a management accounting information system to enable understand their cost base as well as determine the sources of profitability, either through service improvement and or expanding the product ranges. The company is expecting to increase its service delivery through the help of an accounting information management system. It’s also expected to increase the productivity of the company in terms of improving the online booking process to enhance efficiency, accountability, and profitability because it is likely to reduce costs of operation from the streamlined process. The fact that the management accounting information system can offer more within a shorter time, proficiently is expected to offer the company establish an edge over their competitors in the same region of operation. Specifically, the upgrade was the introduction of the Enterprise Resource Planning System (ERPS).
Enterprise Resource Planning System (ERPS)
ERPS came into use middle of the last decade. Since its introduction, the system has created a business model that has proved very critical to many organizations, a fact justified by the sublime speed at which many organizations have adopted it since its inception. An ERPS is a combination of integrated software applications modules with a structure aimed at controlling the flow of all information within an organization, including accounting (Holland & Kelly, 2002). In application, a standardized ERPS module can host several menus such as bookkeeping, product profitability analysis menu, and budgeting. Its use means that a fully integrated database with modules is available for approved users to have access to all the information in real-time when need be. One of such people who have got many benefits from ERPS is the managers at WestJet. This is because they can access all the information at their disposal to help them make decisions for the company’s benefit. One critical and major feature of an ERPS is that it can only allow all the data to be entered once, specifically from the origin of such data.
ERPS has had a significant impact on the management accounting for WestJet. The adoption of the ERPS by the company could be explained by the key business principles they operate on. One of their strategies is to ease the booking process to minimize the cost of distribution through online ticket sales. It has also helped them minimize the asset used as there is an increased turn-around time at the airports; encouraged ticketless travel for passengers whose bookings are confirmed, cost of ticket processing, issuing, and distribution; and increased intensive information technology application in the administration as well as management, with a clear aim of operating a paperless office (Vasilecas, 2005).
The management accounting department at WestJet has specifically targeted reducing routine information gathering as well as information processing by the management accountants at the company. In other words, managers can seek accounting information from the management accountant, as they have the freedom to access the system to acquire the information they are interested in as fast as they wish, thus enabling them to do analysis and come up with their interpretation of the business flow. Furthermore, ERPS’s ability to integrate all the separate lines of business the company deals in into one unit of the system, coordination is normally done centrally with the help of a specialist who has the full responsibility of its operations at all levels. This is in line with the theory of the business information system. According to Vasilecas (2005), of all the areas of businesses such as markets, customers, competitions, core competencies, mission, and technology, no area has seen changes like technology. It is therefore upon the organization’s management to adapt to the changes brought about by the “fourth resource”, technology, which has been found to carry over half of the capital goods dollar spent in the United States (Harvard Business Review, 1999).
However, on the not-so-positive side, ERPS has created an avenue where it is quite difficult to generate information that is locally relevant to WestJet. Notably, the application of ERPS has created core challenges, especially to the traditional accounting system, with professionals in the field finding it difficult to adapt to remain relevant. On this note, the initially confined responsibility of balancing the books of accounts by accountants has changed drastically to other roles such as advisers and consultants, with most finding themselves in a role of interpreting and information of ERPS as well as management support. Additionally, the process of customizing ERPS has proved limited as it requires the business to be re-engineered to be at the standard required by the industry. This is likely to reduce the competitive advantage. Furthermore, the cost of switching to another system may not be feasible for WestJet in the future.
Conclusion
Considering the three core areas of operations for the airline industry; capacity configurations, capacity management, and service quality (Harvard Business Review, 2009); it is critical to find that which can link them to predict the future trend and increase efficiency. This linkage is likely to generate more interest in the role WestJet plays in the new strategic management system in the development new frontline of operations. Whichever route taken the company takes to the process of increasing efficiency and business development, the ultimate destination will require re-engineering their products in areas like value analysis and engineering with the help of information technology. The possible impact from the initiative is to increase a more sensitive approach to customer satisfaction, which in essence remains the core to the survival of any service industry, and considering the increased complexity of their awareness and increased skills used by customers before service choice.
Reference List
Drury, C. (2008). Management and Cost Accounting. Queensgate Huddersfield. University of Huhhersfield.
Harvard Business Review (2009). The Business Value of Information Technology. Harvard Business Press.
Holland, C. & Kelly, S. (2002). The ERP development approach to achieving an adaptive enterprise: the impact of enterprise process modelling tools. Systems Engineering for Business Process Change: New Directions, Springer. Berlin.
Vasilecas, O. (2005). Information Development: Advances in Theory, Practice, and Education. UK. Springer.