COVID-19 Impact on the Logistics Industry : A case study developed with a scoial and economic sustainability perspective on a firm operating in the Middle East.

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COVID-19 Impact

on the Logistics

Industry

PAPER WITHIN Industrial Engineering: Sustainable Supply Chain Management AUTHOR: Daniyal Saleem Siddiqui

TUTOR:

A case study developed with a social and

economic sustainability perspective on a firm

operating in the middle east.

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I would like the opportunity to thank everyone involved in helping me conduct this thesis.

This exam work has been carried out at the School of Engineering in Jönköping in the subject area of Industrial Engineering: Sustainable Supply Chain Management.

The work is a part of the three-year Bachelor of Science in Engineering program.

The authors take full responsibility for opinions, conclusions and findings presented.

Examiner: Hamid Jafari Supervisor: Denis A. Coelho Scope: 15 credits

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Abstract

The purpose of this research study is to explore the impacts of COVID-19 on the demands, lead times and work conditions of an aviation firm which offers parts and maintenance services to both the commercial and military sectors. To achieve this, two research questions were answered; The first one dealt with the impact of COVD-19 on the demand and leads times of an aviation company while the second questions assess the work conditions and the steps and measures taken for these pandemic related improvements.

To answer these questions, a case study was conducted on an aviation firm located in Dubai, United Arab Emirates. The firm offered services across the Middle East, Africa and to parts of Asia. The company’s lead times for certain products along with their demand history for the years of 2019 and 2020 were used as a measure of assessing their progress during the pandemic as a comparison to normal circumstances.

The firm’s corporate social responsibility (CSR) was also studied in order to understand how the socio-economic environment (focusing on workforce availability) has impacted the stability of the company during the times of the pandemic. It was also used to create an understanding of how the changed work environment can affect factors such as demand and lead time and how those factors relate to stability within a firm.

The findings showed the impacts COVID-19 had on the stability of the firm. These also suggest that a positive and focused approached towards the workforce can increase the stability within the company and allow for an increase in revenue as a benefit of this CSR approach. The study informs how workforce stability can help reach corporate stability, and how firms can achieve workforce stability in pandemic times.

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Keywords

Social Sustainability, Lead Time, Supply Chain, COVID-19, Aviation, Corporate Social Responsibility, Corporate Stability, Socio-Economic Sustainability

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global pandemic (Tay et al., 2020). This was mostly due to the difficulty in detecting the virus along with its life threating tendencies to much of the vulnerable populations around the world. Around May of the same year, the virus had spread to 213 countries with almost 6 million cases worldwide. Currently the pandemic has reached new heights with over 33 million cases and almost 1 million deaths in total (Coronavirus Update (27 Sept 2020): 33,082,290 Cases and 999,079 Deaths from COVID-19 Virus Pandemic - Worldometer, 2020).

Covid-19 has led to a huge impact not only in the social living aspects of society, but also has had widely spread economic and political implications throughout many countries across the globe. Social distancing became the norm in many societies, while at the same time many countries enforced quarantine periods of 14 days on people visiting from abroad. Along with this, a whopping number of businesses have shut down or declared bankruptcy as a result of enforced curfews, quarantines and social distancing. Such precautions led to many industries incurring massive impacts on their day-to-day activities, given the suppressed inflow of customers that would normally support their businesses.

Many countries restricted the entry of non-citizens in an attempt at controlling the spread of COVID-19. By April 2020 this number was as high as 91% of the Global population living in countries that restricted foreign entry (McKinsey Insights, 2020). This impact on everyday life was seen all over the world. Businesses stood in unchartered waters, lacking a clear-cut idea of what the future might bring to them. The same principles followed through for the aviation industry. The aviation industry is the greatest means for today’s globalization (Tay et al., 2020). But as the world moved towards a retraction from global connections during this pandemic, the aviation industry took a very large toll. This becomes widely evident through the study of the compound annual growth rate in the United States which skyrocketed between 2009 to 2017 by a whopping 754 billion US dollars, but in

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The aviation Industry is not only limited to airlines and cargo services. It is a major economic force that has profound impacts on other surrounding industries such as tourism and manufacturing (Belobaba, Odoni & Barnhart, 2016). With a lack of possible flights, the level of connectedness in our society decreases overall and this creates a more difficult environment for most industries that work globally, to receive their goods in a short time.

This being said, this thesis tries to identify, through a case study, the impact of COVID-19 on an aviation manufacturing and logistics company. The focus lands on how the lead time for aircraft parts has shifted over the course of the pandemic. A case study as such should give us a better understanding of the impacts of the pandemic on both the day to day functioning of the organization, along with a short to long term impact on the acquisition and supply of the goods and services. The pandemic has led to a complete change in the work environment and work culture of many organizations. Since many countries have implemented new laws to tackle and limit the spread of the virus, the work environments have drastically shifted to a more health and safety focus. With the same philosophy in mind, this thesis aims to study the social sustainability aspect of working in such an organization in one of the most highly active sectors of the airline industry. With the company focusing on providing day to day maintenance services and both logistic and technical support to its customers, we will dive deeper into the safety of the employees.

1.1 Background

Airlines are the centre of the aviation eco-system. They are the key to the entire aviation supply chain in many areas (Tay et al., 2020). COVID-19 has globally impacted the functionality of the airline industry quite significantly. This has not only led to the decline in the supply chain of the airlines itself, but also of the industries surrounding and reliant on the airline industry. The airline industry when discussed generally refers to the transportation of people from one place to another. But one of the major segments of the airline industry that is quite overlooked is the cargo sector. In modern day industry, most of the goods are shipped through air and have been majorly impacted by the global pandemic.

Most of the focus being on the passenger traffic has led air cargo to suffer a less severe depression. Even so, there have been significant impacts on air cargo transportation that can be seen. This can be seen quite clearly in Figure 1 provided by the Capa Center for Aviation (CAPA) in their study of passenger and air traffic through the years.

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Fig. 1. Comparison of air passenger traffic and air cargo traffic by year-on-year growth rate ("Air cargo: more virus-proof than air passengers – but not enough", 2021)

In the value chain of global and transport logistics, air cargo plays an imperative role. The pandemic was expected to impact the growth of cargo markets by four to

five folds as compared to passenger traffic growth by 2020(Senguttuvan, 2006). Air

Cargo is focused on a few major airports with 85-90% being accounted by the top 100 airports in the world, and 70% by the top 30 (Senguttuvan, 2006).

This being said, in the current global environment, air cargo has been impacted quite significantly by the pandemic. This has led to a change in the lead times, not only in air cargo, but also for the parts being supplied to industries through the air cargo. As the pandemic grows and it becomes harder and harder, due to governmental regulations on health and safety, to supply cargo, the lead times along with production and prices are impacted. Business and commercial jets are being converted to cargo planes in order to improve these demand shortages and evidently increased lead times.

This is all concluded from the changes in overall production, as the production is varied by the delay in raw material acquisition and the government regulations along with the overall demands. Companies which focus on supplying multiple services and logistic capabilities to their customers, have had to deal with significant impacts on all these aspects over the course of this pandemic.

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overall social sustainability in terms of work environment for such companies. This in turn creates a research gap in how the productivity in any company can be impacted by a disruption in the work environment created due to major external factors such as a pandemic.

1.2 Purpose and research questions

The aim of this case study is to explore the impact of the Corona virus pandemic on an aviation company’s demand and lead time as factors of their supply chain. The case study determines the impacts of COVID-19 on the work environment and studies the relation between the impacted workforce and the demand and lead times within the organization.

Keeping these factors in mind, this thesis focuses on two major questions:

1. How has COVID-19 affected the lead time and demand for parts and services in the aviation cargo industry?

2. How are firms coping with the post pandemic work conditions in order to improve work standards and reduce instability during COVID-19?

1.3 Limitations

The research conducted in this study was done remotely for the most part. As the study demonstrates, the current pandemic situation is quite critical leading to difficulties in being on site for physical examination of the work environment. The data collected was done mostly remotely which limited the methods of data collection to document reviews and observations.

The Case Company deals with both commercial and military operations. The military operations consist of 60% of the company’s sales and services while the commercial operations are limited to 40% of the overall demand. As military contracts and services, along with maintenance and part distribution are all sensitive and confidential, the research will be entirely conducted on the private sector of the organization.

Companies in Dubai are currently undergoing a skeleton workforce procedure. This means that half the workforce works on one day and the other half on the other days. This largely changes the work environment and makes it quite difficult to set a base setting to compare with. The most ideal method would have been interviews, but unfortunately due to the pandemic, the access to most employees was not possible, leading to the selection of observations as the method of choice.

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1.4 Outline

The report starts with a theoretical background to create an understanding around the topics studied. This will help establish a base knowledge of the required terminology in order to create a greater understanding as we proceed through the thesis. The theoretical background is followed by a review of the methodology clarifying the reasons for the approach towards the study and the techniques being used. The analysis gives a clear description of what the data received from the company shows followed by the discussion where the results of the analysis are discussed in more detail to answer the research questions.

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2 Theoretical background

This chapter provides a study of key literature surrounding the research topic. It gives a detailed analysis of what previous research in the field has dictated. It gives a clearer understanding of what the thesis will entail and revolve around. Provides an account of how social sustainability can impact the reform from a pandemic ridden environment to generate socio-economic benefits.

2.1 Supply Chain

A supply chain consists of various stakeholders and provides a framework for methods and practices that help an organization in integrating the said stakeholders in the practices and methods. These stakeholders range from suppliers, manufacturers, distributors and customers. (Stock and Boyer, 2009). Supply chains allow you to get a deeper understanding and a better holistic view of different market indicators such as demand forecasting, distribution and product availability. (Chopra & Meindl, 2007). Management of these supply chains is quite important, this is especially true for companies that operate globally (Senir & Büyükkeklik, 2020).

A supply chain performance is impacted by both internal and external factors. It is difficult, but not impossible to assess the performance of a supply chain through different metrics. According to Sukati et al (2012), a supply chain validation must have three types of performance measurement: Resource Management, Output Management and Flexibility. These metrics are some of the few that different analysts suggest in order to establish a better understanding of the functionality of a supply chain. In case of the pandemic, flexibility of a supply chain is extremely important. For the purpose of this thesis, we will look further into supply chain flexibility.

2.2 Supply Chain Flexibility

Flexibility in a supply chain refers to how adaptive a system can be when faced with both internal and external uncertainties (Winkler, 2008). It includes system, process and product flexibility (Tang & Tomlin, 2008). The system flexibility looks at how supply chain as a system has to adjust in order to counter the external changes, while product flexibility is intertwined with establishing changes in the product to create more demand. Process flexibility characterizes how each process can be adapted to match the new environment the supply chain is moving towards (Tang & Tomlin, 2008). This thesis studies how the supply chains can adapt to the new externalities that may rise in the demand and lead time due to the current global pandemic. It is a measure of the company’s flexibility to be able to adapt to the new supply chains being established during the pandemic.

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In cases where the production is dependent on the import of raw materials and supply of parts, any unexpected events that adversely affect the supply chain can cause a vast disruption in the functionality of the supply chain. This leads to companies creating sufficient inventory or a safety stock in order to ensure continuous production (Senir & Büyükkeklik, 2020). Even though supply chains may possess sufficient inventory in most unexpected circumstances to function thoroughly, when the situation is as global and comprehensive as COVID-19, it is quite evident that at most times they fail to adapt (Craighead, Ketchen and Darby, 2020). This is not uncommon as such a heavy impact on the economy can catch most supply chains off guard. Therefore, Coronavirus particularly underlined the limitations of supply chains and really highlighted the importance of supply chain management (Senir & Büyükkeklik, 2020).

2.3 Supply Chain Logistics

Governments and health institutions across the world are adamant in reducing the spread of COVID-19 and in treating the infected cases. At the same time manufacturers are struggling in managing the continuously advancing impacts that the outbreak has inflicted on the supply chains (Majid, 2020). The closures of national borders have created a chain of events that has impacted the logistics sectors quite drastically (Senir & Büyükkeklik, 2020). Logistic activities such as transportation modes and courier services have become more unlatched to the standard practices and are more accepting of alternate business models and practices. This can be seen in the air cargo industry too as a majority of the major airlines convert their passenger jets to cargo jets in order to cope with the new business environment created by the pandemic (Tianqiong, Liangzi & Yutong, 2020).

2.4 Air Transportation and Air Cargo

There has been significant change in the use of overall transportation modes. Since the pandemic, 90% of airlines reduced and/or suspended their passenger flight operations (Hamza, 2020). This seems not so significant at first glance towards air cargo, but taking a closer look, it is recorded that 50% of all air cargo moves in passenger flights (Hamza, 2020). This creates a strain on the air freight prices, which seem to climb steadily as the pandemic progresses. Figures 2 and 3 give a clearer understanding of the capacity at which air transport has been affected due to the pandemic.

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Figure 2 refers to a before the pandemic scenario and clearly shows how immensely reliant we were on air transport. The second figure in contrasts lets us establish a better understanding of how the pandemic has quite significantly diminished the capability of air freight transportation across the globe. This limitation in turn drives the prices and alters the supply and demand that has been previously established in the market due to the increased lead times. Companies have to adapt and get accustomed to the new pandemic related, overly diminished air freight capacity that is globally available.

Fig. 2. Air Freight Transport (Freight Airplanes, Hot air balloons) pre COVID-19 (Hamza, 2020)

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For a supply chain to work effectively, there needs to be downstream integration and upstream collaboration between the customers and the firm’s partners. This collaboration needs to be conducted in a very effective and efficient manner in order to maintain the supply chain standards (Kumar and Nambirajan, 2013). A supply chain is only stable while being endorsed by the stakeholders of the organization. The current pandemic, by creating such uncertainty in the globe, especially in terms of freight traffic, has made collaboration between the stakeholders rather more difficult with an overall 31% reduction in air cargo capacity (Rizaldy, Ricardianto and Perwitasari, 2020).

2.5 Changes in Lead Times

Lead times is one of the core parameters of assessing a supply chain performance. A reduction in lead times at any level of the supply chain maximizes the overall supply chain profitability (Chaharsooghi and Heydari, 2011). This is why lead time reduction can be viewed as an overall investment for any organization or supply chain. Uncertainty is one of the key factors that affects a supply chain and occurs usually within two parameters: customer demand, or lead time. The interaction between these two parameters can lead to something called an uncertainty in lead time demand (Chaharsooghi and Heydari, 2011).

As a result of lockdown due to COVID-19, the demand in the current industry for many products and services has overall significantly decreased since March 2020 in tourism, automotive, energy, metal, electronics and quite few other non-food related retail sectors (Senir & Büyükkeklik, 2020). This has leaked over in all kinds of markets and supply chains, leading to a lower demand and an overall lower production in some cases. Services provided are also being demanded less as these global restrictions continue to persist while we tackle the current pandemic.

2.6 The Bullwhip Effect

This phenomenon has been known for a while to researchers. It illustrates how the consequences of time varying and dynamic behaviours of organization can give rise

unpredicted and undesirable behaviours in a supply chain (Lee, Padmanabhan and

Whang, 2004). It is extremely vital for an organization to reduce any uncertainty from their supply chain in order to delimit these unnecessary, unwanted and uncharacteristic behaviours in their supply chain. A change in one small activity such as quality assessment, can cause ripples throughout the supply chain and impact the stability. And performances of the supply chain.

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Bullwhip effect can be carried through the supply chain. The orders to upstream generally have higher variations than the sales to downstream, and thus the distortion between the two propagates upstream in a more amplified form (Chaharsooghi and Heydari, 2011). During the current pandemic, the bullwhip effect has bound to have impacted the supply chain in multiple scenarios. The constant uncertainty in multiple environments of the supply chains, ranging from lead times to production capabilities, have stirred in distortions that were completely unanticipated prior to the pandemic. Every organization had to face restructuring of their work force and their supply chain in order to acclimate with the current global market situation raised by the pandemic (Dubai Government Human Resources Department, 2020).

2.7 Firm Performance

COVID-19 has had quite serious impacts on the global firms’ performances. The reduction in the market size, along with increased lead times and reduced demand for many products has led to an overall decrease in sales revenue throughout the world. This over reduces the total revenue that these companies generate over the ear. Along with this the pandemic limits the production, operation, and sales of these industries which eventually leads to a negative return rate (Shen et al., 2020). This can be seen by having a look at the descriptive statistics of China’s firm performance through a look at the net profit margin on total assets (NROA). This is best illustrated in Figure 4 below that shows the forecasted values against the actual performance values of Chinese industry in the first quarter of 2020.

Fig.4. Forecast vs actual value of industry performance in 2020 first quarter for Chinese companies between 2013 to 2020. (A-S are different Chinese Industry codes shown in Appendix 3) Y-Axis represents CNCA (Certification and Accreditation Administration of republic of China) as a standard deviation of the income levels (Shen et al., 2020).

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As it can be seen from the graph in Figure 4, the horizontal axis (X-Axis) shows the Chinese industry codes as issued by the Chinese regulatory commission in 2012, the actual value of industry performance differs quite a lot from the forecasted ones. This is widely due to the pandemic causing the market to decline with the increased lead times and lack of freight cargo transportation (Senir & Büyükkeklik, 2020). It is evident that some industries have had much lower impacts from the pandemic than the others. For example, large retail companies such as Amazon are profiting incredibly during the pandemic as a lot of customers prefer not having to leave home for purchases. At the same time, some industries such as the aviation industry, are struggling more than ever before. This can be understood better in the graph in Figure 5, as it shows the decline in NROA as a result of COVID-19, both in low and highly affected industries using a parallel trend test (Shen et al., 2020).

Fig. 5. Parallel trend test in industry. Plotted for the financial data of Chinese companies from 2014 to 2020 (Shen et al., 2020).

It can be seen quite clearly the decline in performance as the impact of COVID. Both low and highly affected industries face an overall decrease in performance trend which is quite similar, but high effected industries almost dip down to close to 0, reaching 0.002 NROA. According to Shen et al (2020), NROA is a model to

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2.8 Stakeholder Theory

COVID-19 has had widespread impacts across many facets of any given organization, ranging from purchasing all the way to human resources and every other department in an organization. New laws and regulations have made it rather difficult for enterprises to sustain their workforce. Many of them are suspending operations and laying off workers which in turn further leads economy in a downward spiral heading for a new crisis with relentless socioeconomic implications (Obrenovic et al., 2020).

The COVID-19 pandemic may be viewed as a crisis for many organizations. Being a crisis according Hermann (1963), is ‘an unexpected threat to high-priority values of organizations, providing a limited response time.’ Employees here can be considered a high priority value to an organization. They are the grinding gears of any organization, especially blue-collar employees responsible for the day-to-day functionality of an organization. According to Philips (1997), each organization possesses constituencies on which they are dependent for success. These constituencies can be referred to as stakeholders. Stakeholders, therefore, are any entities that in turn impact the organization both internally and externally. Employees also fall under stakeholders.

Phillips (2007) suggests that the managerial staff has the responsibility not only to serve the general interests of society, but rather to serve the general interests of the corporations’ stakeholders. These stakeholders can vary from the society the organization functions in all the way to the employees that help it function. It is the responsibility of the organization to ensure the best path not only for society but for its employees as well.

For an organization to function at its maximum capacity, it is necessary that the employees are entirely involved in the operations. This is rather difficult during the current pandemic as the newly imposed laws along with the health and safety regulations limit the capabilities at which any significant work can be performed. Employees are either laid off or given reduced hours to conduct the same form of work which they are required to do under normal circumstances. The decreased workforce with continuous work can overall increase the lead time for said tasks thus creating even more opportunities for uncertainties to occur. Small tasks that generally require very limited time, in some cases can take much longer to complete because of social distancing and the health and safety requirements. In a logistics firm, where there is a lot of dependence on human interaction to ensure continuity and transparency across the supply chain, a reduction in workforce and delayed task management due to lack of said workforce, can add to the bullwhip effect that is a constant storm over todays corporations in this uncertain industry climate.

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2.9 Current Work Laws in Dubai

A rapid growth in the COVID-19 pandemic has resulted in radical shifts in work practices across the globe. This is particularly true for government functionality and services. Social distancing has become a norm, and protocols have been placed in order to ensure the safety of the workforce while committing to retain the functionality of the organizations. Each country has come up with their own work environment structures in order to ensure not just the physical, but also the mental wellbeing of the employees. Dubai has gone through separate phases of these regulations before settling at ones that are the most adequate for the work environment.

In the current iteration of Dubai’s health and safety regulations, the state has divided the work environment into 3 separate sectors: Pre-work (home), travel to and from work, and at workplace (Dubai Government Human Resources Department, 2020). They have laid out guidance protocols for both employees and the departments that the employees are situated in. These guidelines are to be followed in order to maintain the legal functionality of the organization. Each sector is divided further into its possible actions, and guidelines are provided in each set of actions to ensure that all areas of safety and precaution are covered at each stage of risk that an employee is subjected to. These are further listed in Appendix 2.

2.10 Corporate Social Responsibility

According to Jutterström and Norberg (2013), CSR is a company’s integrated responsibility towards environment, working conditions and human rights. CSR is a pyramid of four layers, economic responsibility, legal responsibility, ethical responsibility and finally its philanthropic responsibility. Therefore, CSR is a company’s responsibility towards its stakeholders, towards aspects that are within the influence radius of the company. In case of a pandemic, as was faced by the world during the progression of this thesis, it is the company’s responsibility to ensure the safety and health of its employees while keeping its promises to the stakeholders of the company and continuing the revenues. This leaves the organization in a rather difficult position where it must satisfy multiple entities in order to a socially responsible. According Visser (2014), CSR is categorized into 4 dimensions or DNA responsibility. These dimensions are value creation, good governance, societal contribution and environmental integrity. Each dimension incorporates different strategic goals for the dimension.

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Economic Development, not just financial development, is a strategic goal for value creation. This means not must a company focus on benefiting the shareholders and executives but should also aim to create value in terms of jobs and opportunities such as skill development while also improving asset value in infrastructure. (Visser, 2014). This falls under the economic responsibility pillar as mentioned by Jutterström and Norberg (2013). It is absolutely vital that during the pandemic the company focuses on economic development through value creation, as already a significant amount of value is being lost due to the pandemic.

The good governance of an organization incorporates the effective running of the organization. Institutional effectiveness therefore is classified as the strategic goal for good governance. Institutional effectiveness is just as important as any social or environmental ideals. It ensures the functionality of an organization through ideal practices such as transparency. A lack of such practices as transparency and fairness ultimately undermines the basic ideology of CSR as an approach (Visser, 2014). Therefore, institutional effective is a strategic goal and vital for good governance. Along with the value creation during the pandemic, institutional effective is very important. Ensuring that the practices in the organization are conducted in an effective manner can in turn ensure value creation without loss.

Societal contribution can be studied through a stakeholder orientation perspective. This gives philanthropy its rightful place in CSR and also provides grounds for the importance of fair labour practices (Visser, 2014). During the pandemic a company’s responsibility to its stakeholders quite vital. This is not for economic development but also for the internal stakeholders such as employees. A fair labour practice ideology ensures that the employees are offered safe and healthy working conditions. According to Tang and Tang (2012), the areas of stakeholder engagement, community participation and supply chain integrity remain some of the most critical elements of CSR.

The final dimension is environmental integrity. This is the most widely recognized dimension of any sustainability practice and entails the strategic goal of creating sustainable ecosystems (Visser, 2014). This is the responsibility of the company to ensure the minimization of the environmental impacts. This can incorporate factors such as carbon emissions or the use of renewable energy.

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2.11 Socio-Economic Sustainability

The stability of a firm can lead to its success in the industry it must perform in. According to Gong and Ho (2018), corporate stability is the measure of the probability of bankruptcy for a firm. Therefore, a firm must generate revenue in order to sustain itself and be listed as a stable organization. The corporate stability can be studied as a factor of the Z score (normal distribution), where one standard deviation in revenue increases the firm’s stability by 6.80%. An increase in corporate social responsibility can therefore create a level of stability within a company by increasing the overall revenue.

In the current work culture, most of the initiatives are primarily on the economic and environmental dimensions of sustainability. As the concern for social sustainability increases, and more organizations commit to sustainability, the integration of social sustainability becomes more viable. Economic and environmental sustainability can also be driven alongside core social factors, such as fairness, poverty, health, education, delinquencies, demography, culture and employee engagement within an organization (Ajmal, Khan, Hussain & Helo, 2017). This ideology promotes the introduction of a socio-economic sustainability approach towards business practices as they can be pursued as a factor of each other. An improvement in social sustainability factors can be seen as an investment in the firm’s economic growth, which creates a cycle of socio-economic growth in the firm.

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3 Methods

This section studies the methodology used to collect the data for the case study. It gives a clear understanding of why the chosen methods were used, the limitations they provide and how they were implemented in the study to create a result and analysis.

3.1 Research design

This investigation is carried out as a case study in which an aviation service provider and logistics company was the main focus of study. With the current global environment amidst the introduction of COVID-19, the company copes with the current worldwide struggle with the acquisition of parts and the provision of services due to the severely tampered lead times. Along with this, the introduction of the new health and safety guidelines and regulations introduced by the Government of Dubai deter the service capabilities and the procurement of said parts while at the same time creating a completely different work structure and environment that the organization must adapt itself with. The choice of this company was made due to the authors past relation with high level company officials, leading to pre-established relationships that would provide quality access to the data and information necessary to analyse the current situation. Along with this the company provides ample opportunity for assessment required in a case study.

3.1.1 The choice of research design

The most suitable choice for this kind of study is a Case study. It gives a view into the real-life scenario of the workings of the organization by allowing for an in-depth study of a certain aspect of the problem and the collection of data through different sources (Bell & Waters, 2014). A case study is dependent on a methodological approach with solid grounding in the literature review. It is portrayed as solid research questions which in turn are answered through the procession of the investigation (Yin, 2018).

Case studies are conducted in a planned and methodological manner. The data collected is both qualitative and quantitative. The data is collected in a systematic way and allows for in depth evaluation of the variables to ensure the creation of deep-rooted knowledge (Bell & Waters, 2014). The knowledge acquired from a case study cannot be generalized. Rather it creates a relativity factor that can be used as a starting point for further research around the area of study. It allows for further generalization of theories that can be raised on the knowledge created by the singular case study. This can be referred to as theoretical generalization (Mills et al 2010).

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Even though a case study is a well-suited method for research design in this scenario, it cannot be neglected that it comes with its drawbacks. It is a singular design and therefore it limits the possibility of cross-checking of the results. Generalization, even though an advantage for future research, can also lead to create broad spectrum ideas if not focused correctly. It can lack focus. Even so, if conducted properly, it can lead to a relatability factor. Relatability is more useful than generalization when addressing the importance of a case study, as it provides guidance on how to behave in similar scenarios in a natural setting even through clear and evidence differences within the cases (Bell & Waters, 2014).

3.1.2 Case Company

The case company was founded in the Middle East with a vision to enhance the overall customer support in the aviation industry. The main offices for the company are situated in Dubai, United Arab Emirates. The company focuses on providing customized technical solutions, parts distribution, MRO (Maintenance, repair and overhaul) services, supply chain management and consultancy services for both commercial and military operations. They specialize in minimizing asset investment and maximizing operation readiness for their customers.

Almost 60% of the case company contracts and services are provided to military operators. The remaining 40% are focused on the commercial sector of the aviation industry. The case company functions with a flexible supply chain, as is necessary for a company dealing with both military and commercial customers. Their supply chain allows for quick adaptation based on specific requirements for specific customers.

The case company has a strategic warehouse situated in Dubai and other parts of the world which can be accessed by air, land and by sea. The Dubai location, the focus of this study, is quite ideal as it is situated within an access range of 4-8 hours of their sphere of influence. A customized stocking and warehousing model is implemented in order to provide on-time support to their customers individual requirements. They provide uniquely tailored services directly to their customers doorstep through customized solutions reducing capital expenditure in stocks yet maintaining high operational readiness of the operators’ fleet.

The company provides ample opportunity for assessment as being located in the UAE, the company was enforced with serious COVID-19 restrictions which in turn drastically changed the work environment. A study of the case company allows us to both qualitatively and quantitatively assess how the case company has been

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3.2 Method

For a case study to be reliable, it must have its information collection linked to more than a singular source (Yin, 2006). This kind of method is referred to as the mixed method. The study focuses on both qualitative and quantitative data analysis, thus making mixed method the ideal approach. The collection of data in mixed method must occur from more than one source. This allows us to strengthen the validity of the research data overall as there is more than one source to back up the claims. The uniqueness of this method lies in its ability to combine the sources of data to achieve a greater understanding of what the data is inferring. It gives a clearer understanding of what the problem dictates and consorts more reliably in addressing the existing challenging theories (Thurmond, 2001). The usage of mixed method also allows us to aim at the collection of both qualitative and quantitative data. In fact, according to Clark and Lang (2002), ‘The distinction [between qualitative and quantitative data analyses] is not one of mutually exclusive kinds of analysis but of kinds that, in the real world, stand side by side, and, in an ideal one, would always be used to complement one another.’

Qualitative data allows for both flexibility and the opportunity to assess the ‘real word’ research (Endacott, 2005). It is commonly conducted using observations and interviews. Qualitative data can be more or less intensive depending on the form of data required and the type of questionnaires or observations established. It is collected usually through individuals or the assessment of individuals in the case of observations. Usually, qualitative data is used to establish theories or hypothesis that can be used to complement the quantitative data being collected. Qualitative data offers both guiding practices and identification of what areas would be most ideal to explore in the future (Endacott, 2005). This ties in quite well with the form of method, which is a case study, as future researchers can elaborate and significantly improve on the collected data.

Quantitative data on the other end allows for high external validity and lets us have a more structured approach towards the data analysis, which in turn can lead to a much clearer identification of the questions on hand. It can provide us with a much clear outline of the start and end to the matter at hand. This is mostly because the data collected is independent of what the observer may expect. Quantitative data is the true representation of a phenomenon and is guided by four major objectives which give it further stability and reliability: empiricism, measurement, replicability and objectivity (Endacott, 2005).

For this thesis, each method of data collection points to some context behind each question. The data collection therefore is based on the impact the data will have on the assessment of the thesis. Table 1 gives us a clearer view of which form of data collection impacts which research question.

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Research Question Document Reviews Observations How has the change in

supply chain due to COVID-19 affected the lead times for parts and services in the aviation cargo industry?

Used to answer this question as gives a quantitative

understanding.

Used to answer this question as it gives a qualitative understanding

of how work

environment impacts the lead times.

How are firms coping with the post pandemic work conditions in order

to improve work

standards and reduce

instability during

COVID-19?

Not used to answer this question as it is more quantitative.

Used to answer this question as it is more qualitative.

Table. 1. Matrix depicting the research questions linked with which research methods are used to answer them.

3.3 Data Collection

The data for this study was collected in the form of observations and document studies. The following headlines give a more detailed account of each data collection method and how they were performed.

3.3.1 Quantitative Data Collection

The data collection was done in the form of document studies which were directly obtained from the company concerning the case study. The method of quantitative data collection was document analysis. The documents were obtained in the form of secondary data being supplied by the organizations internal data storage software. The collected data accounts for the lead times for their purchasing statistics of different parts. It also encompasses the lead times for service provisions in different services and products that the company aims to deliver to its customers.

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The data was collected through the point of contact in the organization. The point of contact, a senior official, was contacted to discuss the aim of the study. He in turn provided his opinions on the type of data that the company can provide that would be relevant for the study. Since the company deals with multiple smaller organizations, 60% of which are military related, the data acquisition had to be done remotely and was only possible through the point of contact and limited to the 40% of the sales that were encumbered in the commercial sector of the company’s sales provisions.

For the downstream data collection for the lead times from suppliers, the data collected followed the same suit. The data collection was ensured to contain only the data containing information regarding the supply of parts for the commercial sector of the organization. For the sake of this study, this does not deter the analysis of the collected data, as the study aims at analysing only the commercial sectors, and the impacts on the commercial supply chains rather than military supply chains. 3.3.2 Qualitative Data Collection

The qualitative form of data collection was conducted in through the primary data selection method of observation. Due to COVID-19 restrictions, it was quite difficult to get interviews. These were in turn replaced by observations and short phone call interviews that could be conducted on a single visit to the company. They encompassed the work conditions and the structure of work environment that was in place during the pandemic. The observations provided an opportunity to collect great insight into the work environment, which in turn could have been lost during the interviews. Observations allowed for both an assessment of the daily work force and the assessment of the senior officials work environment, while the interviews would only be limited to the senior officials at the organization.

Another particular reason for the choice of observations over interviews lies in the pandemic itself. Due to the wide spread of restrictions entailed by the government of Dubai, and the consequences with which an organization has to suffer in case of a singular COVID case, the workforce is very limited and mostly not allowed to interact with external factors in order to avoid any possibility of infection.

Observations are divided in two distinct methods. Structured and unstructured. Structured observations focus on discrete activity and record physical and verbal behaviour for said activity. The observations are prescheduled using classifications developed from known theories. On the contrary, unstructured observations are conducted to get a better understanding of cultural behaviour. They are based around a constructivist paradigm. They acknowledge the value of context (Mulhall, 2002). For the sake of this case study, a lot of the work environment analysis is qualitative, therefore much of it based on contextualization.

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The observations concerning this study were focused on unstructured format of observation. This is particularly because the observations were used to analyse the second research question concerning the work environments. Since unstructured observations allow for a greater contextualization of the work cultures in any organization, it was without doubt the most ideal format of observations to go for. The observations recorded gave a better understanding of the new work conditions being implemented amongst the work force. They gave a greater understanding of the challenges that the everyday employees face and how it can delay or maybe cause increases in the overall lead time for the different services that the company provides.

3.4 Data Analysis

The data collected from the company was raw data. This means there had to be a significant amount of analysis conducted in order to understand and comprehend what the data illustrates in terms of this study. Each form of data collection was carefully examined to establish theories about how COVID-19 has impacted the progress of the company.

3.4.1 Document Review

The data collected to conduct the quantitative analysis for the case of this study was through document reviews. The documents were collected directly from the company through the point of contact. They had to be carefully selected in order to maintain the confidentiality of the military sector. Because of this confidentiality factor, no supplier names, customer names nor any specifics are listed. The data is treated purely as a quantitative entity.

The company uses a software called SAP for their purchasing department. This is a software that allows them to track all their sales along with the lead times, the delays and the early arrival for parts. It also manages transportation operations and allows for scheduling and routing their third-party logistics.

The data was received in 2 instances. The first received data consisted of two sheets, each of which consisting of sales made to customers over the course of 2019 and 2020. This is quite useful as it allows us to develop an understanding of the demands that the company was facing pre COVID-19 in 2019 and the first quarter of 2020, against the demands they received post COVID-19 in the next quarters of the year 2020. These demands on their own are not enough to establish a result for our first

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The second instance of data that was received was also in the form of excel sheets. This time the data consisted of much more confidential information consisting the names of the suppliers that the company uses. At the request of the company, the names of the suppliers have been eliminated in order to maintain anonymity. The second sheet of data allows us to have a greater look at the lead times that were affected due to COVID-19 and provides us with an opportunity to conduct a detailed analysis of the pre and post COVID-19 performance of different suppliers. Both the excel sheets on their own are not significant enough to establish a result for the first research question, but a combination of them allows us to really understand and study how the lead time has impacted the demand over the progression of COVID-19 in this industry. We use both the sheets to establish graphical and tabular understanding of how each of these factors coincide and limit the capabilities of the company to conduct business in this new pandemic ridden environment.

3.4.2 Observations

Observations were used to collect the qualitative data for the case study. The qualitative data collected was the factor that ties both the questions together and brings about the conclusions for the purpose and a conjunction of both the research questions. The data was collected in person at the facilities of the organization. The organization consists of a warehouse located in the port area in Dubai, UAE. The main headquarters is connected with the warehouse where the warehouse is the central facility with the headquarters and operational facilities are collocated with the warehouse. Each of these facilities are separate buildings which are connected through doors. A relevant list of elements was established before reaching the locations in order to maximize the time and efficiency due to a lack of available visiting opportunities.

On arrival at the facilities, I was provided with the required personal protective equipment in order to ensure the safety and protection of myself and the workers at the facility. These were compulsory and seen all throughout the facilities as they were enforced by law. Once everything was in order, I was offered a tour of the facility with one of the facility supervisors in order to assess the work environment and the facilities they provide their employees. They also helped answer some questions I asked in order to create a better understanding of the current surroundings and contextualize what was actually going on.

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Many different qualitative factors such as communication methods, daily equipment that were used, work hours, employee protection equipment, structural changes and productivity were observed. These observations were recorded in a tabular (Appendix 2) format in order to assess them qualitatively and to be able to relate the relevant factors with the quantitative data to create a stronger understanding for the results for the first research question.

Observations were also made at the headquarters of the organization in order to establish an understanding of how the work environment has changed in an office environment. The COVID-19 changes have impacted both the work conditions of employees working in warehouses who conduct hands on labour, as well as office workers who conduct their daily business from cubicles and/or open workspaces. The comparison of both these work environment gives us a thorough understanding of how COVID-19 has impacted the overall work environment and work structure for the employees.

Observations conducted separately at both facilities also allows us to create a comparison between the shop floor workers (those who perform physically demanding task, which require greater physical contact) with the office workers. The study of both these class of workers separately lets us understand the companies influence and efforts towards ensuring safe and sound work conditions for the employees in each of these facilities. A comparison also lets us get a better understanding of the companies CSR towards their employees and how much equality they enforce in their work environment for each type of employees.

3.5 Data Quality

The quality of any form of data collected can be assessed through two main factors. The reliability and the validity of the data provided. The data needs to be both reliable and valid in order for the study to be of high quality and to be effectively used by future researchers as a steppingstone for further progress in the field. The data collected for this case study is done both in qualitative and quantitative format. Both forms of data have different set of ideal for validity and reliability and are therefore discussed as separate entities as follows.

3.5.1 Qualitative Data

The values for validity and reliability of qualitative data can be encompassed within three criteria. These three criteria are credibility, transferability and dependability (Endacott, 2005).

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The transferability of the data refers to its ability to be used as a theory rather than just a sample for the population (Endacott, 2005). This is evident in the data collected as it is used for the establishment of theories of the impact on the work conditions and environments due to the introduction of the new laws and regulations as a result of the pandemic. It is not just a sample for the population as the study allows us to create theories on how a company can function under such pandemics.

The dependability of data dictates the stability of findings over time. Since the pandemic is only a recent option, the dependability of the data comes the fact that the laws and regulations being implemented that are affecting the work conditions, are for each organization situated within Dubai. The laws are strictly implemented and cause relatively equal impacts in most industries. Since we are accessing only the aviation industry here, the dependability of the qualitative data is rather high, as the same restrictions that are creating the new work environment are implemented in each aviation organization.

3.5.2 Quantitative Data

In the case of quantitative data, it is much easier to establish reliability and validity. The fundamental principles of data collection dictate that the collected data must be independent of the observer and that the data is the true representation of a phenomenon. This is exactly why quantitative data is met by four major objectives which must be met in order to pertain reliability and validity (Endacott, 2005), empiricism, measurement, replicability and objectivity.

Empiricism entails that the observations and measurements must have a reproductivity factor (Endacott, 2005). This means that the data being collected should be possible to replicate by others. This is evident, as the quantitative data we collect for this investigation is entirely reliant on the company’s sales and procurement history, which under no circumstances would be different than what it is. This is because the data. Received was directly from the company database. Measurement refers any devices or tools that can be used to measure a certain phenomenon. This is very in line with the collected data as it is being used to measure and understand the lead times changes being caused by the pandemic. Replicability is the ability to be repeated again and again. This is rather similar to the empiricism as the data collected is concrete and would not change regardless of the situation it is being provided in. It is a mere history of the company’s sales and procurement.

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Objectivity aims to understand any bias that may be present in the collected data which in turn could affect the conclusions (Endacott, 2005). The data collected for the sake of this study is objectively reliable as it is collected from the senior managerial staff with high level access to all the company's data, but since the data provided is direct from the record storage software for the company, it is evidently not impacted by any single person or entity. It is a direct depiction of the company’s sales and procurement history.

3.5.3 Limitations

The data collected possess high validity and reliability just because of the format it is collected in. The qualitative data is primary data; therefore, it is a first-hand collection creating fewer channels of uncertainty. The quantitative data is directly obtained from the organizations storage software this lacks the ability to be altered. Even so there are still some limitations presented that may hinder the validity of the data. The most important factor that may affect the reliability of the theories that are derived from the data is that it only encompasses an overall 40% of the sales at the organization. This creates room for misinterpretation, which is not necessary, but is still a possibility. The lack of data from the military sector may lead to a lack of understanding when it comes to comprehension of the new work environment and work force introduced due to the pandemic. An individual analysis of either quantitative or qualitative data would not be deferred at all, but when the mixed study is conducted, where the impact of the quantitative data is depicted on the work force as a whole, or vice versa, where the impact of reduced work force is studied on the lead times, there is a possibility of misinterpretation. This is mainly because the work conducted by the workforce which is observed will be much greater than what is depicted by the quantitative data that is received. This is primarily because the observations will also entail some aspects of the military operations which are not entirely confidential and still conducted within the vicinity of the commercial operations in the organization’s facility.

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4 Empirical Results

This section focuses on using the results from the observations and document reviews in order to answer the research questions and tackle the purpose of the thesis paper. It gives graphical and tabular representation of the results.

4.1 How has COVID-19 affected the lead time and demand for

parts and services in the aviation cargo industry?

As it has been illustrated throughout this study, COVID-19 has had serious implications on the demand and lead times of many global firms. A reduction in air cargo transportation has led to a significant increase in overall lead times for many organizations. This is evident in the data collected from the organization for our case study.

4.1.1 Demand Analysis

The company had a steady growth in demand between the first two quarters and the last two quarters of 2019. Their sales are increasing over the year as seen in Figure 6. There is a general trend in the last two quarters that shows a consistency in the demand for parts. This is quite visible in figure 6 and shows the stability the company establishes in normal working condition pre COVID-19. Their sales values stay rather constant and revolve around a million dollars a month.

It can be seen quite evidently that the trend follows through in the first quarter of 2020 where the sales values are relatively similar to those in the last quarter of 2019. They revolve around the one million mark as would be forecasted if studying the sales graph for 2019. It is to be noted here that we are studying the sales made by the company in the suggested time frame. These sales are equated to the demand assuming that the market demand was overall met.

In contrast, the introduction of COVID-19 came forward in March of 2020. Figure 6 shows that the sales values were at their lowest during the month of April 2020. This is right after the introduction of COVID-19 and thus directs us towards the implications that the pandemic could have had on the demand for parts. The sales value drastically dropped from $1,147,432 to a record low of $170,293. This is a clear representation of how COVID-19 has had negative impacts on the demand for parts during COVID-19.

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Figure. 6. Demand for parts post and pre COVID-19.

This can also be seen by studying Figure 7. Figure 7 depicts the pre and post COVID-19 quantity shipment of parts performed by the company. We can see clearly that during the first quarter of 2020, quite similar to 2019, the shipments were relatively standard with an average of 5200 orders monthly. The first quarter of 2020 follows a similar trend with shipments well over 5000 pieces per month. But quite similar as Figure 6, Figure 7 shows that as soon as COVID-19 was announced in March of 2020, the quantity of orders being shipped drastically reduces. This trend follows through all the way to September as we are still dealing with COVID-19 at the current time.

$0.00 $200,000.00 $400,000.00 $600,000.00 $800,000.00 $1,000,000.00 $1,200,000.00 $1,400,000.00

Pre and Post COVID-19 Demand Value

Value USD (2019) Value USD (2020)

2 per. Mov. Avg. (Value USD (2019)) 2 per. Mov. Avg. (Value USD (2020))

0 2000 4000 6000 8000 10000

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4.1.2 Lead Time Analysis

Lead times have had one of the greatest impacts due to COVID-19. Within an overall reduction in global air transportation, major firms that lay roots in the aviation industry have suffered quite significantly. This can be seen in an analysis of the lead times of the organization in question.

Before the introduction of COVID-19, most of the goods were either received on time, or in most cases, even before the dated delivery. This was a common occurrence and can be seen quite clearly in Figure 8. Most of the lead times for parts lie below the null day mark. Figure 8 shows how most of the parts are received prior to their expected date of delivery, apart from part number 7 and 3. This is a pre-COVID-19 result and shows how the consistency in parts receival is expected from the suppliers by the organization.

Figure. 8. Lead times for parts delivery pre COVID-19.

On the contrary, lead times post COVID-19 are quite significantly increased. This is quite evident in Figure 9 as most of the deliveries take significantly more time than what is expected. This is quite a common trend in most deliveries regardless of the supplier. Apart from 3 deliveries from the data we received, all the remaining deliveries were quite late. This is particularly true for the first few parts where the delivery times rise as much as 120 days, or 3 months, past the expected date of delivery. COVID-19 significantly impacted the capability of suppliers in delivering their orders in the expected time.

-150 -100 -50 0 50 100 150 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 N um be r o f D ay s p er D el iv er y

Ordered Parts from Suppliers

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Figure. 9. Lead times for parts delivery post COVID-19.

4.1.3 Combined Analysis

Impact on demand for parts due to COVID-19 is studied as a factor of time. It is studied against the time during which COVID-19 has influenced the functionality of an organization. This is done in contrast to the pre-COVID demands and sales It is quite evident, as stated priorly, that the demand significantly reduced after the first quarter but slowly starts to catch back.

Lead times studied with suppliers as an offset let us understand quite clearly how COVID-19 has overall increased the lead times for parts to be delivered. This however does not let us see the impact over a time period. The graph does not show clearly the lead times as a function of time, therefore, we must conduct an analysis on Table 2, which shows us highlighted the deliveries which were on time. Of the 3 deliveries 2 were placed in September and one in late August. Using this information, we can clearly see that most of the orders that were on time were

placed in the 3rd_{quarter. This falls in line with our analysis of demand, wherein we}

proceed through the demand, we can see the demand slowly increasing.

Both the increase in demand, and an increase in orders delivered as a percentage of orders placed, leads us to believe that as COVID-19 progresses, the organization is achieving stability in its operations. This shows us a level of adaptability and flexibility in supply chain, as mentioned in Chapter 2, which leads to a level of stability that can only be achieved in such a flexible and adaptable supply chain. According to Winkler (2008), flexibility in a supply chain refers to how adaptive it

-40 -20 0 20 40 60 80 100 120 140 1 2 3 4 5 6 7 8 9 10 11 12 N um be r o f D ay s p er D el iv er y

Ordered parts from suppliers

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Table 2. Lead times for different parts ordered from suppliers by the firm. DESCRIPTION Customer Expected

Delivery Date

Actual Delivery

Date DELIVERY DAYS ANTI SEIZE COMPOUND _1-Jul-20 29-Oct-20 LATE ₁₂₀ PREMIUM AIR COND LUBRICANT _2-Jul-20 10-Aug-20 LATE ₄₀ BATTERY PACK CHARGER _8-Jul-20 6-Sep-20 LATE ₆₀ SHAFT BATTERY CELL _7-Aug-20 6-Sep-20 LATE ₃₀ HYDRAULIC TRANSMITTER _13-Sep-20 1-Sep-20 ON TIME _-12 FLAP ACTUATOR RT _12-Nov-20 20-Nov-20 LATE ₈

TORCH IGNITER _30-Nov-20 3-Sep-20 LATE ₃₅

PACKING PREFORMED _26-Aug-20 12-Sep-20 LATE ₁₇

SEAL _26-Aug-20 6-Aug-20 ON TIME _-20

SEAL _17-Sep-20 7-Sep-20 ON TIME _-10

FILTER _30-Aug-20 22-Sep-20 LATE ₂₃

FILTER _20-Sep 9-Oct-20 LATE ₁₀

4.2 How are firms coping with the post pandemic work

conditions in order to improve work standards and reduce

instability during COVID-19?

The work conditions during the pandemic had to change significantly in most of the industries. From an obligation to wearing PPE (personal protective equipment) during all working hours, to isolation and continuous testing, many different measures had to be taken to ensure stability within the organization. To collect knowledge and understand how the organization had to adapt in order to sustain itself in the new global climate during the pandemic, observations were conducted at the facilities gathering first-hand primary data.

To collect this data many different aspects of the work environment were studied. Each of these factors is recorded in Appendix 1 and gives a clear description of how the company coped with them in order to reach stability and control the impact of the reduced work capacity has created on the demand and the lead times.

4.2.1 The Workforce

The work environment greatly differed from normal circumstances. The work conditions where once constant interactions for communications were a norm, were drastically switched to a more online and isolated format. The departments were greatly separated to ensure lack of contact between each department. This ensured the lack of spread of the corona virus in case of an infection. Many more steps along the same lines were taken to overall improve the work environment, making it a safe and healthy place for all the employees.