SAFE System for Toronto Pearson Airport - Case Study Example

Feasibility Analysis Report Name: Course: Instructor’s Name: Date: Executive summary The level of technological advancement over the years has its effect on various business units. In last two decades, the aviation sector has tried to adapt to these technological change. The industry has been faced been faced with new security threats such as terrorism, increased number of passengers and illegal practices such as smuggling and theft. The fact that the perpetrators of this front use advanced technology has brought in the need for airports to improve their systems. For instance, The San Francisco Airport currently uses the physical identity and access management system (PIAM). This outdated system has been used since its inception and has had minimum improvement. Apart from limiting efficiency, the system is prone to security threats. This necessitates the need for an improved system in SFO. Quantum Secure offers the answer to the problems of SFO. Through the SAFE system, the airport can improve its efficiency; maintain user-authentication while also ensuring absolute safety of the airport and its users. This report analyses the return of investment for the airport in the next five subsequent years and uses the results obtained to justify the need for the airport to undertake this venture. Purpose In business, efficiency and effectively are vital for growth. Effective In the aviation business, the key lies within having an efficient, effective, and secure operation system. Thus, the objective is to access and calculate the costs arising from the installation of the SAFE system and illustrate financial and logistical benefits of the regime to the airport. This will include the use of empirical data to estimate and make assumptions on turnover rates and the metrics for investment justification. Background The SFO serves approximately 100,000 passengers annually and depends on the operating system of the airport for ticketing, security checks, and baggage claim. In addition, thousands of tenants, vendors, third party contractors, and airline personnel need the day-to-day access of the airport. This creates the problem of inefficiency in service and poses a threat to the reliability of the Airport. The increasing security threats to the aviation sector also have necessitated the need to increase compliance to safety measures in place (Bennett and De Serio, 2017). The assistant deputy director of Aviation Kim Dickie came up with a solution to solve the challenges facing the airport. The primary problem they sought to address was the increasing passenger counts due to the rising launch of service by low-cost carriers. The initial solution was to renovate the out of service terminal 2. However, the vision driven Kim Dickie saw this as an opportunity to address all the challenges facing SFO eventually. She saw this as an avenue to not only address capacity and security issues but also as an opportunity to introduce a system that will be efficient and improve the credentialing system. After deep review and considerations, she showed good Information management skills by selecting Quantum securer’s SAFE software suite for the terminal two credentialing system. Their proposal of this software was based on the solutions it offers which were backed up by primary data on its effectively in Toronto Pearson Airport thus, Outsourcing information for the benefit of SFO. According to the data obtained, the airport serves 175 clients per day and 45,000 annually (Diermeier and Meagher, 2017). The implementation of the SAFE software ensured the cost of badges was reduced from $49 to $35. Before this installation, the average wait period was 560 minutes, however, with a new system this improved to just 20 minutes in the waiting bay. Besides, the average service time decreased from 74 minutes to 25 minutes. Reports from Toronto Person’s Airport also indicate a streamlined system of credentialing and compliance to the regulations set by Transportation Security Administration (TSA, 2016). The probable effects of SAFE installation in SFO include offering solutions on security issues especially checks, credentialing and compliance to safety directives, thus facilitating security management. This system increases the efficiency of identity management and makes sure that changes to policies can be easily integrated into the system (Botchkarev, Andru, and Chiong, 2012). In SFO, the system seeks to address the problems relating from badges, labor, security, record keeping, and compliance. This will immensely reduce the time passengers take waiting, the cost of new badges, increase the efficiency and accuracy of the record keeping department, and improve the moral of the employees. Swot analysis In business, the success of a system is analyzed based on its ROI and its strengths and weakness. SAFE is a product that boosts of crucial strengths as it ensures the reduction in the cost of labor and material and it guarantees the improvement of SFO security. Weaknesses occur on the need for a high initial cost of setting and the requirement of training for its implementation. However, the system creates opportunities in the airport as it enables the terminal to integrate changes in policies easier in the case of technological advancement in the future. The only risk arises on the dynamics of the centralized system. Its centralized nature may hinder its effective if the central server is compromised. Assumptions made while conducting ROI analysis The purchase cost of the software suite is $250,000 with a maintenance cost of $25,000 for the next five years. Thus, the total purchase cost over the duration (2009-2013) is $375,000. This is the purchase price provided by Quantum Secure. The current time value is 6hours as estimated by Dickies’s team and the new cost is approximately 20minutes. This period is based on primary data obtained from Toronto Pearson Airport (TPA). The dynamics of security and credentialing are the same the assumed period is 20 minutes or 0.33hours. Terminal 2 is assumed to start with new 2,000 users in 2009 and have a 10% growth annually to 2928 in 2013. The number of new badges processed will be 2000 in 2009 but will be a constant from 2010-2013 because the system will be implemented in the rest of the airport over these years. The reduction of labor time spent on identity management is estimated to be 35% based on primary data from TPA. The hourly cost of labor is $8.00 based on the economic dynamics of travel and the assumed time spent per user yearly to collect, renew, change access and replace Ids will be 15 minutes. The number of ID users is estimated to increase by 5% annually for the next five years. This makes it grow from current 20,000 to 24,310 in 2013. Data obtained from TPA indicate that the cost of the new badge will be $7.00 with an average percentage of badges lost each year being at 5%. This is based on a large number of users in the airport and the measures put in place necessitating the daily use of the badges. In record keeping, the reduction in labor costs will be 85% based on data obtained from Toronto, which shows 96%. However, SFO has a higher number of users, which in turn requires more time. Return on investment In the determination of restitution on investment, the analysis is centralized on labor and material costs, increased accuracy of record-keeping, increased compliance with security measures and compatibility cost savings. All these quantified sections try to illustrate the business process improvement. The system will be implemented in Terminal 2 before being integrated into the rest of the airport. During analysis, the material costs and cost of Badge are the only reliable figures. The cost of a badge is currently at $44.00, using data from Pearson’s airport a 28% saving will make it $31.68. The 20,000 employees will need badges for Terminal 2 after the renovations. The savings due to SAFE installation will be $246,400. The installation of the SAFE system will introduce new security badges for terminal 2 to retrofit into the old PACs system. Consequently, this will eliminate the need for two security badges. However, regardless of the installation, all the employees will need new badges, thus no saving is realized. Savings will only be attained with the introduction of new employees. The predicted growth of employees is 10% per year. Given the current number of employees is 20,000 in five years it will be 29,280, which is 9,280 more. The new staff will require a single badge that accesses terminal 1 and 2 costing $7.00 rather than two badges that cost $9.00. This amounts to a total savings of $18,560. The total cash outflows for the purchase of SAFE is $375,000, and the total savings on ID badge processing and material cost is $265,200. With the 5% increase in users in the five years, the savings realized from ongoing identity management activity costs will be $77,359. Proper financial planning will ensure that all this savings are accountable for or reintroduced into facilitating other development in the airport. This shows this investment will introduce savings that could not be achieved with just the upgrading of Terminal 2. This mitigates the need for the investment. A proper investment should be able to repay itself over the stipulated time and introduce savings (Phillips, 2012) The total savings from purchase yearly are based on savings from labor costs annually, SFO savings on identification processing yearly, savings from ongoing identity management costs, lost badge savings annually and value of labor savings. Thus, the total savings from the purchase in the five years will be $903,094, thus deducting the maintenance cost of $25,000 for five years the net cash flow from the acquisition is $778,094. Calculations show that the Net present value (NPV) for the cash flow of purchase for the five years is $629,596.The Net Present Value of the investment based on a 10% discount rate and a series of income acquired in the five-year period is $297,252. The internal rate of return for the investment is 40%. In investments, the higher a projects IRR the more desirable it is to undertake the project (Andru and Botchkarev, 2012). This 40% rate shows the high potential of the project once implemented. Recommendation The information obtained from Toronto Pearson airport and the analysis shows that SAFE is the best solution for SFO. The system provides an answer to the challenges the airport faces. Its implementation should be done at terminal two first then rolled over to the rest of the airport in the oncoming years. Its implementation will enable the airport to thrive economically while also ensuring safety. The system is more beneficial as minimizes inefficiency and leads to savings. The compatibility of the system also ensures it offers long-term service to the airport. As the relative high IRR shows, it is a worthy investment for the airport, as it will rejuvenate the capabilities and potential of the airport. References Botchkarev, Alexei, Peter Andru, and Raymond Chiong. "A Return on Investment as a metric for evaluating information systems: taxonomy and application." Interdisciplinary Journal of Information, Knowledge, and Management 6 (2012): 245-69. Andru, Peter, and Alexei Botchkarev. "Return on Investment: A Placebo for the Chief Financial Officer… And Other Paradoxes." Journal of Multidisciplinary Evaluation 7.16 (2012): 201-206. Phillips, Jack J. Return on investment in training and performance improvement programs. Routledge, 2012. Bennett, Christopher R., and Christopher J. De Serio. Improving Aviation Safety, Security, and Operations in the South Pacific. No. 17-72. 2017. Diermeier, Daniel, Evan Meagher "San Francisco International Airport and Quantum Securer’s SAFE for Aviation System: Making the Business Case for Corporate Security." Kellogg School of Management Cases (2017): 1-12. "Security Screening." Transportation Security Administration. N.p., 11 Apr. 2016. Web. 01 Apr. 2017. https://www.tsa.gov/travel/security-screening Read More