Supply Chain Management
Supply chain management (SCM), as a type of management information system (MIS) is commonly associated with logistics management. Oriade & Cameron (2016) explained that SCM is not exatcly the same as logistics management. The authors clarified that SCM “builds upon the ‘single-plan’ framework of logistics” involving the coordination of business operations and processes from suppliers of goods and services to customers. In the commercial airline industry, this means that SCM includes several elements such as “industry value chain, from upstream suppliers, through sub-assembly manufacturers, final manufacturers, distributors and retailers to the end customers” (Oriade & Cameron, 2016). A specific example is the linkage
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This practice was prone to error and inefficiency resulting in either over-booking or under-booking of flights. The system then did not only cause inconvenience to customers but also financial impacts to the airlines.
To address the persistent issue with reservations, airlines started to invest in information technology in the early 1960s. American Airlines, a major U.S. airline based in Fort Worth, Texas, pioneered the use of information technology in the airline reservation systems. In the early 1960s, it launched the semi-automated customer reservation system known as Reservisor with the main purpose of cutting clerical costs (e.g., time and financial costs) and errors in managing flight bookings (O'Connell & George,
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In the United States, as Moreno (2017) reported, commercial airlines would have loss US$ 3.2 billion if different types of MIS are not employed. With the implementation of MIS, airlines can harness real-time data in their operations that can help maximize financial returns. As such, the use of MIS in the aviation industry is no longer an option but a necessity if airlines are serious in finding ways to save millions of dollars and increase their revenues as well as overall operation
Montealgre, Ramiro, H. J. Nelson, Carin I. Knoop, and Lynda M. Applegate. BAE Automated Systems (A): Denver International Airport Baggage Handling System. Rep. no. 9-396-311. Boston, MA: Harvard Business School, 1996. Print.
Delta does business globally in 503 cities in 94 countries and is the third largest airline in the United States. In 2003, Delta's daily needs included 7.3 million gallons of fuel, 109,000 meals and snacks, 151,000 bottles of water, 87,000 cans of soda, and 219,000 pounds of ice. Its daily operations also required large amounts of information relating to such areas as flight schedules, gate information, baggage handling, customer service, and tower operation. To be competitive in the airline industry, Delta required an efficient flow of operations. However, accurate advanced planning is nearly impossible because of such elements as changing economic realities and weather conditions, and unexpected maintenance issues.
The terrorist attacks of September 11th, 2001 have forever changed how commercial airlines operate. Even with today’s security measures in place, terrorism is once again on the rise. In the aviation community, the airlines are the ones left to feel the negative effects of these terroristic attacks. Logan (n.d.) explains that airlines had a 30 percent loss in demand with the initial shock of the attack of 9/11 (para. 2).
According to the International Air Transport Association, 2001 was only the second year in the history of civil aviation in which international traffic declined. Overall, it is believed that the IATA membership of airlines collectively lost more than US$12 billion during this time (Dixon, 2002).
Due to the increased use of the internet, it is becoming more and more easier to book online. This allows customers to book flights easier and increase Jet2’s revenue. Revenue is increased through not having to deliver or post tickets out to its customers, in comparison with other non-internet based airlines. It is believed that over 97% of Jet2’s customers book online, which further highlights Jet2’s emphasis on online bookings.
2.Price: A price must be set to add value to the consumer but also add revenue to the airline. Cost is considered the most volatile areas in the airline industry today; deregulation has forced pricing to become the major competitive variable. Like any industry supply and demand control the pricing elements of the ai...
Secondly, they have to offer additional services which significantly improve their margin such as seat reservations, improved in-flight catering or transport services. Customers tend to be most receptive for these services 48 hours before departure • CRM helped for automation of basic business purposes such as marketing, sales and service of airlines. • It also play a key role in analysis of customer data and behaviors using business intelligence. • Prove to be collaborative for communication among the clients. It helped to create touch points with all the important operations and provide superior features to the customers.
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
For any airline, their reservation system is the most important element that will determine their success or failure in the travel business. The reservation system has to be able to handle a very large amount of data and must be able to offer the services and systems that customers need and want from an airline. The first steps in determining what and how their reservation system needed to be updated JetBlue and WestJet needed to run a systems analysis. As Laudon (2013), stated, “First step is to identify the problem, gather information, devise alternative solutions, and make a decision about the best solution” (p. 372). Defining the problems is not as simple as it sounds. While considering these problems many different people must have some input into what those problems, such as various members of the company. Many have different ideas about the nature of the problem and its severity.
“Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistic activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third parties service providers and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.’
The Airline industry is a capitally intensive industry, and because of this companies within the Airline industry focus greatly upon cost, as well as revenue generation. If costs increase beyond control, profitability will soon decrease. Southwest were quick to learn that if they were going to run their company in a profitable manner they had to first establish their market, and then make every effort to keep costs low. In the early 1970’s soon after their inception, Southwest established the ten-minute turn. This was the ability to unload and reload passengers, refill the plane with gasoline, and make all the necessary checks, all within a ten-minute window. They had to keep their planes in the air as much as possible, because of their low price, high frequency market niche. “Part of the great strength they’ve had, is that they have consistently followed a pattern of keeping costs low in every place they have gone.” (Freiberg, 1996, p35)
Supply chain management is basically refers to the fundamental supply chain analysis of the organization which predominantly describes functionalities from source to the delivery point. In this process of delivery, supply chain management framework divides in four categories: In Planning the products and suppliers evaluated and selected, Sourcing pull the information process including contracting, ordering and expediting, Moving is a physical process from suppliers to end user and Paying is the financial process including payment and performance measurement.
Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. These included esclating fuel prices, increased maintenance and repair costs, staff costs, low yield per available seat kilometer ("ASK") via poor yield management and an inefficient route network.
David Neelman realized his vision of creating an airlines company that is focused on customer service by starting JetBlue. During the startup phase or entrepreneurial stage, typically most of the companies go through the activities of marketing the service and /or product. But Neelman, perceptive of the industry needs, went about raising enough capital before starting JetBlue, as airlines industry is a capital intensive industry. His entrepreneurial style and previous experience enabled him to identify the core value of the service “To improve the passenger experience at a low cost” that he wanted JetBlue to provide. Neelman wanted to utilize technology to bring better customer experience at a low cost. Some of the technological activities that JetBlue planned include state-of-the-art revenue management system, paperless tickets etc. His in-depth experience enabled him to identify the external factors that would affect the business such as simple check-in and boarding process, hassle free ticketing procedures etc. This emphasized his knowledge of adapting to the ever changing customer needs. Neelman instilled the culture of...
Coyle, J., Langley, C., Gibson, B., Novack, R. and Bardi, E. (2008).Supply Chain Management: A Logistics Perspective. 8th ed. Cengage Learning, p.366.