Archaic revenue management system stunts air cargo industry growth
Air cargo is a very dynamic and volatile business. It can also be highly competitive and is constantly under margin pressures. In these circumstances, it is critical that cargo carriers make use of any available opportunity and respond quickly to customers – and in a manner that does not compromise profits.
This is where Revenue Management System (RMS) comes in. This is formulated to automate a lot of the calculations involved, leaving flight planners to make more effective use of their time and focus on ensuring the optimal usage of available capacity.
First introduced in the early 1980s in the airline industry to increase revenues and avoid empty seats, RMS has been transitioned to many other industries, including air cargo.
An effective cargo revenue management system accurately forecasts and deploys available supply, resulting in improved revenue and profit. It also supports billing and accounting processes highly customized for the industry.
Success in today’s industry requires a solution that incorporates advanced technology that is robust in providing airlines with more accurate, real-time information in an easy-to-consume and interpret format, according to Sabre Airline Solutions.
Air Cargo Update met with Ashok Rajan, the Vice President and Head of Airline Cargo Services at IBS Software, to discuss how iCargo adds business value to the industry.
iCargo emerged from the need of the air cargo industry to have a dedicated air cargo management solution for managing all facets of the business – sales, planning, managing operations and accounting for revenue. Generic ERP solutions were too vast and generic requiring heavy customization, maintenance etc. and bespoke/ point or legacy solutions for cargo never managed to keep it all together.
“iCargo was developed ground up by IBS Software, with the help of global airlines forming a Core Group of Influence (CGI), who provided the business capabilities to be built into the solution. The CGI member airlines also validated the requirements through acceptance testing of iCargo solution to suit to their business operations. Nippon Cargo Airlines, a CGI member became the launch customer for iCargo in 2008 and the solution has since then been implemented across numerous carriers and has 22 active customers today,” said Rajan.
Today, iCargo is a fully integrated platform solution tailored for the industry that also includes “mobility based warehouse operations, sensor integrated tracking capability for cargo, specialized capability for management of cool products like pharmaceuticals, etc.”
As a fully integrated platform solution for air cargo management, iCargo offers capability to process all business updates and transactions for cargo shipments from the time of sale, through the various touch points in handling/operations and finally to billing and accounting.
This helps automate the accounting process in the following ways:
a. This provides a ‘full picture’ view of the air cargo process – thus minimizing errors and discrepancies and also eliminating the need for repeated data capture/entry
b. It automatically registers deviations at each stage and also re-calculates the billable value after each update. E.g. when the tendered shipment weight is different from booking, thus eliminating the need for manually identifying these anomalies and correcting them through manual re-calculation
c. iCargo works on a principle of ‘work by exception’ – a function called “AWB Audit” checks all shipments for correctness of data, conducts ‘plausibility checks’ such as very high billing value etc., missed milestones (E.g. spot rate not approved by authorized person) and highlights this prior to billing, thereby reducing billing errors.
The Cargo Revenue Accounting (CRA) business module of iCargo is built as a fully integrated component of the overall platform. This provides seamless and end-to-end visibility of the full process of processing cargo shipments from sales to operations until it goes through all of the cargo revenue accounting processes.
“This means that data once captures as part of sales, operations processes as well as the flown or uplift data as the cargo moves from origin to destination flows automatically and seamlessly into the CRA module, thus eliminating the need for repeated data capture or even the need to have any bespoke system integration between the two functions. This saves cost, time and effort for end practitioners,” Rajan explained.
It also does not require any specialized process for ‘importing’ AWB operational data from any other system. It simply flows from the other modules for sales and operations within the iCargo suite.
However, in the instance that the carrier might be using iCargo CRA as a standalone module and a different IT system for the operations side, the import is achieved through a custom built interface. iCargo also has pre-defined APIs allowing any other system to provide such information directly to iCargo.
“We believe in using technology innovation to create practical use-cases that can deliver tangible value to our customers. For this, we have constituted an internal “innovation focus group” that is responsible for evaluating innovative solutions and ideas centered on technology and creating practical use-cases or business applications for this,” said Rajan.
“The result is that we have at any point of time a healthy set of ‘lab’ ideas in the form of prototypes, proof of concepts etc. that we showcase to our customers and work with them to shortlist the ones that has the maturity and practicality to deliver value,” he added.
Flexibility in meeting targets
Helping carriers become more profitable, more efficient and also very responsive to customers does this. This has a direct impact on an airline’s financial performance, where margins are wafer thin and the services are also largely undiffer-entiated.
“The game today for air cargo operators is to identify a good product mix, the right parameters for sufficiently differentiating itself from competition and in delivering to the promise in a profitable manner. iCargo provides tools and capabilities as well as a whole set of innovation led solutions to help carriers and air cargo service providers achieve this very delicate balance,” said Rajan.
“The challenge for carriers is to find the right mix of long term capacity commitments (e.g. allotments), space for the specialized and high value shipments (E.g. pharma, mail etc.) and to the open market or free sale, where there is a lot of potential for upselling in high demand routes. How well a carrier manages this, fundamentally determines how well they carry out “revenue management” and consequently, how profitable they are,” he noted.
The iCargo product provides capabilities that enable carriers and service providers to create highly customized products and offerings to suit specific business needs.
These services can either be bundled into branded products which have a higher price compared to regular shipments or can be provided as and ‘a-la-carte’ menu, which can be selected by the customer during booking.
This opens up a large set of oppor-tunities for the carrier or service provider by using similar concept as ‘ancillary service revenue’ model that has proven to be very successful in the passenger side of the business.
iCargo also provides several in-built value adding capabilities which will enable carriers to ‘step-up’ their cargo business and the way they offer their products and services.
“This could be in the form of introducing new technologies such as self-help kiosks at warehouses, advanced sales force engagement tools etc. on top of the core system. IBS has facilitated this ‘second wave’ of transformation for many of its customers leveraging on its strong software services capabilities – which allows customers to introduce a layer of ‘personalization’ on top of the core solution,” said Rajan.
Archaic system no longer effective
Rajan thinks carriers and cargo experts should focus on being able to differentiate their business from competitors and deliver superior quality in customer experience and in service to make processes more efficient and less resource intensive.
“The immediate impediments to such a transformation are the lack of good quality data and the requisite tools to enable its workforce with. Many archaic processes and practices are the result of years of ‘legacy’ and these results in higher costs, lack of service quality and poor customer experience,” he said.
“Technology can solve part of this – like providing a good data backbone, providing tools to automate processes, diagnostic and self-monitoring capabilities and so on. The other part is to enable the organization to make use of these tools and capabilities by being open to change,” he concluded.
Other concepts that IBS is currently working on are:
AI based applications to help automate repetitive tasks like AWB rate auditing and error correction
Virtual ‘chatbot’ to work as a personal assistant in cargo,
IoT concepts that provide real time monitoring and diagnostics of shipments in transit through a variety of sensors such as temperature, geo position etc.
Virtual reality based visualization of cargo planning and operations
Mobile apps for providing direct access to real time shipment tracking customers from their smart devices and several others.