“Flying high in the blue sky” is the most beautiful dream that has haunted the heart of the man since Iracus. Numerous attempts to fly by the inventors became reality with AEROPLANE in the early 20th century around year 1903. On 1st January 1914, first commercial flight took off from St. Petersburg, Florida with a single passenger to open the doors of the aviation industry. Over the past 100 years this industry has spread its wings all over the earth and helped 65 billion people to touch almost every country on the earth. Aviation has brought the cultures, ideas, people and countries together to transform the earth into a global village.
Inheritably the aviation industry is a high cost industry with high fixed costs (fleet size, airports) as well as high operating costs (fuel cost, taxes, landing charges etc.). In short, the industry is always exposed to insufficient profitability challenge. Increased security measures post 9/11 attack, coupled with dynamic weather conditions have added further operational hurdles, those from which none of the aviation companies could escape. The aviation market today, is also seeing an onslaught of low cost carriers, increased cross-border players and changing consumer desires.
Interestingly, the aviation sector is one of the strong proponents of capturing the data at every touch point starting from the design of aeroplane engines, dynamic data collection on engine performance to voice recording of the cabin crew in the black box. Most of the airlines religiously capture passenger information, booking/reservations transactions, various operational costs, cargo information, flight data, sales data, promotions data, flights routes, flights schedule to name a few. Innovative use of the data combined with analytics can uncover crucial insights needed to manage customer satisfaction, deal with dynamic fuel prices, and underutilized capacity.
The massive volumes of historical data can be analyzed to discover valuable insights. They can be used to predict: the future market, changing customer preferences, global security threats. Business analytics can bridge the gap between the available information and strategic impact for competitive advantage. Analytics is best suited to handle this situation with his immensely powerful descriptive, prescriptive and predictive analytics.
Over the years, a few courageous players in the sector like American and Southwest airlines have sought the help of Analytics to change the business they do and to become most admired companies in the world. Now a days, Analytics territory is not just limited to airlines but has been spread to airports, aircraft manufacturers, suppliers, governments and others in the global aviation space.
One of the global leading aircraft fasteners distributor in the aviation industry was struggling to improve overall profitability of the organization. They were a leading supplier of high performance fasteners to premier aircraft manufacturers around the world. The organization was exposed to razor thin margins of the products due to cut throat competition and highly volatile demand for the products causing operational inefficiencies. Faced with a limited scope to increase the customer base or range of products, they decided to take the analytics route to solve its business problem and approached BRIDGEi2i.
BRIDGEi2i‘s proprietary forecasting solution helped predict product level demand to give more visibility to the future demand outlook. Further, the BRIDGEi2i team also classified all the products into different groups depending on the gross margin percentages, number of customers, demand volatilities to facilitate demand forecasting at most granular level.
Not stopping there, we also built a tool that incorporated demand forecasts, current backlogs, inventory on hand, inventory targets and pipeline inventory to devise optimal replenishment policies. This helped the organization not just to solve the problem or simplify the problem but also create sustainable business impact. We also devised an optimal inventory turns for each group, depending on the characteristics of the product groups.
The optimal replenishment policy helped the organization to reduce operational cost for holding inventory. This optimal pricing model improved gross margin for every product!
These recommendations empowered the business performance with improved gross margins and reduced operational costs. Now the fastener supplier is able to “fly high in the business sky”.
This blog is written by Avinash Narode, Analytics Consultant at BRIDGEi2i
About BRIDGEi2i: BRIDGEi2i provides Business Analytics Solutions to enterprises globally, enabling them to achieve accelerated business impact harnessing the power of data. Our analytics services and technology solutions enable business managers to consume more meaningful information from big data, generate actionable insights from complex business problems and make data driven decisions across pan-enterprise processes to create sustainable business impact. To know more visit www.bridgei2i.com
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position or viewpoint of BRIDGEi2i.