Making IT count
How can you keep your revenues in synch with costs, even during times of hardship? IBS' iCargo solution has the answer.
Adding value to your business is one of the key components in ensuring a profitable operation. For IBS chairman and chief executive officer VK Mathews, 25 years of experience in the travel transportation and logistics sector has revealed that only a complete end-to-end solution can truly add value for the client, whether that client has interests in air cargo management, airports management or supply chain solutions.
But finding ways to promote efficiency in such a vast and diverse sector is naturally difficult; each company will understandably seek a tailor-made solution that will allow his operation to run smoothly.
The trick is to find a product that can offer companies diversity while at the same time continuously adding value and still providing an excellent service to the customer. In this sector, a small error of any kind, or a bad decision, can result in lost revenue, and client retention is thus of paramount importance.
"In the 70s, 80s and 90s, the pace at which customers' preferences changed was far slower than it is now," recalls Mathews. "Shippers nowadays want different possibilities and different options, and they want them as soon as possible, as each is trying to optimise his own economic operation."
In trying to locate the ways to streamline different customers' businesses, Matthews started asking the questions that are familiar to all company directors. How can I enhance my market share and profitability? How can I respond to market conditions over which I have no control? How can I make sure my company scales up and grows? Just by speaking to the founder of IBS Software Services, it is clear that these sorts of questions are a constant factor in the back of his mind.
IBS is an IT products company that specialises in differentiating ideas from other services, and provides its solutions to a sector on which one out of every 10 dollars is spent worldwide. It has six business verticals, which between them cover the air transportation business thoroughly.
The company's airline business covers all aspects of not only passenger management - from reservations to departure control, inventory control and ticketing - but also covers the logistics of others who travel on board an aircraft, such as the crew members.
In addtion to cargo, IBS also has a number of solutions for airport operators, and a recent addition to the firm's family of clients was Tokyo's Narita airport, a huge freight hub in its own right.
"We have an excellent track record through our operations and resource management," smiles Mathews. "And we carry out operational monitoring for some of the best-known airports in the business, like Heathrow and Gatwick."
Ã‚Â For Mathews, maintaining and understanding the relationship with the traveller or the client, and then rewarding that relationship, is IBS' main aim. "We are probably the only company in the world which has invested in building a product, iCargo, that looks at the entire cargo logistics platform from the operator to the consignee, addressing all the requirements of all the players in the logistics chain," he outlines.
The IBS components are run from various locations: airline and airport operations are managed from the UK, while engineering and maintenance and airline services are both run from the US. Responsibility for software services is undertaken in India.
In addition, the firm has four major base areas of operation: North America, Europe, Middle East and Africa and Asia Pacific, IBS' largest, which covers the emerging markets of India and China, plus Japan and Australasia.
After the dotcom' crash at the beginning of the millenium, Mathews decided to retain staff, instead of laying them off, an option that he saw as an excellent opportunity to invest in a new generation of cargo business. Nowadays, the company has a workforce of over 2000 and a roster of around 150 clients, which include the most recognised names in the business, such as Qantas, Cathay Pacific and KLM.
"Some of the best airlines in the world use our product to manage their mission-critical operations," states Mathews, proudly. "Nippon Cargo Airlines - the third-biggest all-cargo carrier - operating out of Japan, has just gone live with our iCargo product. These airlines have effectively bet their business on us, because they are all-cargo carriers. If our system stops, Nippon Cargo stops. Their confidence in our system is absolute, even though the actual product wasn't actually ready to go on line when we first showed it to them."
iCargo is the generic name for IBS' cargo solution. According to Mathews, the product helps an airline manage its cargo business completely by allowing the client to gauge capacities and schedules, book flights, produce airway bills, carry out shipment handling and ULD management, plus looking after terminal operations and even going so far as to interface with the customer. All this is carried out with the aim of enhancing an airline's profitability.
To create a futuristic leading product for the industry, IBS created an innovative concept, the Core Group of Influence', with world's six leading carriers participating in a programme to influence the direction of the product being built.
These six diverse major air cargo operators - Qantas, Gulf Air, Australian Air Express, Air New Zealand, South African Airways and NCA - all gave their input into the definition of the product.
"We really wanted the practitioners to contribute so we could understand their true business requirements," explains Mathews. "For example, if we were to ask just one preferred airline about their business practice, we would have lost the crucial component of a general debate about best practices. This really helped us create a solution in which the airline industry was keen to invest."
An important factor shared by all these carriers is the maturity of their cargo systems and the fact that they have had different suppliers.
"The inputs from our core members added to the global appeal of the system as they represented their unique business models, geography specific business practices as well as the industry's best practices."
Given the increases that are predicted in the airfreight market in the long-term future, such a solution would seem crucial. "Most of air cargo is predicted to grow at about 6.1% every year for the next 17 years - that's the forecast," continues Mathews.
"This means that from the 200 billion freight tonne kilometres (FTK) we are witnessing now, there is likely to be around 600 billion FTK by around 2025. That's a three-fold increase - how can a company expect to cope with growth of that size?"
As Mathews points out, such rapid growth movements can actually work against the operator; dwindling resources aligned against increasing market demand can ensure that costs may actually rise instead of dropping.
One of the key concerns is that while operators inevitably have a control on operating costs over a particular period of time, there are other factors in play that can affect revenues severely. Such issues can include the fuel price, which is among the reasons why around 25 airlines have recently gone out of business, or one-off events that have harmed the aviation industry.
"During the SARS crisis in 2002, freight movement throughout the world changed completely, as the two giant hubs of Singapore and Hong Kong, as well as the northern parts of North America, were very badly affected," says Mathews.
"What this meant was that some airlines saw revenues drop by around 25%. If you operate a model where market conditions are unpredictable and not fixed, then there is no way you can be safe. But if you have a model that pulls down your costs in synch with a drop in revenues, then you are of course going to be better off."
So what is it that the IBS solution offers that can help stem any potential drop in revenues? By creating economies of scale, iCargo can help airlines outsource different aspects of their operation.
The internationalisation of costs is also a crucial component. Airway bill processors working in London will cost more than employees carrying out the same transactions in India, and there is no need to take the more expensive option.
Flexibility is also key; previous systems could not support changing business models and processes effectively. "If someone comes to the table with a fantastic new idea for improving revenue, will the legacy systems be able to reliably implement that suggestion?" questions Mathews.
"IT should not be the limiting factor for the business, which was the case in the past. Customers are now demanding additional services and that is where you make real money as a value-adding service provider - a 24-hour service or a door-to-door service, for example. The system that you implement should be able to effectively address the changing requirements of the customer in a timely and cost effective manner."
In addition, IBS sees the seasonal peaks and troughs of airfreight trade as an opportunity rather than a hindrance. During lean months, carriers and try and augment their market share, but this is difficult to do quickly. By Ã¢â‚¬Ëœmobilisation' of trade, carriers can persuade customers that are not sending time-bound shipments to transport their goods during off-peak times.
With regard to the Middle East region, the IBS chief executive is clearly aware of the growth being witnessed by the region's carriers, but he also sees the aviation industry as having clear community, not just financial, benefits.
"The transportation sector is that much more fulfilling here than in the West; it leads to quantum growth and generates more meaningful jobs," he argues. "So the impact of the activity is enjoyed by the community, which is actually the value of the growth."
As IBS continues to work with the Gulf region's biggest players and garner ever greater market share, the varied offerings it provides to a new generation of globally active freight players are only set to increase.
All modules share information and data while being functionally independent
Cutting-edge technology and advanced security ensure high system availability
Responds quickly and effectively to changing market conditions
High visibility of service throughout the entire logistics chain
Able to effectively implement new-generation business practices and models
Reduces cost of system ownership via ultra-modern system architecture