I am back in India. I still have a bunch of general observations from my trip, but I think I should focus on some management observations for a change!Today, I will write about how one of the world's leading airlines became that way - by optimizing EVERYTHING. This airline (which I will not name) has spent a lot of time and effort and money to create, buy and customize software to mathematically optimize every aspect of its business.
When we were studying to be engineers, we would hear about the legendary Narendra Karmarkar and the Karmarkar's algorithm, which could solve very large linear programming problems that were till then practically unsolvable. Karmarkar used to work at the famous AT&T Bell Labs. They would charge airlines a lot of money for letting them run their flight scheduling problems on Karmarkar's algorithm.
But it's not just flights and planes that need scheduling, but also crews, food services, fuel services, maintenance operations and so on. The more of these things you can optimize, the better off you are.
At the airline I mentioned, crew scheduling is now so sophisticated that the crew members can even give their personal preferences and these are taken into account! "We want our crew members to be always smiling, and perhaps our optimization can help in that", a Vice President of IT at the airline told me.
Then there is revenue management optimization, where you price the ticket differently depending on whether it is a one-way or a round-trip, the number of days in the trip, whether the trip includes a weekend, when the ticket is bought, the amount that is refunded if the ticket is canceled, and so on. You want to make as much money as possible from each passenger but not annoy him or her! By doing a better job of optimizing this pricing, you can make or lose a lot of money.
This sort of opportunity is going to be very much needed in India. While industry was booming, everyone focused on growth at any cost. Now that the limits to growth have been demonstrated, we are going to see a lot more focus on squeezing the most out of current operations.
The IT and OM students can surely capitalize on this!
[Photo by Boeing - www.boeing.co.in]
5 comments:
good morning sir,
this blog explains me about that if proper scheduling of a perticular task is planned and properly executed than we can get proper and maximum benefits out of that.
yours truly,
saurabh bansal
fall 09
Respected Sir,
We are being taught that a person who can utilize the available resources at optimum level then only he can be called as a good manager.This 'optimization' has become our objective.We have to learn it to become a good entrepreneur.But we need to learn this practically .And this we are learning at Proton.
Thank you Sir for such a great post.
Regards
Proton Shraddha
Hello Sir.
Thanks for sharing wonderful insights on better utilization of resources and thinking behind revenue management.Finally,I came to a conclusion that optimum utilization ultimately allocates resources efficiently and leads to growth of the business fairly.
From revenue management its all about how much you understand yours customer psyche while hitting your strategy to customer while serving him through your services.Its all about diffrenciating between marketing and selling.
And you are definately right Sir Indian companies needs to understand this as early as possible for growth prospects.
Regards,
Lovish Dua.
Regards
Nice learnings Sir.
Just to add to "daily schedule"
of crew members
May be they should "keep patience" along with "keep smiling"
Manmeet Arora
The last Economist pointed out "dynamic tariffs" as a mobile phone pricing model that has made waves in Africa. That's revenue management too! In fact, it's somewhat analogous to airline pricing in intent.
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