Global Logistics and Supply Chain Strategies - August 2008 - (Page 16) IATA Calls for IT Solutions to Airline Industry Crisis; Sees ‘Deep Losses’ Continuing Through 2008 Information technology holds the key to driving down costs and improving the general lot of the airline industry, according to Giovanni Bisignani, director general and chief executive officer of the International Air Transport Association (IATA). Speaking at a recent conference in Brussels, he claimed that IATA’s “Simplifying the Business” program stands to save airlines $6.5bn annually. Innovations include 100-percent electronic ticketing, which alone will save the industry an estimated $3bn. Other efforts center on more self-service options for passengers, including self-tagging of baggage, automated document checks, self-boarding and kiosks for resolving service problems. Bisignani also called on governments to employ IT as a means of improving security, with a particular focus on passenger convenience. Too often, he said, “we get more hassle than value for the $30bn that airlines and their passengers have paid in the last seven years.” The IATA-led “Simplifying Passenger Travel” project will result in more effective security measures, he claimed. Even so, IATA continues to issue negative outlooks for the rest of this year. In June, it projected industry losses of $2.3bn, down sharply from the $4.5bn in profit forecasted back in March. And the final tallies are likely to be much worse, given that the June estimate was based on crude oil at $106 per barrel. One month after that, oil prices were breaking the $140 per barrel mark. “For every dollar that the price of fuel increases, our costs go up by $1.6bn,” said Bisignani, addressing IATA’s annual meeting in Istanbul, Turkey. With oil at $130 per barrel, industry losses could be $6.1bn, he said, adding that the record high “has brought us into uncharted territory. Add in the weakening global economy and this is yet another perfect storm.” He called for cooperation by government, industry partners and labor to address the problem. While the airline industry has improved its fuel efficiency by 19 percent over the last six years, “there is no fat left,” he said. “To survive this crisis, even more massive changes will be needed quickly.” Visit www.iata.org. Companies Must Look Within Themselves Before Deciding Whether to Outsource Logistics, Seko Says The weakening economy hasn’t stopped companies from outsourcing their supply chain management activities, according to Seko Worldwide, the global provider of logistics and supply-chain services. But companies today are realizing that outsourcing to logistics service providers “is not an all-or-nothing proposition, and requires an in-depth evaluation of the entire supply chain process,” the company said. John Fitzgerald, vice president of global sales and marketing with Seko, said companies need to evaluate their cultural alignment, core competencies and overall business capabilities before deciding whether and how much to outsource. There are six “paradigms” involved in the decision, he said. Companies should determine the state of their warehouse management systems, with a particular eye on the prevalence of stockouts for finished goods. They should take a close look at their production facilities, to see if they are down for long periods of time. They should evaluate delivery-date success for time-sensitive products. They should assess overhead and fixed logistics costs, to determine whether the shared facilities of an LSP would be more economical to use. They should examine their information technology capabilities. And they should evaluate their readiness to comply with new import regulations of U.S. Customs. Having conducted such an indepth evaluation of supply chain processes, companies often find that a mix of in-house and outsourced logistics functions is the best way to go, Fitzgerald said. Visit www.sekoworldwide.com. 16 AUGUST 2008 http://www.iata.org http://www.sekoworldwide.com
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