PLF During A Record-Setting Holiday Air Travel Season

More people than ever before will fly on U.S. airlines this Christmas holiday season – nearly 46 million of them – according to a new projection from the industry’s Washington trade group. With less than a month left in 2018 it now is almost certain that the average inflation-adjusted domestic round-trip air fare in America this year will be the lowest it has been in at least nine years. In order to accommodate the expected demand and to predict customer demand for specific flights on specific days, airlines should use advanced data analytics.

PLF (Passenger Load Factor) has always been an important metric for profitability which is highly effected by this holiday season. PLF measures the capacity utilization for airlines. It indicates the efficiency of the airline; filling seats and generating revenues. 80% of passenger load factor is considered as standard in the domestic airline industry.

PLF can be increased by improved forecasting of future demand or more appealing offerings. A high load factor, in itself, does not necessarily mean profitability. But in general, the lower the load factor, the lower the profit.

Considering the airline industry dynamics as cancellations of reservations, multi-leg flights complexity and the openings of new flight routes, forecasting PLF becomes even harder. Yet it is attainable by building airline-specific models to forecast the aggregate passenger traffic in a certain time frame, region or an individual flight. The model delivers an optimum revenue and enables the business units to cleverly act on price and campaigns.

The improvement of PLF is a direct impact on the bottom line. The bettering of this KPI effects the plan and costs of complimentary functions; such as workforce, fuel, catering and ground services.

Take a look at our PLF solution, which is developed on R and the visualizations are developed with MicroStrategy, to see how we can help you grow your business.

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Don’t Cover Under Your Shelf(!) During the Christmas Shopping

There is no official start date for retailers to begin launching their Christmas holiday season sales. In fact, each year, different retailers set new standards to follow so the Christmas/holiday retail sales season is dynamic and continues to evolve. Retailers should be prepared for holiday shopping seasons.

On Shelf Availability(OSA) is one of the important metric for every retailer’s performance measurement during these seasons. OSA is defined as availability of product for sale to a shopper, in the right place he expects and at the time he wants to buy it. OSA is impacted by many different factors, all along the supply chain.

Collaborative Planning, Forecasting and Replenishment are mostly used collaboration efforts between retailers and manufacturers in order to reduce the out-of-stock rates. While there are some marginal improvements, the truth is that many of the problems are self-inflicted wounds. Retailers are not constantly putting the right products on the shelves. Key reasons for this are:

  • Store replenishment procedures fail to replenishing shelves on a timely basis
  • In-store inventory counts are inaccurate
  • Forecasting and assortment processes and systems do not adequately account for local demand
  • Space planning and planogram processes are not readily adaptable to local store footprints and demand

As a result, the consumer does one of four things: buy another brand at the same store; buy a completely different type of product; look for that brand in another store; or, simply, not buy anything. If the consumer does not (and cannot) buy your product because it is out of stock, you don’t sell. And, provide an opportunity for your competitors to gain your consumers business and loyalty.

There is a lot that retailers can do to get their own store in order for better on-shelf availability while they pursue collaborative supply chain efforts. The time is now! The complexities of delivering on consumers’ omni-channel demands for seamless and consistent shopping journeys will not go away, they will only become more complex. And as more retailers gear up to satisfy these demands, consumers are becoming even less tolerant of delivery failures. The time to transition planning and store operations to accommodate these increasing demands is now, or else you will be left behind as customers shift their loyalty to those retailers who best meet their expectations. For more information on improving on-shelf availability, check Obase Replenishment – Smart Inventory Management solution.

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Leading Retailers by Kahn

BÜLENT DAL | CEO

The first of the last two major revolutions in the retail sector began with the creation of “ever day low price” slogan led by Aldi and Wal-Mart. In the mid-1990s, with this philosophy Wal-Mart led the  “Food Retail Revolution” to start in USA. After a while Amazon showed that providing customer friendly and support giving shopping experience was as effective as pricing on customer decision making process. The “Customer Experience Revolution” pioneered by Amazon has led many leading retailers including Wal-Mart to reshape their business models to facilitate a good customer experience.

The destructive transformation process that Amazon has pioneered continues uninterruptedly. Barbara E. Kahn, Marketing Professor  of the Wharton School of the University of Pennsylvania published on June 2018 her thoughts about how successful retailers win customers in an era of endless disruption in her “The Shopping Revolution” book. Professor Kahn explains in her book that the customers enter the gravitational field of different retailers depending upon their own needs. She lists two principles that influence a customer’s shopping decision.

  1. Customers want to buy something they value from someone they trust.
  2. They buy from retailers who provide superior value.

She starts with two basic principles. The first is the principle of customer value. In the retail world, it means that customers want to buy something they value from someone they trust. That forms the columns of Khan matrix — product experience and customer experience. The second principle is the principle of differential advantage. They want to buy from retailers who do it better than anybody else. They can either give more pleasure or take away pain. That provides the rows of the matrix.

Below in Kahn Matrix according to two principles there occurs four pole retailer clusters. Top left  “Product Brand” row lists the digital native vertical brands, really cool customer experience brands like Warby Parker, Saks Fifth Avenue and Nike. The product quadrant would be things like brand or luxury or design or technology or something that’s really super-cool about a product that you’re willing to pay a premium price or even a luxury price.

On the top row, which is benefits or pleasure, the product quadrant would be things like brand or luxury or design or technology or something that’s really super-cool about a product that you’re willing to pay a premium price or even a luxury price. It’s the importance of in-store touch and feel. That quadrant would be retailers like Sephora or Eataly, which provide incredible, state-of-the-art customer experiences in the store.

On the second row, Walmart is an example of take away pain and offer low price. Walmart, Costco, TJ Maxx would be in that quadrant. Take away the pain from the customer experience is what Amazon did really differently, and they made it convenient. In Amazon’s case, their differential advantage is collecting a lot of customer data so that they can constantly simplify and personalize and customize the experience to make it easier and easier for the customer. In the matrix, that’s how she can define things. But the strategic implications of the matrix are something else.

When we looked at the winning strategies, each one of the winning retailers were the best at something. But they leveraged that leadership advantage to be the best at something else, too. Khan calls that the two-quadrant strategy. You have to be the best at two things and good enough at everything else. Retail is very, very hyper-competitive now. If you can’t make it, you’re really going to go out of business.

Source: “The Shopping Revolution: How Successful Retailers Win Customers in an Era of Endless Disruption”, Barbara E. Kahn, June 2018.

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