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Enterprise Resource Planning: Air Transport

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Question:

Discuss about the Enterprise Resource Planning for Air Transport.

 

Answer:

Introduction

In the current business scenario, innovation is one of the key sources of gaining competitive advantages in the market. Thus, any entrepreneurial ventures should first identify the gap in the current marketing scenario, according to which they will offer their products or services in the market. Initiation of the innovative approach in the market will help the entrepreneurs in having positive organizational performance from the initial stage (Volberda, Van Den Bosch & Heij, 2013). Check tag is a new entrepreneurial venture started in Australia, which will provide security and tracking tags for the luggage of the air travelers. This is one of the most innovative and potential market to have for them due to the reason that, in the current scenario of air transport, millions of people are availing the service and with the increase in the air traffic, more instances of loss of luggage is originating (Sennou et al., 2013).

Thus, with the help of the safety and tracking tags, check tag will enable the airliners as well as the customers to track the movement of their luggage in real time. The instances of loss of luggage will also get reduced. Due to the fact that. This is a new concept in the market and thus check tags will have huge market potential for them.

This report will discuss about the potentiality of check tags in the market. Moreover, the idea of this concept along with various factors of having potential of this idea will also be discussed. Recommendations will also be discussed, which will further help them to enhance their effectiveness and performance in the market.

Current market scenario

With the increase in the air traffic and movement of air travelers around the world, issues such as mismanagement and loss of luggage is rapidly increasing. As of 2016, 5.76 cases of loss of baggage per 1000 travelers had been aroused (Ahmed, Pedersen & Lu, 2013). Moreover, it is being expected that with the increase in the air traffic in the coming years, these types of instances will increase further. Thus, there is an urgent need of initiating some sort of technological devices to overcome this issue (Alsyouf, Humaid & Al Kamali, 2014). This is due to the reason that, the loss of baggage involves not only the particular travelers but also the airliners. Airliners have to pay penalty and compensation to their customers in case of loss of baggage. This involves a good amount of money for them. On the other hand, customers also have to born the consequences when their baggage having important documents is getting lost. In addition, the rate of satisfaction level of the customers also gets reduced due to this issue (David, 2013).

Mishandled Bags

   

5,73 mishandled bags per 1000 in 2016

3,77  billion passagiers a  year

 

Luggage lost

0.0057

 

Passangers woldwide

3,770,000,000.00

 

Total mishandled bags

21,602,100.00

 

towards SITA 2016

10,200,000.00

 

Costs for Airlines

   

costs for mishandled bags 2016 (SITA)

2,100,000,000.00

US $

costs per passenger

0.56

US $

Table: 1 Cost involved in mishandling of the bags

Source: Author’s creation

From the above table, it is been seen that, a huge cost is being involved with the airliners in paying the compensations. However, in the recent past, no effective means of overcoming this issue is being found. This is due to the reason that, the management of baggage of the air travelers is quite complex and involves several process and methodologies (Nicolae et al., 2016). Airliners have to maintain all the luggage of their customers to be transported in various part of the world from different areas. Thus, the new concept should effective as well as efficient in order to provide holistic and full proof solution. In addition, the involved cost should also be considered in initiation of new concept.

 

Initiation of check tags

With the need in the market of a new sustainable and effective concept to overcome the above identified issue, check tags is being initiated. It will be a GPS enabled tag, which will be attached with the check in tag of the customer’s baggage (Collota, Pau & Tirroto, 2015). This tag will have multiple benefits for both the airliners and the customers. This tag enables the airliner to keep track of the movement of the baggage from the check in counter of the customer to the outbound facilities. They can also track he movement of the baggage in the arrival airport till the time it is being delivered to the customer (Mantin & Wang, 2012). Thus, it will help the airliner in keeping the track of the whole movement of the baggage along with identifying the area of loss in case of any loss of baggage. Security can also be enhanced with the involvement of the check tags. Any types of theft can be effectively identified and traced (Ahmed, Calders & Pedersen, 2015). On the other hand, customers will have the access of seeing the movement of their baggage from the departure airport to arrival airport in real time. Thus it will also empower the customers. If the customer will have the access to this, then they will be surer about the security of their baggage, which will in turn increase their satisfaction level.

Moreover, customers will be provided to dedicated apps in their mobile devices, where they will have the access of tracking and managing their baggage (Page, 2012). Push messages and notification will be sent to the customers after delivery of their baggage in every destination. This system will be similar to what is being followed in the delivery of the online products. Thus, customers will have the periodic update about the movement of their belongings. The ap will also feature alarm button for the customers, which they can use in case of any emergency. For instance, if customer thinks that their baggage is going the different way, then they can communicate with the airliner with the help of the alarm button.

Cost involved in the process

The concept being discussed above will only be successful if it can prove cost effective compared to the existing system of baggage handling. Thus, a complete chart of cost involved with this new concept compared to the existing one has been made.

 

Check tag cost (Including all) (US$)

Cost/ passenger (US$)

Mishandled bag cost (per passenger) (US$)

saving (Per passenger) (US$)

Sum per year (US$)

Airport > 25 m passengers

2,360,000

0.0944

0.56

0.4656

11,640,000

Airport > 10 m passengers

952,000

0.0952

0.56

0.4648

4,648,000

Airport > 5 m passengers

448,000

0.0896

0.56

0.4704

2,352,000

Airport > 1 m passengers

80,000

0.0992

0.56

0.4608

460,800

Table: 2 Calculation of cost involved

Source: Author’s creation

From the above table, it is been seen that, the cost involved in mishandling of baggage per passenger is 0.56 US$. However, on the other hand, cost involved including all the elements of check tags per passenger is 0.0944 US$ for the airports having more than 25 million of passengers annually (Le et al., 2012). Thus, there is a savings of 0.4656 US$ per passenger, which can summed up to US$ 11,640,000 per year with help of check tags. Thus, all the stakeholders related to the management of baggage of the travelers will be benefited from incurring low cost. Thus, it is proved that initiation of check tags will be more cost effective compared to the existing systems.

Challenges

  • Though initiation of the check tags will change the existing scenario in the airports, but there are still some challenges that may pose threats to its utility. This includes tag having different built material and color in different regions. For instance, European standard tag should have to be black and white with green strips. Thus, it will be difficult for the airliners to change the tag in between the journey in case of travelling from one region to another. Another challenge is built material.
  • If the tags are being built with hard material then the cost will get increased and on the other hand, if it is being built with soft paper material, then chance of worn out of the GDP label is high (Caceres & Friday, 2012). Thus, it will also pose challenge.
  • To have the optimal utility of the tags, tracking systems should have to install in every airports around the world. Thus, this will involve a good cost and will require permission of the respective authorities.

Recommendations

  • Privacy of the customers should be maintained effectively. This is due to the reason that, customer information will be stored with the tag. Thus, breach of privacy can happen and should be prevented effectively.
  • Check tags should start as the pilot project in the domestic aviation of Australia. If it can get success, then it will be easy for them to convince the governments in other countries for installation.
  • Technical part should be considered effectively due to the reason that the tracking the luggage with the help of the tag in the mobile of the customers will be based on pure technical expertise. Thus, it should be ensured by them that, any type of technical snag will not happen. Otherwise, it will affect the impression and service quality to the customers.

Conclusion

Thus, it can be concluded that, check tags have huge potential in the market due to being an innovative concept. It is been discussed in this report that, Check tags will provide accuracy as well as cost effectiveness to the users along with reduction in the probability in the chance of any theft and security concerns. Satisfaction level of the customers will also get increased due to this. However, there are some challenges also being identified in this report. Accordingly, recommendations are being provided to overcome these challenges and have effective and holistic implementation of this concept.

 

Reference

Ahmed, T., Calders, T., & Pedersen, T. B. (2015, June). Mining risk factors in RFID baggage tracking data. In Mobile Data Management (MDM), 2015 16th IEEE International Conference on (Vol. 1, pp. 235-242). IEEE.

Ahmed, T., Pedersen, T. B., & Lu, H. (2013, June). A data warehouse solution for analyzing rfid-based baggage tracking data. In Mobile Data Management (MDM), 2013 IEEE 14th International Conference on (Vol. 1, pp. 283-292). IEEE.

Alsyouf, I., Humaid, F., & Al Kamali, S. (2014, December). Mishandled baggage problem: Causes and improvement suggestions. In Industrial Engineering and Engineering Management (IEEM), 2014 IEEE International Conference on (pp. 154-158). IEEE.

Caceres, R., & Friday, A. (2012). Ubicomp systems at 20: Progress, opportunities, and challenges. IEEE Pervasive Computing, 11(1), 14-21.

Collotta, M., Pau, G., & Tirrito, S. (2015, March). A preliminary study to increase baggage tracking by using a RFID solution. In AIP Conference Proceedings (Vol. 1648, No. 1, p. 780005). AIP Publishing.

David Mc A, B. (2013). Service quality and customer satisfaction in the airline industry: A comparison between legacy airlines and low-cost airlines. American Journal of Tourism Research, 2(1), 67-77.

Le, V. T., Zhang, J., Johnstone, M., Nahavandi, S., & Creighton, D. (2012, October). A generalised data analysis approach for baggage handling systems simulation. In Systems, Man, and Cybernetics (SMC), 2012 IEEE International Conference on (pp. 1681-1687). IEEE.

Mantin, B., & Wang, J. H. (2012). Determinants of profitability and recovery from system-wide shocks: The case of the airline industry. Journal of Airline and Airport Management, 2(1), 1-33.

Nicolae, M., Ar?kan, M., Deshpande, V., & Ferguson, M. (2016). Do bags fly free? An empirical analysis of the operational implications of airline baggage fees. Management Science.

Page, T. (2012). The Influence of Mobile Devices and Apps on Product Design: Design Tools on the Move. LAP Lambert Academic Publishing.

Sennou, A. S., Berrada, A., Salih-Alj, Y., & Assem, N. (2013, January). An interactive RFID-based bracelet for airport luggage tracking system. In Intelligent Systems Modelling & Simulation (ISMS), 2013 4th International Conference on (pp. 40-44). IEEE.

Volberda, H. W., Van Den Bosch, F. A., & Heij, C. V. (2013). Management innovation: Management as fertile ground for innovation. European Management Review, 10(1), 1-15.

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