Supply Chain Management in Travel Trade Industry - Research Paper Example

Supply Chain Management in Travel Trade Industry: Introduction Travel industry was historically associated with lower pay scale and the working hours were unsociable. However new trends are on the rise as this industry is considered as one of the mammoth service providing industry. Timings of this kind of industry are now becoming very sociable and benefits are now being provided to the staffs. Travel sector requires people with skills in the fields of general sales and customer service skills. Travel industry can be defined in the way it functions. Some of its characteristics are ‘intangibility’, ‘heterogeneity’, ‘perish ability’, ‘inseparability’, and ‘lack of ownership’. (Robinson, 4) In a logistics industry processing of the information is a very key component. The reason is it links all other components of the same system. This helps to achieve the success in the overall supply chain management. Supply chain can be defined as the complete set of suppliers of goods and services required for a company to operate its business. Travel businesses have always heavily relied on its intermediaries to help in the distribution of products, and maintain relationship with the travelers. In the recent past the growth of internet has benefitted the logistics industry as organizations have been able to reduce distribution costs and have gained access to and increased control over their actual and potential customers. A major benefit has been provided to the travel industry as time frame has been shortened in terms of supplying the products to its end users directly and quickly. However it has to be remmebered that although information processing industry is emphasized in logistic industry its over dependence can prove to be fatal for the overall organization as travel organization are to deliver total tourist experience and these data are often shared over a global distribution network. Travel industry are able to generate accumulate and process vast amounts of information concerning their suppliers and consumers. (Robinson, 105) In the recent past the supply chain are facing with broader and deeper challenges. Traditional supply chain business models have given way to the emergence of new horizontally integrated high performance on demand value chain networks. These new supply chain strategies have opened up competitive advantage opportunities for the logistics industry. Supply chains have increasingly moved towards outsourcing and partnerships which have increased the challenges in meeting demand and supply of the overall logistics industry. (“Energize your supply chain network: New competitive advantage from existing investments”.). Problem statement In times of recession the supply chain management in Travel industry has been able to take the advantage of technology through the medium of e-commerce. Challenges faced by the travel industry: In the current scenario travel industry faces very tough and challenging times. Consumers budget have been curtailed and people are cutting down their unnecessary expenses. The travel industry also faces downturn in case of middle class families as they are taking vacation on a reduced budget. Things are also becoming gloomy in case of the corporate classes too as they have also tightened their budget. Increase in the fuel costs and in the overall inflation rate has brought in more challenges for the travel industry. A table is provided to show the decline in the overall expenditure in the travel industry. (Plunket, 7-8) Year Expenditures(billion $) Growth (%) 2006 699.8 - 2007 739.4 5.65876 2008 775.9 4.936435 Whenever we speak about supply chain it has to be kept in mind that if the travel industry is badly hurt then all the links that are attached with it will also feel the pinch. An illustration needs to be attached with it where a holiday trip is planned up by a family. Now this will include booking of flights and it will include booking of hotels. If by chance the trip is cancelled then the overall supply chain will take a battering as people who booked the flights tickets and the hotel rooms are not coming and also other passengers cannot make further bookings until and unless the original bookings are cancelled. This sometimes causes the loss of customers as people tend to move to other hotels due to the lack of rooms when actually the scenario is not exactly the same. To tackle this issue of supply chain management both the travel agencies and the hotel owners should try to get advance money from the people who are booking it and in case of cancellation they must provide guidelines for customers where a prior intimation is given at least a week back. Opportunities looked upon by the travel industry: In this times of recession where the expenditures of general public have taken a toll the travel industry are looking after the new avenues to improve their overall profitability. It is seen that many leading airlines have cut routes and reduced the total number of seats available. They have also come up with ideas to remove fuel guzzling aircraft from service as it helps in consuming less fuel. The World Travel & Tourism Council (WTTC) has made an estimation on the overall expenses on the travel and tourism and has found that both direct and indirect spending are expected to grow at around 1.40% per year over the next 10 years. A table is provided to access the scenario. (Plunket, 8) (Plunket, 8) The opportunities that supply chain will have are that in the near future the bookings will directly be made with the local suppliers. This will be done as technology has provided them with such opportunity. Introduction of e-commerce facilities will be improving the convenience of the booking. Hence booking flights and hotels for the purpose of traveling will not be an issue in the near future. This is also very cost effective for the travel providers. Tour operators, hotel owners and travel agents will take on this opportunity to demonstrate their specialist knowledge in case of a particular market or a product. It is known fact that today’s kids and teenagers are not going to decline any packages unlike the olden days. More so because the usage of technology tempts them to book tickets and rooms without thinking too much. Here lies the big opportunity of supply chain managers who can sell of their goods without making them realize what exactly they have sold. The supply chain managers can also focus on the ecotourism and adventure tourism which are on the upswing. Although the overall business of the travel industry is suffering from the slowdown of the global economy still it continues to be very attractive as corporate decision makers have come up to the conclusion regarding the rest and relaxation provided to the customers when they are traveling in the business class cabins in the aircraft. This will only strengthen the overall facilities as well as the supply chain. (Plunket, 8, 12; Jarosz) Management Solution: In modern time the travel management companies need every advantage to compete with pressure from mega agencies online travel companies and regional players. In a fast changing world and a demanding service sector like this one technology has to be updated so that the processing can be done efficiently. Failing to do this only will bring more challenges for the travel companies and the industry as a whole. GDS have created traditional back office systems which help in the automation of designing tickets. Certain problems that are associated with this kind of disconnected systems are that they fail to provide more sophisticated business information and analysis. The problem that management need to quickly address are, information generally remains scattered across spreadsheets, report generation is cumbersome and systems are brittle and lack adaptability. Management also needs to focus on a couple of more things such as the wastage of time on error correction and manual tasks, and waste of money on unrecognized vendor commissions. To avoid such kind of scenarios, management needs to look at the ERP (Enterprise Resource Planning). The reason is it helps to control the overall financial back office operations. Management can also look forward to Central Command services which help in providing the detailed level of reporting with complex statements. This will also help in optimizing the business processes. By applying one of the above tools {Central Command} the management can increase the revenue and reduce the overall cost of the organization. Customer satisfaction can also be improved as consumers will be able to get a detailed and accurate reporting which meets the specific needs. Overall staffing and overhead costs can also be reduced by the application of such services. (Agresso Travel Industry Solutions). Managers will also have to look at the various other issues such as delays in flights cancellation of flights and inefficient security checks as it causes irritations among travelers especially in case of ‘air travel’. Valuing the customers time is of the very urgent needs as far as the travel industry is concerned but in a report of 2008 it was found in case of aviation industry that 40% of the population felt that their time was not respected. This has forced many of the passengers to abort many significant trips. (‘Business travel falling out of favor’). It is the duty of the management system of the travel companies to help the visitors shed their frightening attitude from visiting any particular nation. We would like to mention the traumatic attack that took place in US during the year 2001. People since then have been very fearful to travel to US as the image of the nation has been badly tarnished. Also in addition to this people who travel has to wait for hours in queue during the checking procedure and also people has to go through the bureaucratic visa policies. This problems needs to be accessed by the managers of the travel industry and sooner than later they will have to find a way so that people do inhibit their fears and travel to countries which has already faced the brunt of terrorist attacks. The above problems can be mitigated if photos and fingerprints can be taken of the visitors when they are placed at the land borders or at the ports of entry. (Yee) Lesson Learned: Travel industry did have a very humble beginning but over the years it has been touted as the biggest service providing industry in the world. In this industry information processing is a key component. Staffs and employees who work in this particular kind of an industry have a hectic schedule as they have to work carefully. In this form of industry the main focus is always on the intermediaries as they help in distributing the products as well as they help in building up the relationship with the customers. One major benefit that has been derived from it is that travel industry has been able to shorten the time frame in terms of supplying the products from one part to the other. (Robinson, 4, 105) In these times of recession the travel industry has been able to undergo certain changes that are made by compulsion and not by choice. People have stopped visiting places and have focused more on saving their money. This has also forced the travel industry especially the airlines sector to curtail the number of seats and occupancy so that the overall profitability margin can be met. In addition to this job cuts and pressure on employees to meet the target is another issue which the travel industry has gone through hugely. (Plunket 7, 8,12). Companies have also started using the technology in a better way so that in this times of recession also they can get some benefit by providing ‘combo’ packs after the tie ups happening between the airlines industry and the hotel industry. New systems have also been organized which has helped the overall business of the travel industry to grow in a big and better way. Applications of central command services and ERP are some of the tools which the traveling industry has implanted to get the best result for them as well as for the consumer. (Yee) Why I care? I care because travel industry is the main source of income for many nations and it is the industry which has integrated different cultures, information and opportunities across the world. Information technology can be utilized in the optimal manner to avail the facilities of this industry and my idea here is to understand and analyze how the supply chain can reap the benefits of this technological upgradation and survive in times of economic downturn. This is mainly because I believe travel which is a crucial part of culture and socialization should not be hindered too much by the economic issues. Business to Business interactions in Travel Industry: Internet has persisted to give adequate reasons and motivation to the software and web developers who work to make the lives of business professionals smooth and has helped in ensuring more productivity. In travel industry when people go for holidays or for that matter going in for business meetings proper bookings must be made. Hotels and flights are the prime concern for any consumer who wants to have a trip. Also in addition to this receiving of the information for the destination and knowing more about the locality is very necessary. However it consumes time and patience for the customers hence they opt for business travel booking. In this planning is easily done as it is an online market place which provides the information about the destination. More importantly it also gives options and alternatives about other places too. A relatively new web service has been recently launched and it has served the purpose of business in a big way. The sites name is tripsync.com. The basic feature of this website is it is a travel planning tool which works with an outlook calendar. This tool is very helpful as it makes it possible to book air flights, hotels, and find the destinations with the help of a map. It also has a direct connectivity with the global distribution system and also posses with a mobile phone booking feature. (Business Travel Planning made easy). Below is the graph showing B2B model. Source: CC Avenue. Business to Client interaction in Travel Industry: The interface between the client and the businesses in the travel industry has been made easier through the internet sites. Rather than physically approaching a travel agency or carry out the individual activities of a tour package (buying tickets, booking hotels, food arrangement) customers balance their time schedule with the help of easy access of these services over the internet. The functionality of the web services have stressed so heavily while discussing the B2C model in travel industry because web services ranges from a complex mode to a simple mode in maintaining the information starting from the departure of flights to the arrival of flights. Web services can easily fit into the large scale enterprise application integration efforts. An example can be related to this where web services help to bring together many various systems of the fragmented rail industry to render the unified projection of reservation schedules and ticketing. The concept of B2C was exploded in the early 1990’s and the concept of web services has helped in creating more evolution for its next generation. The best facet of Web services in case of B2C is that they are targeted at Systems integration and machine-to-machine communications, rather than focused directly at people as end-users. (Power, 2) A diagram can be provided to show the B2C model. Source: web services architecture usage scenarios. Works Cited 1. “Agresso Travel Industry Solutions”. Travel Solutions. Available at: http://www.agressona.com/solutions/travel (Accessed on Nov, 9, 2009). 2. Avenues Corporate Profile. CCAvenue. 2009. Available at: http://www.ccavenue.com/content/company_profiles.jsp (Accessed on Nov, 9, 2009). 3. “Business Travel planning made easy”. B2BToday.com. 2008. Available at: http://www.b2btoday.com/bb/B2B_Travel/Article_67228.html (Accessed on, Nov, 9, 2009). 4. “Business travel falling out of favor”. Management Issues. Available at: http://www.management-issues.com/2008/6/18/research/business-travel-falling-out-of-favor.asp (Accessed on, Nov, 9, 2009). 5. “Energize your supply chain network: New competitive advantage from existing investments”. IBM. 2005. Available at: http://www-935.ibm.com/services/us/index.wss/ibvstudy/imc/a1001625?cntxt=a1000068 (Accessed on, Nov, 9, 2009). 6. Jarosz. Andy. “The Travel Industry Supply Chain - Fat, Doomed, Or Full of Opportunity?” Ezine articles. Available at: http://ezinearticles.com/?The-Travel-Industry-Supply-Chain---Fat,-Doomed,-Or-Full-of-Opportunity?&id=3067106 (Accessed on Nov, 9, 2009). 7. Plunket, J.W. Plunketts biotech & genetics industry almanac 2006. Houston: Plunkett Research, Ltd. 2005. 8. Power. Ken. “The application of emerging technologies in the travel industry”. Available at: http://www.collecter.org/archives/2003_June/01.pdf (Accessed on, Nov, 9, 2009). 9. Robinson, Peter. Operations Management in the Travel Industry. Oxford: CABI. 2009. 10. United Nations Environment Programme. Division of Technology, Industry and Economics. Class of 2006: industry report cards on environment and social responsibility. Hertfordshire: UNEP/Earthprint. 2006. 11. Yee, Amy. “US Tourism ‘Losing Billions Because of Image”. Common Dreams.org. Available at: http://www.commondreams.org/headlines05/0509-06.htm (Accessed on, Nov, 9, 2009). 12. “Web services architecture usage scenarios”. W3C. 2004. Available at: http://www.w3.org/TR/ws-arch-scenarios/ta.png (Accessed on, Nov, 9, 2009). Read More