Travel Industry Demand Management Competitiveness

Travel Industry Demand Management

Competitiveness in all industries is a direct reflection of their supply chain efficiency, transparency, performance, and ultimately demand management.

Each industry has varying degrees of transparency inherent in the formation and structure, operations, and transformation of its supply chains. The travel industry specifically has one of the most visible and easily evaluated supply chains and as a result, more accentuated and advanced approaches to demand management. What is one of the most challenging aspects of the travel industry supply chain is making it sustainable, reflecting the many demand management requirements on it. As all travel industry companies are based on a project-based service, the revenues that flow up and down a supply chain can at times be sporadic. Making supply chains permanent in the travel industry has many advantages; foremost among them is the ability to become a trusted advisor to global customers on behalf of their holidays and vacations, and long-term the development of sustainable demand management processes and frameworks. The intent of this paper is to apply the best practices of demand management as defined by the world leaders in supply chain management research, providing constructs and frameworks for evaluating and promoting through quantified results the benefits of bringing demand management and supply chain concepts into the travel industry, delivering sustainable travel industry as a first step.

The Many Benefits of integrating Demand Management and Supply Chain Concepts into Travel industry

The best practices as defined by Aberdeen Group, AMR Research, Gartner Group and several other research firms all point the need for service industries to focus first on creating strong, integrative reporting and information sharing relationships throughout their supply chains. Demand signals as a result can quickly be interpreted and acted upon.

The goal of having these many integrative relationships is to provide each member of the supply chain and the travel industry package provider with visibility of sources of supply to meet demand. AMR Research calls this collective integration of suppliers a Demand Driven Supply Network (DDSN) the goal of which is to give suppliers visibility into the specifics of each partner's current inventory positions, sharable pricing scenarios and levels, and sourcing strategies. DDSN is a concept that is useful to the travel industry in that it illustrates the relative level of integrative relationships between suppliers, which is critical for sustainable business models. DDSN can be further used from the context of creating a maturity model of the supply chain for travel industry in specific markets and globally.

Sustainable travel industry supply chains are demand-driven, synchronizing based on the unmet needs of travelers on the one hand, and the sustainable supply chain components of a travel industry business and strategies on the other. Clearly the role of e-procurement and strategic sourcing in the context of region- and country-wide travel industry services offerings and strategies. Automating procurement through the use of hosted or SaaS (Software as a Service) applications, looking to unify all suppliers by providing their pricing, availability and variation in services are called e-procurement in service-related industries including travel industry. The use of e-procurement for managing supplier relationships has become a stand-alone strategy in its own right, with many supply chain researchers calling this area Supplier Relationship Management (SRM).

SRM is often found in the most complex of travel industry programs and services offerings; as a result of the need for coordinating many different suppliers as part of a broader travel industry program is where SRM is most often used. At the intersection of the unmet needs of travel industry operators and the companies they create to support complex orchestrations of suppliers and the unmet needs of customers is the growing use of technologies including Web-based applications, collaboration tools, and the development and delivery of significant, quantifiable benefits to travel industry producers and operators including the following as a result of relying on SRM as a strategy for both ensuring a high level of supplier compliance and synchronization with broader objectives. Large-scale travel operators have been able to accomplish the following quantifiable gains using SRM:

Increased their total spending under contract management by 36%, thereby reducing the amount of Maverick, or unapproved spending by a significant amount.

Reduced their requisition-to-order cycles for major services by 75%

Reduced their requisition-to-order costs on average by 48% of a year with their most active suppliers

E-Procurement and SRM continues to deliver compelling results and to serve as a foundation for the automation of all legacy procurement processes within many travel operators. Yet, there is still tremendous opportunity for many procurement organizations of travel industry operators to improve their performance as a significant gap exists between the Best in Class companies and the rest of the field.

Best in Class enterprises understand that technology is a process-enabler, not a process in and of itself; successful organizations have efficient, proven processes in place before introducing a new technology. This translates into patience in first perfecting the processes surrounding e-procurement and supply chain management first, then selecting adding in SRM and supply chain information technologies products aimed specifically at automating the tasks overall.

Best in Class travel operators understand the large change management issues at play in an e-procurement and the development of an overall supply change strategy. The fact that 70% or more of a supply chain integration projects' cost is used for planning and managing the change at the individual contributor level and it is clear to see how important the process of managing change is in an e-procurement and supply chain strategies.

Best in Class travel industry operators who are generating the highest returns on their e-procurement and SRM also have an executive sponsor which actively seeks out internal support for initiatives and programs, often being the first to endorse an overall program and evangelize its value. This is a critical role in the overall development of a successful supply chain implementation for any travel industry operator and has often been seen as the critical link in making these strategies successful.

Best in Class travel industry operators also have a much different set of supply chain priorities as they relate to the development of supply chain initiatives. Figure 1 show these priorities as defined by Aberdeen Research in their extensive research of the adoption of technologies by travel industry operators to ensure the highest performance possible for e-procurement and supply chain strategies.

Figure 1: Best in Class Travel industry Operator's Information Technologies Priorities

Additional lessons learned from research completed of the highest-performing services operators by Aberdeen and others include the following: