Aircargo PDF

Seminar: Air Cargo Supply Chain
Management and Challenges

Raja Kasilingam
Vice President
Air Cargo Solutions
Sabre Inc.
transporting
Center for Intelligent Supply Networks (C4ISN)
2003 UTD
air cargo
into the future
Agenda
C4ISN
Sabre, Inc. Overview

Air Cargo Industry
Air Cargo Landscape
Cargo Revenue Management Concepts
Cargo Revenue Management Solution
2003 UTD
Slide 2
Center for Intelligent Supply Networks
Sabre at a Glance
Revenues of about $2 Billion
A S&P 500 company

NYSE symbol: TSG
Headquarters in Dallas/Fort Worth,
Texas
Approximately 6,000 employees in
45 countries worldwide
C4ISN
2003 UTD
Slide 3
Sabre Businesses
Travel
Marketing and
Distribution
Airline
Solutions
C4ISN
2003 UTD
Slide 4
Airline Solutions
70 software products
160 products & services clients
70 reservations clients
42 consulting clients
Diversified client list
C4ISN
2003 UTD
Slide 5
The World of Sabre

Europe
4SK 4SU
4AZ 4YW
4IB 4TP
4AF 4OS
4SR 4IW
4SN 4LH
4MK 4SO
4DI 4AY
4OA 47U
4TK 4TU
North America
4US 4AC 4YV4ZV 4QK
4CO 4FL 4F9 4EV 4FH
4HP 4DH 4YX4ED 47F
4NW 4OH 4PA4ZK 4LI
4UA 4QX 4Q24AE 4ED
4AA 4AS 45J 4BW 4QK
4DL 4HA 4XY47G 42K
4NJ 4SY 4OO4XJ 4YX
4UP 4TZ 4JZ 4NJ 49X
4ZX 4JI 4NK4WO 42Y
4DA 4ZW 49N 4EO 4JB
4WN 4ED 49X 4VX 4YJ
Central America
4HQ 4AW 42S
4AM
South America
4MX
4AV
4CM
4AR
4LR
4KK
4TA
4LB
4VH
4LV
4JR
4PL
4RG
4RG
4TR
C4ISN
2003 UTD
Africa
4SA
4AT
4ET
4UY
Slide 6
Middle
East
4KU
4PK
4TK
49W
4AI
4MS
4BY
4BA
4EW
4LO
4BD
4KL
4CY
4LT
4K8
Asia / Pacific
4CZ
4GF
4EK
4CX
4MH
4NZ
4PR
4CA
4TG
4MU
4NH
4TC
4KE
4SQ
4QF
4VT
4OZ
4CI
4BR
4KA
4JL
Airline Products and Services

Pricing /
Yield Management
AirMax
AirPrice
AirPrice Contract
Composer
Availability Processor
Group Management
System
Cargo
CargoMax
CargoRev
Cargo Claims
CargoNet
SabreCargo
CargoPlan
Airport
Finance Systems
Quasar
TravelCard Pro
C4ISN
2003 UTD
FliteSource
Gate Plan
GSE Plan
StaffAdmin
StaffManager
StaffPlan
GateManager
Crew
Management
AirCrews
BLGO
CPOS
CrewPlan
CrewQual
CrewTrac
Planning /
Scheduling
AirFlite
Oasis
ARM
FAM
TAM
CRSSim
DPM
APM
Slot Manager
PC AirFlite
Slide 7
Sales &
Marketing
Traverse
CRSView
ProVision
LiteVision
WiseVision
Flight Operations
FOS
AirOps
AirPath
SteadyState M & E
Maxi-Merlin
FliteTrac
RAPS
Eagle
Dining & Cabin

Services
Customer Service
Qik-Access
AirServ
Air Cargo Industry
transporting
air cargo
into the future
2003 UTD
Air Cargo Industry
C4ISN
The international air cargo market is $40 billion a year

and it is still the combination carriers that dominate.
Growth in air cargo anticipated to exceed passenger
traffic growth in every major regional market
Forecasts anticipate the addition of more than 2,600
freighter airplanes by 2019, as nearly 1,100 current
freighters retire
Customers around the globe are demanding better and
faster products
The air cargo industry has realized that information
technology is key to meet their challenges
2003 UTD
Slide 9
Growth is projected at 6.4%
C4ISN
World airborne cargo will grow at 6.4% per year during the next 20
years.
2003 UTD
Slide 10
Asian cargo markets lead
C4ISN
2003 UTD
Slide 11
Major Traffic Flows
C4ISN
A snap shot of international freight flows as a

percentage of IATA international scheduled freight
2003 UTD
Slide 12
Top 25 Freight Airlines
C4ISN
2003 UTD
Slide 13
Air Cargo Landscape
transporting
air cargo
into the future
2003 UTD
At a very high level
Shipper/Forwarder
Airport/Airline Operations
Consignee
Shipper
Aircraft
Customers
Customers
Forwarder
Terminal
Terminal
Customers
Interline
Interline
C4ISN
2003 UTD
Slide 15
A bit more detailed
Shipper
Integrators
Forwarder
Regional
Hub
Packaging
Own
Termnial
Operations
Airline Trucking/
Off-Airport Trucking
Terminal Operations
Warehousin
g
Own
Ground
Handling
Own Aircraft
E
Customs
Ground Handling
Distribution
Inventory
Airlines
Receiving
S
Airport
C4ISN
2003 UTD
Slide 16
The key players are...
C4ISN
Shipper
Need a commodity sent anywhere in

the world for the lowest cost and meet
the required service level
Forwarder
Act as the middle man between the

shipper and the airline.
Integrator
Operate in business-to-business
markets and specialize in door-todoor transport solutions
Airline Operations
Receive, store, transfer, track, load

and unload cargo; assign and manage
capacity; bill customers.
Consignee
Recipient of the shipment.
2003 UTD
Slide 17
Business challenges
Forwarder
Shipper
C4ISN
Make bookings
Make bookings
Booking acceptance
Negotiate best rates
Negotiate best rates
Bid for space allotments
Preparation of
Documents - Customs,
Insurance
Preparation of
Documents - Customs,
Insurance
Distribution
Track shipments
Track shipments
Invoice shipper
Accept billings and make

payments
Accept billings and

make payments
Interact with multimodal carriers
Place claims and repair

charges
Place claims and repair

charges
Messaging and
Transaction Ability
Speed (time sensitive)
Speed (time sensitive)
Reliability
Reliability
Consolidation of
Shipments
2003 UTD
Slide 18
Warehousing
Business challenges
Airlines / Operations
Schedule cargo flights
Accept /Reject shipments
Shipment prioritization
Plan cargo routes
Maximize Revenue
Shipment re-accommodation
Initialize and open

flights for booking
Improve load factors
Plan Loading of cargo - build,

containerize etc.
Negotiate rates
Publish prices/rates
Accept Bids from

customers
Provide distribution
channels
Allocate Block Space Allotments
Forecast cargo capacity
Resource Management
of Terminal Staff
Segment and forecast

cargo demand
Plan for no-shows,
cancellations and
Overbook
Set-up Bid Prices
C4ISN
Track shipments
2003 UTD
Accept Shipments
Tendered
Dangerous Goods
Control
Unload Cargo
Load balancing
Warehousing
Obtain/Send Flight Manifest
ULD Management - Track,
Inventory, Repairs etc.
Service Reliability
Plan for CAD
Track and re-route Refusals
Package Validation
Slide 19
Business challenges
Airlines / Operations
Airports / Operations
Offer Product Services

- Express, Next Day
Warehousing Storage
Track shipments,
containers
Customs
Invoicing/Billing
Security Clearance
Prorating
Dangerous Goods
Control
Interline billing
Package Validation
Revenue Accounting
Notify Captain
Sales Accounting
Facilitate smooth
cargo operations
Claims Management
Consignee
Track shipments
Accept billings and
make payments
Place claims and
repair charges
Receive/Send updates
on arrival
Receive/Send updates
on delivery
Message Interactions
C4ISN
2003 UTD
Slide 20
Mapping of Business Challenges

Reliability
Maximize Revenue
Negotiate Best Rates
Improve load factors
Bid for Space Allotments
Accept Bids from customers
Schedule cargo flights
Allocate Block Space Allotments
Plan cargo routes

Initialize and open flights for
booking
Negotiate rates
Publish prices/rates
Forecast cargo capacity
Revenue Management
Segment and forecast cargo

demand
Plan for no-shows,
cancellations and Overbook
Set-up Bid Prices
Accept /Reject shipments
C4ISN
2003 UTD
Slide 21

Invoicing/Billing
Prorating
Revenue Accounting
Interline billing
Revenue Accounting
Sales Accounting
Accept billings and make
payments
Make bookings
Message Interactions
Reservations and inventory control
Shipment Tracking
Warehousing
ULD Management - Track,
Inventory, Repairs etc.
C4ISN
2003 UTD
Slide 22

Resource Management of
Terminal Staff
Load / Unload Cargo
Terminal Operations
Staff Schedules
Union Contracts
Shipment Prioritization
Receive Shipments
ULD Tracking
Container Management
ULD Control
Distribution & Warehousing
C4ISN
2003 UTD
Slide 23
Filing claims and repair

charges
Claims Management
Claims processing
Claims tracking
Security Clearance
Embargo / Quarantine
Customs
Dangerous Goods control

Paperwork
C4ISN
2003 UTD
Slide 24
Sabre Cargo Portfolio
Airline Business Area

Revenue Management
Revenue Accounting
Reservations & Inventory Control
Claims Management
Terminal Operations
Customs
Container Management
Warehousing
Other Potential Business Areas
Solutions for Forwarders
Solutions for multi-modal carriers
Auctions
Solutions for Airline alliances (like WOW)
Solutions for Airline Forwarder alliances
Solutions for Integrators
C4ISN
2003 UTD
Slide 25
Sabre
Y
Y
Y
Y
Y
Product
CargoMax
CargoRev
Sabre Cargo, QIK Cargo
Claims Management
CargoPlan, CargoNet
X
X
X
X
X
X
X
X
X
Cargo Revenue Management Concepts
transporting
air cargo
into the future
2003 UTD
Revenue management is ..
Integrated management of pricing and inventory
To maximize total revenue
Key components are
Reduction of spoilage by selling more than available capacity

Match demand and supply (capacity) at network level
Considers routing possibilities
Long-haul displacing short-haul
Key Requirements
C4ISN
By selling the right product (right price) to the right customer at the
right time
2003 UTD
Product/price differentiation exists

Demand exceeds supply
Slide 27
Revenue without and with price differentiation

2.00
Price-Demand Function
1.80
1.60
Rate ($/kg)
Revenue - $96,000
1.40
1.20
80 tons @ $1.20
1.00
0.80
0.60
0.40
0.20
0.00
0
25
50
75
100
125
150
175
200
Demand (tons)
2.00
Price-Demand Function
1.80
1.60
35 tons @ $1.65
Rate ($/kg)
1.40
1.20
45 tons @ $1.20
1.00
0.80
0.60
Revenue - $141,750
0.40
75 tons @ $0.40
0.20
0.00
0
25
50
75
100
125
150
Demand (tons)
C4ISN
2003 UTD
Slide 28
175
200
Passenger vs. Cargo Revenue Management
C4ISN
Capacity is not known and not fixed

Capacity is 2-dimensional
Cargo can be over or under-tendered
Limited number of customers
Relationship based business
Routing in most cases is flexible
Demand is lumpy
Sparse data and poor quality of data
Less sophisticated users
Reluctance to new methods
2003 UTD
Slide 29
Revenue Management Value proposition
Improves revenue and profits (generally 2 to 7%)
Reduces offloads and service failures
C4ISN
Accuracy in capacity forecasts (consistent under forecasting) translates to more space to carry cargo
Better overbooking decisions - more cargo booked to offset noshows and cancellations
Optimal station/customer allotments - low value customers do
not block valuable space
Better rate and density mix - maximize the use of all dimensions
of capacity and protect space for high value cargo
Accuracy in capacity forecasts (consistent over forecasting) translates to less refusals
Better overbooking decisions - improved service reliability when
showup is high
Ensuring operational feasibility through router module
2003 UTD
Slide 30
Critical success factors
C4ISN
Process fit - current processes and process

gaps
Organizational alignment departments aligned
to processes
Technology fit - integrating revenue
management system with existing systems
Data availability - the major data requirements
include post departure data, air waybill data,
passenger bookings, and flight schedule
User acceptance - acceptance and willingness
from the user community
2003 UTD
Slide 31
Cargo Revenue Management Solution
transporting
air cargo
into the future
2003 UTD
Cargo revenue management - Functional

Overview
Medium to long-term allotment management
Short-term capacity and demand management
Capacity forecasting
Showup rate forecasting
Overbooking
Demand forecasting
Route generator
Bid pricing
Reporting and proactive flight management tools
C4ISN
Optimal assignment of space to station/customers
Management reports
Flight workbench (critical flights analyzer)
Performance monitoring
Customer valuation
2003 UTD
Slide 33
Interaction among revenue management

components
Performance
Monitoring
Flight
Manager
Common Functionality
Overbooking
Show-up
Rate
Forecasting
Capacity
Forecasting
Allotment
Management
Bid Pricing
Demand
Forecasting
Value
Determination
Route
Generator
Cargo Capacities
Bid Prices
Space Allocations
Values
Management Reports
C4ISN
2003 UTD
Slide 34
Modeling and Functionality
C4ISN
Focuses on profitability as opposed to load factor

Manages network capacity instead of leg capacity
Focuses on freight mix based on density and revenue
Controls are based on commercial feasibility and
operational feasibility
Capacity segmentation is in terms of time horizon and
products
Allows the capability use bonus or value based on
O&D and customer.
2003 UTD
Slide 35
System Setup
C4ISN
Control values are set several days before

departure and then updated nightly until
departure
Control values are in terms of weight, volume,
and positions
Users have the ability to set default values and
overrides
Monitors performance of forecasts and user
overrides
2003 UTD
Slide 36
Approach to Forecasting
transporting
air cargo
into the future
2003 UTD
Approach to Forecasting
C4ISN
Capacity, showup rate, and demand forecasts

are key inputs
Forecasting is based on historical and current
data
Forecasts are monitored on a regular basis
2003 UTD
Slide 38
Cargo Capacity
Psgr Weight
PAX Weight
PAX Bag Weight
Mail Weight
Other Weight
Extra Fuel Weight
Payload
PAX Bag Volume

Mail Volume
Allotments
Other Volume
Total Cargo
Capacity
Freesale
C4ISN
2003 UTD
Allotments
Freesale
Slide 39
Belly Volume
Total Cargo
Capacity
Capacity Forecasting
C4ISN
A tool for forecasting the capacity available for

cargo by flight leg and departure date
Forecasts flight capacities in terms of weight,
volume, and positions
Interfaces with Passenger Revenue
Management system to obtain expected
passengers on board
2003 UTD
Slide 40
Capacity Forecasting
Bag
Standards
Positions
Stacking
Loss
Payload
Forecast
Capacity
Forecasting
Model
Mail
Forecast
Passenger
Forecast
Capacity
forecasts
by flight leg
and
departure date
Belly
Volume
Fuel
Weight
C4ISN
2003 UTD
Slide 41
Showup Rate Forecasting
C4ISN
A tool for forecasting the booking behavior of

flights by flight leg and departure date
Considers no-shows, cancellations, and
over/under tendering.
Forecasts showup rates in terms of weight,
volume, and positions
2003 UTD
Slide 42
Showup Rate Forecasting
Historical
Tender
Showup
Forecasting
Model
Historical
Booking
C4ISN
2003 UTD
Slide 43
Showup
forecasts
by flight leg
and
departure date
Demand Forecasting
C4ISN
To properly manage cargo profitability,

forecasting needs to be done by demand groups
or rate classes
A rate class should have shipments that are
very similar in density and revenue - to address
density mix and rate mix
Key data requirements include historical
bookings and current bookings
2003 UTD
Slide 44
Rate/Density Clustering (Rate Class)
2.5
Revenue
1.5
0.5
Revenue Class
0
0
10
12
14
16
18
20
Density
C4ISN
2003 UTD
Slide 45
Rate/Density Clustering (Rate Class)

Remaining demand by Rate-Density class
2.00
10
11
5 tons
1.50
5 tons
Rate($/Kg)
9
10 tons
4 tons
6
15 tons
10 tons
0.50
0 tons
8
10 tons
1.00
12
3 tons
2
5 tons
3
4 tons
2 tons
0.00
0
20
40
60
80
100
120
140
160
180
200
220
240
Density (kg/Cu.M)
C4ISN
2003 UTD
Slide 46
Demand Forecasting
Demand
Group
Definition
Forecasting
Model
Parameters
Demand
Grouping
Demand
Forecasting
Historical
Booking
Current
Booking
Demand Forecasts
C4ISN
2003 UTD
Slide 47
Methodology for Optimization
transporting
air cargo
into the future
2003 UTD
Methodology for Optimization
Capacity segmentation by time - allotment

optimization for medium term customer/station
allotments
Overbooking of remaining space to account for
booking behavior
Generate routing options to carry cargo
Match O&D demand to leg capacities
considering routing options and rate/density
classes
C4ISN
Compute bid prices

Determine capacity allocations
2003 UTD
Slide 49
Allotment Management
A tool for managing medium term station or customer

agreements
Contains a network based optimization model that
evaluates competing requests based on:
C4ISN
Promised revenue
Historical utilization
Flight schedule
Available capacity for allotments
A pre-defined set of business rules
The model generates a business-practical solution that

maximizes the revenue for the airline
2003 UTD
Slide 50
Allotment Management
Allotment
Requests
Schedule
Available
Capacity
Container
Data
Allocation
Rules
C4ISN
2003 UTD
Allotment
Management
Model
Allotment
Usage
Model
Recommended
Allotments
Slide 51
Overbooking
C4ISN
Overbooking offsets the effect of cancellations,

no-shows, and over/under-tendering
Based on booking behavior, economic aspects
(maximize net revenue or minimize sum of
offload and spoilage costs), and acceptable
level of service failure
Users can set the maximum acceptable service
failures at flight, entity, or system level
Users have the ability to override the authorized
capacities for specific flight departures
2003 UTD
Slide 52
Spoilage and Offload Costs
Spoilage Costs
Cost
Overbooking Level
Total Cost
Offload Costs
0
20
40
60
80
100
120
140
160
Overbooking Level
C4ISN
2003 UTD
Slide 53
Overbooking
Flown
Air waybills
Costs and
Overrides
Show-up Rate
Model
Overbooking
Model
Booking
Records
C4ISN
2003 UTD
Acceptable
Service
Failure
Authorized
Capacity
Capacity
Forecasts
Slide 54
Routing
Generates routes for the bid price model within

the Revenue Management Module
Determines feasible routes at the time of
processing a booking request
C4ISN
Takes into account operational requirements

Accounts for shipment characteristics
Ensures that the selected routes meet the service
level
Considers cost, time, and distance
Handles the complexity of multi-hub network
2003 UTD
Slide 55
Routing
Schedule
Via/
Not Via
Route Costs
and Times
Connect
Times
Shortest Path
Model
Routes
Service
Level
Shipment
Characteristics
C4ISN
2003 UTD
Slide 56
Bid Pricing / Allocation
C4ISN
Is an O/D based network optimization model

that maximizes network profitability
Matches demand to capacity over multiple
routes by redirecting cargo from high to low-load
factor flights
Leg bid price for a flight leg is (wt BP + Vol
BP/density)
O and D bid price is the sum of the bid prices of
flight legs along the route of the shipment
Bid price gradients enable bid prices to be
adjusted to reflect capacity changes
2003 UTD
Slide 57
Bid Price Example

2.50
Capacity = 15 tons
Bid Price = $1.00/kg
2.00
Rate ($/kg)
3
tons
@
$2.00
1.50
6 tons @ $1.50
Capacity = 25 tons
Bid Price = $0.50/kg
1.00
10 tons @ $1.00
0.50
20 tons @ $0.50
0.00
0
10
15
20
25
30
35
40
Demand (tons)
C4ISN
2003 UTD
Slide 58
Bid Price
Schedule
Authorized
Capacity
Demand
Forecasts
Space
allocation
to Demand
Group
Network Based
Bid Price Model
Connection
Matrix
Bid
Prices
Revenue
and Cost
C4ISN
2003 UTD
Slide 59
Customer Valuation
C4ISN
A tool for assigning relative importance to major

customers
Customer value is used to scale up or scale
down the offered rate when making booking
acceptance decisions
Customer value may vary by segment and
season
Customer value can be based on several
variables: total revenue, space utilization,
commodity shipped, claims history, etc.
2003 UTD
Slide 60
Customer Valuation
User Preferences
Sales
Operations
Revenue
Management
Finance
C4ISN
2003 UTD
Value
Determination
Model
Customer values
Slide 61
Major categories of data
Flight Schedule
Booked and tendered cargo information
Pre and post departure flight information
C4ISN
Mail, bags, passengers, cargo, payload, fuel, etc.
Expected passengers on board

Reference data
Advance and live air waybills
Aircraft, container, station, customer, commodity,

products, etc.
Historical data
2003 UTD
Slide 62
Key interfaces
Cargo Reservation
System
Cargo
Revenue
Accounting
Flown Air Waybills
Post-departure
Flight
data
Operations/
Departure Control Schedule
Bid Price/Allocations
Booked
Air Waybills
Booking Requests and

other updates
Cargo RMS
Reference Data
Passenger
Revenue
Passenger Booking
Management
DB Tables/
User Inputs
Legend:
RealReal-time link
Batch Process
C4ISN
Batch/realBatch/real-time
2003 UTD
Slide 63
Further research is needed
Overbooking model
Demand forecasting
C4ISN
Show up rate distribution

2-dimensionality
Shipment level overbooking
Stability/accuracy of forecasts - Lumpy demand,
multiple rate classes, fewer booking requests
Predicting when to use and when not to use forecasts
Estimating true demand: demand reduction/untruncation
Integrated overbooking and bid pricing

2003 UTD
Slide 64

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Seminar: Air Cargo Supply Chain

Management and Challenges

Center for Intelligent Supply Networks (C4ISN)

Sabre, Inc. Overview

Center for Intelligent Supply Networks

Revenues of about $2 Billion

A S&P 500 company

Center for Intelligent Supply Networks

Center for Intelligent Supply Networks

Center for Intelligent Supply Networks

The World of Sabre

Center for Intelligent Supply Networks

Airline Products and Services

Dining & Cabin

Center for Intelligent Supply Networks

Air Cargo Industry

Air Cargo Industry

The international air cargo market is $40 billion a year

Center for Intelligent Supply Networks

Growth is projected at 6.4%

Center for Intelligent Supply Networks

Asian cargo markets lead

Center for Intelligent Supply Networks

Major Traffic Flows

A snap shot of international freight flows as a

Center for Intelligent Supply Networks

Top 25 Freight Airlines

Center for Intelligent Supply Networks

Air Cargo Landscape

At a very high level

Center for Intelligent Supply Networks

A bit more detailed

Center for Intelligent Supply Networks

The key players are...

Need a commodity sent anywhere in

Act as the middle man between the

Receive, store, transfer, track, load

Recipient of the shipment.

Center for Intelligent Supply Networks

Negotiate best rates

Negotiate best rates

Bid for space allotments

Accept billings and make

Accept billings and

Interact with multimodal carriers

Place claims and repair

Place claims and repair

Speed (time sensitive)

Speed (time sensitive)

Center for Intelligent Supply Networks

Accept /Reject shipments

Plan cargo routes

Initialize and open

Improve load factors

Plan Loading of cargo - build,

Accept Bids from

Allocate Block Space Allotments

Forecast cargo capacity

Segment and forecast

Center for Intelligent Supply Networks

Offer Product Services

Center for Intelligent Supply Networks

Mapping of Business Challenges