Importance of digital supply chain in airline industryNews / OnlineBy Viewpoints | October 25, 2013Share This article was originally published on One of the most fascinating things that technology has done for people is create a digital version of practically everything, from money to relationships and entertainment to education and even people (avatars).NB: This is a viewpoint by Abhishek Singh, product manager, Travel & Hospitality, at Infosys.With mobility, this trend has jumped up a notch – always connected, always ON. What this does for airlines is to create immense possibilities both for revenue generation and cost optimisation. But a slight paradigm adjustment is required – welcome to the age of the digital supply chain.A term originated in the media industry, digital supply chain is equally applicable to the airline industry. Especially when considering the digital assets of user-generated content, airline-generated content, agent-generated content and transactional data – both offline and real-time.But, what are these digital assets that airlines should pay attention to? What supply chain needs to be managed for proper assets handling and most importantly what value proposition does it hold for the traveller and the carrier?IATA’s e-Cargo initiative and e-Services (NDC, EMD and eTicket) are simplistic examples of digital supply chain management by the airlines industry and aim to fix problems of broken digital supply chain for airlines leading to entitlement-mismatch and lost ancillaries.The Digital Airline initiative of Boeing is a more sophisticated initiative. And still there is substantial amount of untapped potential waiting to be harnessed.[caption id="attachment_139766" align="aligncenter" width="550"] Basic supply chain for e-Tickets[/caption]Digital assets (DA)In economic terms, assets are defined as anything tangible or intangible that can be owned or controlled to produce positive economic value.Digital assets by their sheer nature must be digital – pieces of information – which can be owned and generating value. This information may be generated by the aircraft, the passenger, in-flight attendants, check-in agents, employees of the airline, IT systems of the airlines, etc. One such example is the ‘fuel burn data’ which is generated by the aircraft and the other is customer review of the airline on Skytrax.Facebook profiles of passengers and frequent flyer data with the airline would also be classified digital assets. Similarly, YouTube videos (both promotional ones posted by the airlines and personal ones posted by passengers) are also digital assets.And just like other assets, digital assets would have a point of production and a point of consumption. In between these two points would be the aggregation, intermediation and distribution, etc.A digital asset is distinct from plain ‘information’, ‘content’ and/or ‘data’ on two scales – value and rights to use.Digital assets (like a brand logo image) come with a distinct value and rights to use whereas ‘data’ (like the name of the same logo’s author) is just information; it has no tangible value and no rights of use. The digital asset may have any one of these direct values to the airline – revenue impact, cost impact, brand impact and service impact.These digital assets have traditionally been managed using digital asset management (DAM) solutions.Digital asset managementDigital asset management (DAM) consists of management tasks and decisions surrounding the ingestion, annotation, cataloguing, storage, retrieval and distribution of digital assets. DAM systems are a natural extension of content management systems.Types of digital assetsDigital assets can be categorised into some broad categories, just like their physical counterparts:1.Fixed assets – These are digital assets which has a very long shelf life and are capable of generating significant long-term value. For example a website. It is a digital asset that has substantial value to any airlines especially since it has revenue impact, cost impact and brand impact. 2. Perishable assets – These are the digital assets which have a short shelf-life if not consumed or processed. For example, customer compliments. If not processed in a timely manner, they outlive their natural life and the value that the airline can extract from them diminishes over time. 3. Dangerous goods – Although less common in the digital world, there are certain digital assets which can explode and cause a lot of damage (of course non-physical). Remember the “United Break Guitars” incident and the loss in shareholder value it led to. Most companies nowadays need to have a proper handling process for such DGs.Based on the source of the digital asset, they can be further classified as per below for the airlines:1. Customer-generated digital assets – These are types of assets that are created by the customer or passenger of the airlines. Emails, online reviews, digital photos, Pinterest/Instagram images, Youtube videos featuring a certain airline, etc. are digital assets.For those unaware, each ‘Facebook Like’ has actually been estimated to be anything between 21 cents to US$8 by different marketers and a ‘Facebook fan’ can be worth US$136.38. Based on that, now try to estimate the value of 4.028 million Facebook fans of Southwest Airlines.Another extremely valuable customer generated digital asset is the customer profile that an airline has for its passengers.Traditionally used CRM tools are beginning to outlive their shelf life with the advent of social media and mobility which these tools do not effectively integrate with. 2. Airline-generated digital assets – These are created by the airlines themselves, their aircrafts and employees. Digital airline initiative of Boeing, Electronic Log Books and Electronic Flight Bags are examples of the airline generating digital assets for themselves. 3. Agent-generated digital assets – These are created by travel intermediaries (Travel Agents, Online Travel Agents (OTAs), Aggregators (OLTAs) and Travel Management Companies (TMCs)). 4. Others – These are DAs created by any other party in the travel supply chain. For example, movie studios that create movies to be played in-flight or the chef who creates menu for inflight dining.Digital supply chainA typical digital supply chain could consist of a number of steps, although the only mandatory steps for digital assets are: creation, delivery and consumption.[caption id="attachment_139768" align="aligncenter" width="550"] Generic digital supply chain[/caption]Digital supply chain is distinct from digital asset management as the focus is not on how to create or manage the digital assets but the end-to-end supply chain of these assets, particularly from the point of production to point of consumption.Different travel players, like aircraft manufacturers, travel agent, ground handlers, in-flight attendants, IT partners, etc. may be involved to support these functions for each of the assets at different levels.[caption id="attachment_139769" align="aligncenter" width="550"] Digital supply chain for inflight entertainment[/caption]Areas of applicationWith the advent of social media, mobility and Big Data, several new possibilities relating to digital assets have emerged for many traditional businesses like airlines. In-flight entertainment, in-flight dining, in-flight retailing, customer experience management, personalisation and digital currency are some of the known application areas for creating new revenue opportunities for airlines.For example, should in-flight entertainment be just restricted to what the airline wants its passengers to see or can it be entertainment-on-demand for a fee – freemium model?Similarly, e-operations with EFB, ELB and digital airline by Boeing are examples of cost reductions that can be achieved using proper digital supply chain.Imagine the potential fuel savings that can be achieved using an iPad that weighs only 650grams instead of an inflight magazine that can weigh up to 2kg? Singapore Airlines has tried something similar and estimates suggest millions of dollars in savings at the rate of US$440,000 per 11.5 kilograms of weight eliminated from their aircrafts.Next stepsMost airlines can appreciate the need for digital supply chain management, since they are intimately familiar with the concept and value of physical supply chain management.There are substantial opportunities that exist in the airline industry today for increasing their revenue channels while optimising their costs further that will be explored in subsequent articles.Today, digital assets are being managed in a piece-meal approach leading to severe discrepancies from the point of production to their point of consumption. Some of the corporate travellers are more than familiar with such entitlement discrepancies that they hear about from their TMC, the check-in agent and finally their inflight attendant.Just last week, in one of my domestic flights, a fellow passenger was made to pay for his inflight meal by the attendant because she had no records of his meal pre-payment – a classic case of broken digital supply chain that can lead to the inadvertent - and completely avoidable - transformation of one digital asset into a Dangerous Good.The world has evolved into a virtual reflection of itself. For everything that moves in the real world there are digital footprints in the virtual world. It's time that the travel industry stood up, paid attention and managed its digital supply chain effectively.NB: This is a viewpoint by Abhishek Singh, product manager, Travel & Hospitality, at Infosys.NB 2:Inflight system image via Shutterstock.