1. Peter, can you define what an Ancillary ERP does and why it is now so important to the industry?
Firstly, for any readers unfamiliar with the term, ERP stands for ‘Enterprise Resource Planning’. Basically, it’s about using software and systems holistically to support planning and management of all the core elements and processes across any organization to drive a much stronger performance. At Omnevo, we’ve evolved beyond the traditional ERP model by developing a unique Ancillary ERP system specifically designed to meet the needs of travel and hospitality providers. Our system enables us to define, manage and effectively steer the non-primary product offering in these sectors, especially for airlines, airports and railway companies.
Although ancillary revenue streams are obviously not new to these sectors, we see that many are currently set up in various silos within the same company, thereby not generating any synergies. Omnevo’s technology provides the perfect solution to break away from these silos. It bundles the various revenue possibilities under a single umbrella and so maximizes the outcome and increases the efficiencies of these new business models.
2. So, what are the top issues when it comes to Ancillary ERP for an airline, airport or railway operator?
It's all about maximizing the profitability of the retail program - both F&B and retail - and therefore a solid Ancillary ERP system is the engine. I think that many operators make the mistake of focusing primarily on maximizing revenue. Of course that’s important but, in fact, the key for successful retailing is to manage the costs as well as ensuring agility in steering, forecasting, analytics and ergonomics for both the back and front office users.
Our back-end system provides a state-of-the-art toolset that enables precise supply chain management based on data analytics, such as waste and leakage information, warehouse and ordering optimizer, as well as an automated load planner.
When it comes to our front-end solution, its intuitive design and intelligence provides the ability to save valuable time during the preparation process on logistics. Simultaneously, it enhances retailing performance for sellers by using our EPOS application through simple but highly efficient mechanisms, such as sales recommendation parameters and live commission trackers.
3. Why does anything on the back-end need to be digitalized at all? Is there an argument to be done in the same way - part analog/human and part digital?
Digitalized processes are only as good as the degree to which they can be understood and effectively implemented by their users but the performance gains are absolutely clear. Therefore, for us, it has always been important to start by gaining an in-depth understanding of our customers’ operational processes. Only when we really know them do we then adapt the OMNEVO toolset in order to optimize its efficiency and ensure that all users are fluent, comfortable and fully effective with the system. From our experience, we find that a shared planning approach enables our customers to quickly and smoothly adapt and very quickly see the performance gains that can be made.
4. Can you develop the argument as to why an Ancillary ERP approach needs to be fast-tracked, and give some clear examples with adoptees?
The holistic beauty of our system is that not only do we have many examples of powerful new solutions to complex operational issues but we also have many simple engineering changes that have also increased efficiency. One of my favorite examples is one that delivered a huge impact by increasing revenue on board one of our train customers, TGV Lyria, based in France.
Food and beverage outlets on board trains all face a core challenge; many passengers want to make a purchase from the bar, almost invariably generating long queues. Those frustrating queues demotivate the customers and sales are often lost. We found a solution to speed-up the selling process for the crew by quickly adding a barcode scanning functionality to our EPOS devices. Instead of typing the product barcodes manually, the crew simply scanned them, instantly saving time on every transaction.
That sounds a relatively simply system enhancement, but the gains were startling. The average number of sales tickets per trip increased by an impressive 10%, the customer satisfaction index rose by 5 points, retail revenue increased by 15% while the waste factor on fresh goods decreased by 8 points. And don’t forget the crew motivation; their sales commission increased! So, you can see how this was a simple, pragmatic, yet highly effective example of how we look at system engineering to drive startling results - creating wins for the customer, the operator and the crew.
5. So, for guidance, what are the first steps that an airline, airport or railway operator should take if they want to digitalize their ERP? Perhaps you can answer to both these sectors?
For any operator, the first step would be to understand the weak points of their current systems and their priorities. As I suggested earlier, an Ancillary ERP system needs to be adaptive, ergonomic and efficient and we tailor our solution precisely to their specific needs. I would recommend their first step be to contact us to see how we blend our technology with in-depth industry knowledge and let us assist them in determining where to start, particularly in developing an initial MVP, which is a powerful first digital step for any operator.
6. How, then, should a vendor be selected? What, in your view, are the key criteria?
Even though costs are certainly one of the main drivers when selecting a vendor, operators should take a wider focus on the efficiency and real benefits that an Ancillary ERP system will bring, both in the short and the long term.
The basis of our business model takes all those elements into consideration. We provide a strong and efficient Ancillary ERP system built on real experiences, established on minimum capital and operating costs and proven to deliver powerful results.
Also, a spirit of partnership is important. We want to be a real entrepreneurial partner for the long run, sharing risks and opportunities rather than being an unambitious provider simply aiming for comfortable, recurring revenue.
7. One last question. To summarize, if there was one key message you would like to convey to the airline, airport and rail industries about Ancillary ERP, what would it be?
We believe the time has come for airlines, airports and rail operators to take the fate of their ancillary programs into their own hands. This applies across those industries but the airline ecosystem in particular has always struck me as a strange one, where everyone around the airlines - whether suppliers, manufacturers, handlers or caterers - are all operating profitably and yet so many airlines themselves are not! Much of that has to do with the limited value chain handled by an airline internally – and it has to change. I’m sure those points will resonate with many airports and rail operators and they too have the opportunity to change.
In particular, one of the areas that will drive the most value to airlines is wider and deeper targeting of ancillary revenues. Especially in the current challenging climate, airlines should stop using the strategy of outsourcing everything – which leaves them with no control, no digital marketing capability and no usage of their valuable customer data. Instead, they need to use technology to run, steer and operate a significantly more efficient in-house operation with the help of a technology platform that democratizes the ancillary revenue game and puts them back in control. Digitalization gives airlines, airports and rail companies the opportunity for greater efficiency, performance and control – they now have to seize it.
A three-part series of blogs showing how LCCs of any size have a proven, low-cost entry option to seize the digital initiative in driving their ancillary revenue recovery.
After 20-months of Zoom sessions it was amazing to be out in the real world again this month, flying the globe and actually meeting industry colleagues in person! Following the World Aviation Festival (WAF) in London I moved on to Future Travel Experience (FTE) in Las Vegas and it was so encouraging to find that these two major industry events, 8,000 km apart, echoed the industry’s increasing buzz around the digitalization of ancillary revenue. Sadly, I’ve now been brought back to earth by the latest twist in the crisis as Omicron looks to inflict yet another challenging phase. However, after two years of disruption the aviation industry knows it has to adapt to each new challenge and strengthen its ability to respond just as long as governments finally realize that locking down borders is a very short-sighted approach (unless you are an island state) and haven’t stopped any of the previous 4 COVID waves in any meaningful way. If the last two years have taught us anything, it is that airlines, like governments, will need to think a lot more globally than locally.
December’s World Aviation Festival in London was a great opportunity to bring the industry together and, although attendance was inevitably lower than normal, there was a strong conference program that carried a mood of guarded optimism. Best of all, I was delighted to see just how strongly the focus was on real action to drive ancillary revenue and recovery. Much of 2021 has been spent waiting for a recovery to be established and many airlines have understandably been hesitant (or unable) to commit to new investment or major change in their customer operations. The long hoped-for recovery has been impossible to forecast accurately and many airlines opted to simply ‘hunker down’ and wait until a clearer path can be seen through the storm. That strategy carries deep risks. We now face a new phase of crisis as Omicron sadly develops its global presence but the fact is that the world will continue to turn, people will continue to travel, the crisis will eventually recede, and traffic will return. Airlines need to be preparing right now to create the customer experience that the recovery will demand. Yes, the picture of how the 2022 travel market will look in recovery is still blurred right now - but the key point is that we do already know exactly what the returning customer looks like and what they want. We have a clear understanding of the experience they want - and we have the digital tools to deliver that experience.