To Appreciate The Value Of Digital Networks, Look To The Skies

Pat McCarthy

En route to a recent conference on how procurement networks are reshaping the aviation industry, I realized how amazing it was to be arriving in the historic city of Athens, the cradle of Western civilization. My enthusiasm owes not only to the city’s timeless beauty, although that’s reason enough to visit. Athens, it turns out, is ideally suited for such a gathering because it holds a unique place in the imagination for all of us who’ve ever wanted to fly.

When you’re fortunate enough to have as many Greek family members as I do, you learn about the ancient legends. So the fable of Icarus is well known to me.

Icarus, of course, was an early aviator. He looked to the birds and thought, “Why not me?” So he constructed a set of wings using wax and feathers. But his father warned him not to fly too close to the sun as the wax would not tolerate the heat. As we all know, Icarus declined to follow his dad’s advice – and, as he soared skyward, his wings began to melt. Icarus crashed back down to Earth.

What’s the moral of the story? Some people say Icarus was too ambitious, too proud, too single-minded. They say he flew too high.

But I believe Icarus had a different problem. Now, I may not be an expert on classical antiquity, but I believe Icarus could have been much more successful – he could have built much stronger, sturdier wings – if he’d only had a better supply chain!

In all seriousness, when it comes to aviation in our own time, there’s no mythology about it: The industry faces immense opportunities but also enduring challenges. High demand and low interest rates have fueled significant growth in recent years. Air transport has doubled in volume every 15 years, with no end in sight. Aircraft keeps getting more reliable, more efficient, more technologically advanced. But high fixed costs and fierce competition are facts of life for airlines.

Controlling costs

That’s why controlling costs spells the difference between success and failure, in every economic climate. To control costs, airlines are turning to technology to improve operations and the customer experience in four main ways: increasing real-time visibility and control, optimizing efficiencies across business functions, enhancing service offerings, and deepening customer loyalty through personalization and rewards programs.

In aviation, we’ve moved from wax and feathers to variable-intake turbofan engines and intelligent avionics. Yet in other respects, the industry remains largely unchanged. After all, the very same factors drive profits year after year:

  • Revenue per passenger kilometer flown. How do airlines engage with customers to generate revenue premiums? Data, of course, plays a key role. What do they know about the person in seat 11C?
  • Load factor. How do airlines optimize their routes, aircraft, and services to ensure maximum lift per weight? Here again, data proves essential.
  • Unit cost per available seat kilometer. How do airlines maximize efficiency and minimize costs? As with the other factors, the right data leads to the right outcome – for passengers, shareholders, and the environment.

Meanwhile, as airlines seek to optimize value, safety, and support while improving the passenger experience, they need to be able to track and manage every part and every piece of equipment. Naturally, it helps to do so when airlines can also track and manage the suppliers of those parts and equipment.

Managing risk

In an industry like aviation, where risk management is so crucial – risks ranging from weather to regulation. commodity prices, and exchange rates – savings become essential. Digital networks achieve savings by making risk more manageable. By providing visibility into the interconnected operations of airlines and their suppliers, cloud-based procurement platforms help identify and resolve issues before they arise, aided by machine learning and artificial intelligence applications.

Collaborating with trading partners

In addition, digital networks enable trading partners to collaborate on product design and service delivery, thus creating mutual value, extending competitive advantage for their organizations, and empowering them to reimagine not only the airline industry’s future but procurement’s role in shaping it. In the aviation business, real-time collaboration with one’s suppliers unleashes innovation and spurs growth. More often than not, success arises through partnership. Seldom do we succeed when flying solo.

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | FacebookYouTube


Pat McCarthy

About Pat McCarthy

As senior VP and general manager for SAP Ariba, Pat McCarthy is responsible for the go-to-market strategy, sales performance, and operations of the SAP Ariba field organization globally. On a deeper level, he leads SAP Ariba’s effort to understand customers’ goals and to marshal the power of digital transformation to help meet or exceed them. Since joining SAP in 2005, he has held a broad range of executive roles, including successfully leading the SAP Ariba North American region and various teams responsible for mobile and other emerging technology platforms. Prior to joining the technology world, Pat practically grew up in supply chain and procurement. He spent 11 years at PepsiCo and its subsidiary Frito-Lay, Inc., where he led teams in warehouse and fleet management, distribution operations, manufacturing, and supply chain planning and optimization. As a former practitioner turned technology enthusiast, Pat loves finding new ways to extend a customer’s competitive advantage, from funding its strategic objectives to leveraging speed and efficiency to outpace rivals. A native Chicagoan, Pat graduated from Elmhurst College; sits on the board of Chicago Tech Academy, a charter non-profit for Chicago high school students, and supports global charitable endeavors through Kiva.