September 2014

How the Transportation Industry Can Do More with Less A BoldIQ byline in Mass Transit

As if our roads aren’t cluttered enough, a report from the International Energy Agency projects there will be 1.7 billion vehicles on the road by 2035 – double the current number. Not only does this mean highly congested streets, but it also means an unhealthy increase in emissions and pollution. (Even if we move to electric vehicles, there is still maintenance, oils, paint, manufacturing, and more). Transportation accounts for 20 percent of the world’s energy consumption, leaving the transportation industry under increased pressure to operate more efficiently with fewer resources, while still having to meet the growing demand.

It seems that demand for transport continues to grow hand in hand with the outcry to reduce the number of cars owned by people. Thus the advent of so-called “on demand app based” series such as Uber and Lyft. However, these are simply less than efficient additions to our streets, creating yet another layer of congestion and inefficiency. While they may be very flexible for the passengers, they are adding multiple vehicles to the streets that significantly surpass demand – but I will not be discussing these services in this post.

On the other hand, public transportation departments seem to be facing ongoing budget cuts and their immediate and understandable response is to cut services. In the Seattle area for example, bus services will be reduced by 16 percent due to so-called budget cuts. While it would seem that service cuts are the only remedy for budget cuts, this is an antiquated thought process and these days, simply wrong. Transportation agencies should be continuously finding ways to provide more service with less budget as opposed to wait for a budget cut and simply cut service as a reaction. And with sophisticated optimization technology readily available, this is doable.

Operations optimization technologies are already transforming the way other industries are managing their resources. Take the aviation industry as an example. Airlines are using optimization technology to manage large fleets of planes and staff amidst constant complex planning requirements, unpredictable disruptions due to weather, mechanical failures and staff illness. In an optimized system, resources are more efficiently managed to maximize potential revenue, maximize productivity of pilots and crew, minimize fuel costs and waste, all while providing superior service to their customers. And they do this in real-time, all the time.

Imagine the possibilities for fleets of taxis, buses and other ride-sharing services. With real-time optimization, these transportation services would be able to work efficiently to not only meet demand, but to also improve congestion on the streets and reduce fuel consumption and emissions. Think of how much fuel taxis and ride-sharing services burn driving around looking for their next customer. Through an optimized “central nervous system,” these drivers could receive the best fitting on-the-spot assignments in real time. This provides value not only to the driver and passenger, but to the network as a whole.

According to Robert Burn, “The best laid plans of mice and men often go awry.” No matter how well-planned long-term and short-term scenarios are, disruptions and changes will always occur – be it machines breaking down, a change in weather or even a changed requirement or deadline from a customer.

The U.S. has the largest transportation system in the world. It serves over 300 million people and 7.5 million businesses. It shouldn’t be managed by antiquated technology (if using technology at all) as it largely is today. The transportation industry must rethink its approach to operations and resource management.

The future of transportation will be centered on efficiency. Let’s stop waiting for the future to arrive. We have the technology at our fingertips to make the best possible transportation decisions when it counts most – right now.

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BoldIQ Customer in the News: JetSuite ranked fourth busiest US charter operator – A Corporate Jet Investor story by Terry Spruce

JetSuite has been ranked as the fourth largest US charter operator by total hours flown and second in aircraft utlilisation by ARGUS International.

JetSuite has been ranked as the fourth largest charter operator in the US in terms of the total hours flown and the second largest for aircraft utlilisation.

JetSuite was the youngest charter operator to feature in a comparison of 20 companies by ARGUS International. This report, ranking all FAR Part 135 operators nationwide, was created by ARGUS using flight market intelligence data and analysis programme TRAQPak.

Alex Wilcox, CEO of JetSuite, says: “It is gratifying to learn that JetSuite already flies more than almost every other jet charter company.”

“This ranking and these top safety awards are truly a tribute to the women and men of JetSuite. These professionals, and our partners at Embraer, Cessna and the hundreds of FBOs and support businesses earn the trust of JetSuite’s thousands of clients each and every day,” adds Wilcox.

JetSuite has recently been awarded its IS-BAO certification, ARGUS Platinum rating renewal and FAA Diamond Awards.

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Boards Steal a March With Risk Management – An Agenda story by Tony Chapelle

Handling specific risks smarter than the other guys can gin up a company’s edge on the competition. While overseeing all the risks in the enterprise is already board members’ fiduciary duty, experts say that directors can help managers gain strategic advantage and even steal market share by mitigating certain upside risks.

Athletic apparel company Under Armour is trying such a move. The company is betting the farm that the upside reputational risk that superstar Kevin Durant of the National Basketball Association brings can take a bite out of rival Nike’s dominance. But the advantage can also apply to managing utilization risks to get more airline capacity or even start new lines of business.

Under Armour has offered Durant the equivalent of 10% of its annual marketing budget to agree to a face-of-the-brand sponsorship deal for the next decade. The company is taking the huge risk of spending that much on a single player because it’s vying for a chunk of Nike’s commanding 96% of market share for basketball shoes. Under Armour currently holds just 0.25% share, according to SportsOneSource, a sporting goods research firm.

To make the deal accretive, Under Armour would have to move $400 million worth of Durant’s signature shoes a year. This after Durant’s shoes generated only $175 million last year for Nike, with whom he’s been signed since he graduated from college.

Under Armour is largely counting on the fact that last season Durant was named the NBA’s most valuable player. He’s also younger than the league’s biggest star, LeBron James, so Durant could outlast him as a player and marketer. On the downside, however, another former MVP, Derrick Rose, has been a drain on the Adidas brand that signed him to a $183 million deal two years ago. Since then, Rose has played in only 10 games due to knee injuries.

Under Armour’s CEO is game, however. Kevin Plank in 2011 promised to take market share from Nike eventually. Every percentage point of share in the basketball shoe market is worth $45 million.

“Your willingness to take on risk comes with the knowledge that it may not pay off,” says Roei Ganzarski, a former chief customer officer for Boeing. Ganzarski is now CEO of a Seattle-based software company, BoldIQ, which helps corporations improve efficiency by getting higher utilization rates in their operations. “The smarter way to mitigate risk is in fact to make your business operations more efficient so that risk doesn’t come to bear in the first place.”

In fact, Ganzarski’s BoldIQ makes software that minimizes risk for corporate customers. His clients in the aerospace and trucking industries need to use their physical, financial and human resources better to grow. Instead of buying more planes and trucks and hiring more people, which increases expenses and therefore the risk of not getting acceptable return on capital or suffering more accidents and paying more for insurance, Ganzarski’s software can help airlines and haulage companies get more out of their current fleets.

For instance, since the industry average revenue utilization of business aircraft is 65%, a fleet of 20 aircraft actually is equivalent to 13 revenue-generating planes. Buying two more planes would increase the utilization rate to the equivalent of only 14 revenue-producing planes. This kind of economics requires high fares to produce profits.

With optimization software, however, companies stand to boost utilization rates by 10% to 25%, Ganzarski says. The programs can show an airline how to fly the same number of planes with fewer disruptions to flights or how to manage as efficiently with fewer pilots and cabin crews. If that lowers operating costs and risk, the company could lower its fares or start a second fleet offering more seats and longer range, which could take market share from competitors.

As a CEO, Ganzarski says a board should ask three questions before letting its managers use risk as a strategic advantage. “I expect my board to ask me: What’s the purpose of the CEO to take on new risks from investing new capital? Is there another way to achieve the goal without taking on a new risk? And finally, if not, what are you doing to mitigate that risk?”

Glenn Davis, a CPA and corporate advisor at accounting firm CohnReznick, is particularly fond of internal controls as a tool of good governance and risk management. He says this seemingly bland duty — confirming that proper procedures are being followed — can have direct benefits to the bottom line.

For instance, with good internal or metric controls in the accounting department, Davis says, a company can bill clients more accurately and faster. That can result in being paid faster. Since the typical company collects its money from customers in 28 days, Davis says, just one day’s improvement per month can be worth a significant amount. In addition, if the accounts receivable don’t linger as long, lenders may lower interest rates on a company’s cost of capital.

Davis cites similar benefits on the payables side. If the internal controls let managers process invoices faster with fewer disputes, they can pay vendors faster. Some vendors might agree to sell products at a slight discount if offered the chance to be paid a few days earlier each month.

John Bugalla, principal at training and consulting firm ERMInsights, tells the story of howSnap-On, a national franchisor whose franchisees sell work tools, built a new subsidiary based on managing risk. Under their contracts, franchisees had to buy hazard insurance. Dan Kugler, an assistant treasurer of risk management at Snap-On, identified an opportunity when he realized that, since the partners had to buy from rated insurance companies, he would recommend discounts if they used four specific companies. As he found out more about the risk of losses, cost of supplies and adjustments, Kugler then convinced Snap-On senior managers to let him set up a captive insurance company.

The result was SecureCorp, which is not only a multimillion-dollar profit center, it also has benefit programs that help in recruiting new franchisees.

Ganzarski adds that the board has a role in monitoring upside risk to gain an advantage on competitors. “At some point, I would like the board to ask the CEO if he’s taking on enough risk to grow the business. Is he trying new things, innovating and opening new markets?”

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