Responding Profitably to Changing Business Conditions
Cascade worked with Polar Air Cargo to develop the tools and processes required to manage unanticipated short-term changes in network capacity and in market opportunities. Polar and Cascade had earlier developed a systematic tactical process for optimally allocating its capacity to target markets in the medium term. This process integrated rate information and demand forecasts with network cost information to produce optimal market allocations for each scheduled flight segment. The tactical process defined the nominal plan for managing the business. However, in the operational short term, the conditions assumed for the tactical plan do not always hold. For example, a flight cancellation might make it impossible to serve some origin destination markets on a particular day or combination of days. In this case, a recovery plan would have to be developed to address the network disruption. Or, as another example, there might be an unexpected surge in demand for a very profitable market that was not considered in the tactical forecast. Here the question would be whether adjustments could be made to capture more of the profitable demand.
Cascade developed a network optimization engine to address the short term operational issues. This engine has the same structure as the engine Cascade had developed for the tactical plan. However, to address the short term changes it was fed on the demand side by the changes in market forecast and on the supply side by changes in network capacity. To be able to effectively evaluate the impact of changes in network capacity, Cascade implemented a router, to quickly and easily evaluate the impacts of changes in network capacity. Given the available network assets including cancellations, aircraft substitutions, and extra sections, this router evaluates all the options for serving particular markets that are consistent with service requirements and other business rules, so that the optimization engine can determine the most profitable way to serve the short term demand for business.