Incentive Management
Introduction
In the travel industry, when it comes to online bookings of airline tickets, 4 main global distributor system (GDS) companies take up close to 90% of the market share worldwide. These GDS companies enter into contracts with many different travel agents / online ticketing websites (Zuji.com, Booking.com) in different countries. As these agreements with the travel agents are usually not exclusive in nature, the market strategy between these GDS vying for bookings made by the travel agents through their own system lies in the incentives that are paid back to the travel agents for each booking.
These incentive computations are complex in nature, and varies from country to country. There are many factors to consider in each contract’s incentive computation, such as frequency of incentive payment and computation, target setting, tier incentive rates and bonus incentive for growth or market shares.
Issues with Legacy System
In this particular case study, our client has contracts with travel agents in many different countries, and for each of these countries, they have different ways of calculating incentive payback. The task at hand is to compute the incentives accurately, for large number of contracts, with large volumes of booking data, and applying a complex set of computation logic to generate a payment report for the travel agents on a monthly basis. However, lying behind the simple process is a manual, error prone mixture of systems to manually generate payment reports each month.
There are a few key issues with the legacy system of computation being used:
- Contract management system could not handle the complexity of the contracts.
- Computation system was a traditional relationship DB system, unable to handle the complex computation requirements of the contracts.
- Contracts had to be “stored” in excel files, that does not reside on a share database.
- Incentive computations had to be manually calculated for each payment cycle on excel. Error prone and taxing on user as all bookings had to be retrieved from source and “pasted” onto excel sheets to compute incentives.
- Entire process was labour intensive and could not meet the payment cycles required of the business.
Value Proposition
Analysis of the above process shows the main issue exist in contract management and the computation of the complex incentive payout amounts. Having manually store contracts in Excel files as records and using the Excel files to manually compute the incentives stands out as the key process that needs to be replaced with a proper system.
The current relational DB system is unable to perform the complex calculations required, it is also slow in speed and cannot provide an Excel-like “live” system that can react to contract term changes instantly. This is also a bug bear in computation investigation in the event of discrepancies in payment amounts.
Our team of consultants proposed Incentive Management module powered by IBM Cognos TM1 as it is able to counter every problem and issue that the current system encounters. It provides a single, cohesive set of performance management applications for complex computations of the incentive payouts, the reporting requirements as well as a highly customised contract management system.
Users are now able to:
- Maintain contracts with very complex incentive calculation terms via a system instead of manually maintaining in Excel
- Retain full functionality of Excel in payment report and in accessing the solution
- Quickly view and edit the contracts that are being managed by our solution
- Once the contracts are edited with new terms, TM1’s unique RAM-based approach provides users with the ability immediately see the new incentive computation. All complex calculations are performed realtime and on RAM, resulting in very high performance and quick computations.
- It also allows the users to look at incentive computations and do in depth analysis if there should be a need to verify the incentive computations.
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