Photo: Changi Airport. Passengers are not yet feeling the full force of rising oil prices as airlines struggle to pass on the higher cost as increased fares, a major airline industry group says.Association of Asia-Pacific Airlines director general Andrew Herdman said airfares were edging upwards but needed to go higher to reflect increased fuel prices.Although passenger numbers and loads were up, airline yields (a measure of average airfares) had not reflected the fact that oil prices were rising,“That rise in oil prices has continued relentlessly this year and that’s been biting airlines, depending on the extent to which they’re hedged,’’ Herdman told reporters in Korea Thursday.“The question has been how much of the fuel cost can be passed on in the average fares and that varies dramatically by market.“But in general there is a lag and so margins have been under pressure.’’Herdman said the impact varied by market and had been lower in the US, where profits had come down a little but were still significant.Results so far this year showed that Asian airlines had found it difficult to pass on the full cost impact of oil prices, reducing margins and profitability.“Overall, I still suspect Asian airlines in aggregate to make substantial profits but it seems pretty clear that it will be lower than the levels we’ve seen in recent years,’’ he said.“As usual, it’s a very mixed picture by market and it’s interesting that the fastest growing market, which is India, has the worst profitability.”The AAPA boss said increased efficiency at airlines had helped offset some of the higher fuel costs“But there’s no escaping the fact that higher oil prices feed into higher fares and it’s not complete,’’ he said, noting that the trend was global and that it had meant the demise of some smaller airlines in Europe.He did not believe the increased oil prices would hurt travel demand or consumer confidence.Oil prices are among a number of issues being discussed at the Kuala Lumpur-based AAPA’s annual Assembly of Presidents, which brings together the heads of many of the fast-growing region’s major airlines.READ: Where the airline and hotel price rises will be in 2019Other issues being discussed at the meeting in Jeju, South Korea, include the need for new infrastructure, safety and environmental sustainability.The region’s strong growth means that infrastructure is a particularly thorny issue with the need for new airports, runways, terminals and air traffic control capacity need to match an influx of new aircraft.There is also a need for big numbers of pilots, cabin crew and technicians.The association revealed that growth in the Asia-Pacific continues to forge ahead with the increase in international passenger traffic well above the long-term trend for the first eight months of the year.Cargo traffic growth, while moderating after a big jump last year, was up by 4.8 percent in the same period.Herdman said passenger growth was broadly based across leisure as well as business and other premium traffic.The rise of premium economy was continuing in the region, he said, although there was still no definitive description of the class and consumers were left to work out which airlines were offering the product and with what characteristics.“But there’s a big gap between flatbed business and economy, particularly with densification and stripped down fares,’’ he said.“The gap between those two products is very large so premium economy fits into that category.”A major concern of airlines was whether premium economy would see passengers downgrade from business class or upgrade from economy.Herdman said it was still unclear where that balance lay but it appeared to be “an upgrade path for people flying economy who are prepared to pay a premium for additional legroom and comfort”.Steve Creedy traveled to Jeju courtesy of Korean Air and the AAPA.
Related Posts Take a sheet of paper and write down everything you can think of that’s white. You have 15 seconds, go. Done? Good, now take 15 seconds and write down everything that is or could be in your refrigerator that’s white. Finished? Raise your hand if had better luck with the second list.Dan Heath, who co-authored the book Made to Stick: Why Some Ideas Survive and Others Die with his brother Chip, started his talk at BIF-3 this afternoon by asking the audience to complete the exercise I described above. A good number (perhaps nearly half) of audience members were able to name more white things the second time around. But that’s an odd outcome, said Heath, because there are more white things that exist in the universe than in your refrigerator. The constraint, however, helped focus your thinking and made the task of identifying objects easier because of the stricter perameters.We’ve all heard the term “thinking outside of the box,” Heath told the audience. But thinking out of the box isn’t really as great as it sounds. As his exercise demonstrated, it can make things harder. “We don’t need to think outside the box, we don’t need to escape it, what we need to do is find the right box and get in it,” said Heath. Improv actors, said Heath, have long utilized the benefits of inside the box thinking. Improvisation needs a clear catalyst, something to motivate the action, and for that reason improv actors are trained to be very specific with their dialogue. They don’t say, “what’s the matter?” they say, “are you still angry about that time I threw your necklace in the toilet?” The added constraints help them to jump into the scene and continue to be creative and riff off the idea.Inside the box thinking is found all around business in the form of what Heath called a “high concept pitch.” Example he gave are Jaws in space = Alien, Die Hard on a bus = Speed, and Blockbuster by mail = Netflix. These pitches are boxes that inform creative decisions down the line. For example, if you were the set designer for the movie Alien and needed to design a spaceship, looking at the type of thing that had already been done, you’d probably end up with something clean and futuristic like the sets seen on Star Trek. But since the pitch is “Jaws in space,” that design aesthetic won’t work. Jaws is gritty, frantic, and sweaty, which changes your perception.The box can inform many decisions taking place throughout an organization. The concreteness and specificity of constraints aide in decision making, and the box can be a guide to thinking, an inspiration to thinking. But you have to find the right box, said Heath, who told a story about pitching one of his earlier businesses to venture capitalists and failing because he was stuck in the wrong box. He was pitching his product (online textbooks) as a product rather than pitching it as an investment, and not getting any bites from VCs as a result. In that case, being stuck in the wrong box was detrimental.“The idea that we need to think out of the box is wrong,” concluded Heath, “instead we should go box shopping. We need to try on as many boxes as possible.” josh catone 1 Why Tech Companies Need Simpler Terms of Servic… A Web Developer’s New Best Friend is the AI Wai… Top Reasons to Go With Managed WordPress Hosting Tags:#BIF-3#conferences#web 8 Best WordPress Hosting Solutions on the Market
At some point in your retail loss prevention career, if you haven’t done so already, you will be called upon to help make procurement decisions on new technology, such as electronic article surveillance (EAS) or video surveillance.While you may be most interested in the features, functions, and benefits of the technologies, your CFO will be more interested in the oft-used cliché, “bang for the buck.” So, how do you calculate ROI in retail?This post explains the financial concepts required to conduct a cost vs. benefit analysis, as well as a full-fledged return-on-investment (ROI) analysis. It will also provide insight into the process by which your CFO decides the following key questions:- Sponsor – What type of analysis (simple or complex) should be used?What are the costs and benefits associated with this project?How long will it take before the costs are recovered?Will the project turn a profit? If so, how much?How does the profitability of this project rank against all others?What Is ROI Analysis?Simply stated, an ROI analysis determines the amount and rate (percentage) of anticipated or earned profit, if any, from an investment. A pro forma analysis is conducted in the planning stages of a project using cost and benefits estimates.The idea is to calculate an expected or anticipated return based on well-reasoned assumptions. ROI analysis is also used after a project’s implementation in order to calculate the actual return and to see whether or not the investment met financial expectations.There are basic and comprehensive analytical methods. The basic methods simply calculate a time horizon for cost recovery (payback) in months or years, or a simple return on investment percentage (what percentage of the cost will be, or has been, recovered). Payback ignores the concept of the time value of money, meaning a dollar that you have in your hands today is worth more than the promise or expectation that you will receive a dollar in the future. Payback also ignores any costs or benefits beyond the first year. Because of these limitations, we will not employ a payback calculation in this analysis.The more sophisticated and accurate calculations, often called discounted cash flow methods, try to encompass the following items and concepts:All fixed and variable costs and benefits, no matter when they occur,ROI measured against a prescribed time horizon, such as a five-year depreciation schedule,Taxes, opportunity costs, and the time value of money, andROI results compared to a benchmark or “hurdle” rate (a rate of return below which the project will be rejected).Net Present Value. Discounted cash flow analysis is a method of valuing a project using the concepts of the time value of money. All future cash flows (incoming [benefit] and outgoing [cost]) are estimated and discounted at a required rate of return to give their present value. The sum of all discounted cash flows covering the time horizon is the net present value (NPV). A zero NPV means the project repays the original investment and covers the required rate of return—essentially a breakeven. A positive NPV indicates a profit (over the required return), and a negative NPV indicates a loss. In capital budgeting, the discount rate used is called the “hurdle rate” and is usually equal to the incremental cost of capital. The ROI on a project must exceed the hurdle in order to be judged worthy of an investment. When choosing among a number of investments, the CFO looks for the highest NPV.Internal Rate of Return (IRR) is the rate promised by the project over its useful life. It is sometimes referred to as “yield on project.” The IRR is the discount rate that will cause the NPV of a project to be zero. Once the IRR has been calculated, it is compared to the company’s required (minimum acceptable) rate of return. If the IRR is equal to or greater than the required rate of return, then the project is acceptable. If not, it is rejected. Often, a retailer’s cost of capital is used as the required rate of return. The logic is that if a project cannot provide a return at least as large as the cost of the investment, then it is unprofitable.Both NPV and IRR are readily available formulas in spreadsheet software. There is no need to calculate them by hand.Why Is ROI Analysis Important?First, an accurate return-on-investment analysis prohibits unprofitable decisions. A well-reasoned, thoroughly researched financial justification tends to inhibit emotional decisions, and promotes “buy-in” for the project, and helps the loss prevention department make a professional case to senior management for accepting and implementing new technology for retail stores.Quantifying Costs and BenefitsProper ROI analyses start with a thorough compilation of all costs and benefits that could possibly be associated with the proposed project. While each project may be different, the costs can be divided into three categories—investment, one-time preparation, and other.The main investment is the cost of any hardware or software licensing fees. These costs will most likely be depreciated (hardware) or amortized (software) over a fixed time horizon established in our generally accepted accounting principles (GAAP).One-time preparation costs include sales taxes, freight charges, and the cost of site preparation and installation. These costs are added to the total investment for depreciation/amortization purposes.Other costs include such things as the labor required to operate or manage the project, maintenance, IT expenses, or any other incidental expenses. These costs may be one-time or annual, fixed or variable. Generally, they are not included in the investment, but are “expensed,” meaning they are accounted for in full when they are incurred.A “hard” cost, such as the cost of the EAS tags or other retail theft prevention system, is objective and easily acknowledged and quantified. All hard costs and benefits should be included in the ROI analysis. “Soft” costs/benefits are those that are more subjective estimates rather than precise calculations. For example, an anticipated improvement in labor productivity may not be as easily acknowledged and quantified. The most accurate ROI analyses rely upon “hard” costs as exclusively as possible and only include “soft” costs where the circumstances can be clearly understood and agreed upon by the project participants.Measuring the Major BenefitsThe “R” in ROI means return. A return is a tangible benefit, most often measured over time, which offsets some or all of the project’s costs. Each project has its own list of potential benefits. The most common benefit types in projects that implement new technology for retail stores are:Reduction in inventory shortage,Labor savings,Additional sales, andProductivity improvementA reduction in inventory shortage is usually the largest and most important potential benefit from loss prevention investments. If you think about it, we are making investments in security programs with the intention that shortage will be reduced from current levels, or that the countermeasures will keep shortage from rising to unprofitable levels. Shortage reduction and control is loss prevention’s raison d’être. We must be able to accurately estimate the impact that the project will have, or has had on shortage.The shortage performance graph in Figure 1 plots the inventory shortage results in a retail apparel store that had experienced a significant increase in shoplifting. After installing EAS, the results were measured after the first year, and future results were estimated over the balance of a five-year time horizon (years +2 through +5).In this example, EAS is the only countermeasure that was used, so any change in shortage can be directly attributed to its deterrent qualities. The horizontal (X) axis measures time, in years, and the vertical (Y) axis measures shortage as a percentage of sales. Under this scenario, shortage had been rising and the crisis point (year 0) was reached when shortage reached 5 percent of sales. EAS was installed at the end that fiscal year (year 0) directly after the annual inventory was taken. At the end of the first fiscal year of EAS usage (year +1), shortage dropped by 50 percent to 2.5 percent of sales. Management assumed that shortage would remain at the lower level over the rest of the time horizon.Figure 1. Shortage PerformanceThe dollar value of the reduction in shortage over the five-year time horizon is the financial benefit that will be entered into ROI calculation for the project. Assume that the store’s annual sales are $1 million. Assume further that shortage would have stayed at its crisis point of 5 percent (dotted red line) had EAS not been installed. Without EAS, annual shortage would be $50,000. Since the EAS installation, annual shortage dropped to 2.5 percent ($25,000), and with proper management, would remain at that lower level over the subsequent four years. So, the financial benefit gained by the use of EAS is the difference (at cost) between the shortage at the crisis point before the installation (5 percent) and the average rate of shortage after the installation (2.5 percent)—a savings of $25,000 at retail per year.To arrive at the cost of shortage, we must multiply by the cost of goods sold (COGS), in this case 55 percent. By “costing out” the change in shortage, we are treating it (accounting-wise) the same as we treat the cost of the EAS equipment, making the results “apples to apples.” This calculation will be shown later in the real-world example.Additional sales may be generated in other ways. If an EAS investment reduces shortage by 50 percent, there will be more merchandise available for sale than there was before EAS was installed. Will some of these items be sold? Without a doubt. The questions are:Can the amount of incremental sales be accurately estimated?How are incremental sales valued in the ROI analysis?Thanks to the work of retailers and academic researchers, studies have shown that there is an inverse relationship between item-level shortage and sales. In other words, statistics show that when shortage in certain items decreases, sales in those items increase. The range of the sales increase is wide, and at this point this type of benefit has to be considered “semi-soft,” meaning that while there is empirical proof that incremental sales occur, the estimate is still subjective, unless the retailer has conducted its own study. For this reason, an estimate of the impact of incremental sales will not be used in the real-world example analysis below.Calculating the financial benefit of an incremental sale, however, is straightforward. Doing so requires an additional piece of information—the “gross margin” percentage of the items in question. Suppose the EAS project results in provable incremental sales of $50,000 per year at retail, and the gross margin percentage of those items is 19 percent. To calculate the gross margin impact of the incremental sales, multiply them by the gross margin percentage ($50,000 x 19% = $9,500). This gross margin impact is the financial benefit that would be included in the ROI analysis.Labor savings can be included when an investment in technology results in a reduction in labor hours. Labor savings is a “hard” benefit that is calculated by multiplying a wage rate by the number of hours saved in the project. Typically, if labor hours are reduced, then employee benefits are reduced, as well. Often called a “benefits component,” it is usually expressed as a percentage of the base wage rate. Ask your human resources department for the rate.If the benefit component rate is 18 percent, and the hourly base wage rate is $10.00, then the benefit component is $1.80 per hour, and the “fully burdened” wage rate is $10.00 + $1.80 = $11.80. If the investment saves 120 hours of labor per year, then the labor savings benefitin the ROI analysis is $11.80 x 120 or $1,416 per year.Productivity improvement comes in many forms, but is not easily quantified. Suppose that an investment in video surveillance equipment allowed loss prevention agents to apprehend 15 percent more shoplifters per year than previously. Suppose further that the average value of each bust was $75.00, at retail, in recovered merchandise, and the number of annual cases had been 80 per year. A 15 percent increase in productivity allows the agent to work about twelve more cases, and results in an additional recovery of $900 at retail per year. Multiplying the amount of the recovery by the COGS of the items (55 percent) provides a benefit of $495 to the ROI analysis.How Do You Calculate ROI in Retail? A Real-World ExampleThe following section will supply the data necessary to explain the analytical concepts discussed above. How do you calculate ROI in a real-life example?Suppose the management of the apparel chain mentioned above is trying to decide between installing EAS or video surveillance in a high-shortage store. The choice is between a simple EAS pedestal system with plastic tags and detachers versus an array of video domes interconnected to a monitor/switcher/recorder…nothing fancy. Suppose that the chain already used both countermeasures, and EAS has been proven to reduce inventory shortage by 50 percent and video by 35 percent. Assume, as we did above, that the store’s shortage is 5 percent of sales, and annual sales will be $1 million per year for each of the five years. The COGS for the protected items is 55 percent. The various costs have been identified and quantified in the chart:Shortage Reduction Benefit Calculation. In the EAS example, management expects shortage to decrease by 50 percent from 5.0 to 2.5 percent of sales and remain at the reduced level for the five-year time horizon of the project. The annual sales for the store is $1 million and the COGS for the protected items is 55 percent, so the annual ROI benefit from the estimated reduction in shortage is $13,750 per year.In the video surveillance example, management expects shortage to decrease by 35 percent from 5.0 to 3.25 percent of sales and remain at the reduced level for the five-year time horizon of the project. The annual sales and COGS are the same, so the annual ROI benefit from the estimated reduction in shortage is $9,625 per year.Choosing the Most Profitable Investment. Let’s calculate NPV and IRR for the competing technologies in our real-world example to answer the CFO’s questions from the opening paragraph:Will either countermeasure be profitable?Which one is more profitable?How long will it take to recover the investment?EAS—The annual benefit (at cost) from shortage reduction using the EAS technology is $13,750. From that we must account for all of the costs, beginning with the initial investment in EAS system, tags, and detachers, a total of $9,200. One-time preparation costs are $1,250. Both of these items must be depreciated. Annual costs include tagging and tag removal labor ($4,800) and tag replacement ($100). In years two through five there is an additional expense of $200 for maintenance. In addition, the impact of taxes (39%) and the cost of capital (8%) must be included. The results of these calculations are:Video Surveillance—The annual benefit (at cost) from shortage reduction using video technology is $9,625. From that we must account for all of the costs, beginning with the initial investment of $3,000 in the video domes, monitors, switchers, and recording device. One-time preparation costs are $1,010. Both of these items must be depreciated. Annual costs include system management labor ($6,000). In years two through five there is an additional expense of $100 for maintenance. In addition, the impact of taxes (39%) and the cost of capital (8%) must be included. The results of these calculations are:The Verdict Is EAS. Both countermeasures are profitable because the NPV calculations are greater than zero. The IRR calculations suggest that both generate a significant return over and above the 8 percent cost of capital used as the discount rate. Note, however, that the NPV for EAS ($15,400) is almost triple that of video ($5,900), and the IRR for EAS (65.08%) is almost 10 percentage points higher than that of video (55.12%).Based on these metrics, EAS is the countermeasure of choice. There are a couple of reasons. First, the assumed shortage reduction for EAS (50%) exceeded that of video (35%). Second, the annual costs for video in years two through five are higher.This article was originally published in 2010 and was updated January 16, 2019. Stay UpdatedGet critical information for loss prevention professionals, security and retail management delivered right to your inbox. Sign up now
Technology changes rapidly and is leaving many organizations struggling to figure out a path for modernizing their operations. Gartner recommends before spending large amounts of money to completely replace an existing system, a better plan is first try to simplify your existing assets and systems.Phil Dawson, analyst at Gartner, has the following recommendations:Identify existing assets. Take an inventory of all servers and hardware currently and how it is being used. From this list, identify assets that can be rationalized and consolidated. Remove unnecessary assets.Define common process and tools.Consolidate the number of physical locations where infrastructure is deployed.Adopt virtualization an automation to better utilize infrastructure assets.Rationalize the variety of items in the infrastructure.Dawson said that “consolidation is a reduction in the number of physical servers, while rationalization is the reduction of the variety of different server types. Both are important aspects of simplifying IT infrastructure, yet rationalization is often overlooked even though most complex IT systems include underutilized or inappropriate systems. Consolidating without rationalizing simply perpetuates unnecessary functions in a less complex infrastructure.”
CCH Tax Day ReportThe Hawaii Department of Taxation has adopted temporary amendments to the income tax rule defining the term “substantial gainful business or occupation”. Under the amended rule, for purposes of determining whether a taxpayer is engaged in a substantial gainful business or occupation, earned income includes wages, salaries, tips, business interest income, other employment compensation, and gross earnings from self-employment for the taxable year unless gross earnings for the taxable year are less than $60,000, in which case all net earnings from self-employment are included in earned income in lieu of gross earnings from self-employment. Several examples of the application of this provision are added to the rule. Previously, under the rule, earned income simply included wages, salaries, tips, business interest income, other employment compensation, and net earnings from self-employment for the taxable year.Subscribers can view the temporary amendments.Temporary Rule 18-235-1.14(d)Rule 18-235-1.14, Hawaii Department of Taxation, effective May 30, 2017, scheduled to expire on November 30, 2018
Virat Kohli and Anushka SharmaYuvraj Singh has defended Virat Kohli and his girlfriend Anushka Sharma on Twitter. He has appealed to the cricket fans to respect Kohli and his girlfriend Anushka Sharma’s personal lives.Virat Kohli scored just one run in the crucial World Cup semifinal against Australia.Anushka, who was in attendance at the Sydney Cricket Ground, was blamed for Kohli’s failure in the match which the team lost by 95 runs.The comment came after social-media went viral with several jokes on Anushka.”To all our real Indian fans who support us in our wins and loses ! Let’s respect @imVkohli and @AnushkaSharma personal life,” Yuvraj wrote on his twitter handle.The 33-year-old Yuvraj, who was Man of the Tournament in the 2011 edition but could not find a place for the just-concluded mega-event, was also supportive of Kohli.”Someone who’s scored 5 hundreds on Aus tour deserves much more respect and support from his fans !”I’m sure in the coming times he will shine for his country again and again,” he said.The Bollywood fraternity, too, took to the micro-blogging site to extend its support to Anushka.
Yesterday offered a lot of clarity in the College Football Playoff chase. Oklahoma clinched the Big 12 title and assured themselves a playoff berth with a win over Oklahoma State, and the Michigan State-Iowa Big Ten title tilt is set up as a de facto CFP play-in game. Alabama and Clemson will also make the four-team field, provided they take care of business in their respective conference title games next week. Everything seems pretty cut and dry at this point.Still, it’s always interesting to wonder how things would have shaken out under the old BCS system. The guys at BCS Know How have been releasing updated, simulated BCS rankings each week. Here’s a look at how the BCS would have sorted the contending teams with one week to go in the season.This week’s simulated “BCS” rankings are here: pic.twitter.com/UUX60ozRlZ— BCSKnowHow.com (@BCSKnowHow) November 29, 2015I don’t think the protest for an Alabama-Clemson championship game would be too loud, but the fans in Norman, Okla., have to be happy this system isn’t in place anymore. After all, the Sooners would be the odd team out as of now.