After reading the case study below answer the following questions

1. What kinds of models do you suppose Southwest Airlines used in its OLAP?

2. How can business intelligence like that utilized by Southwest Airlines lead to higher profits and a more competitive position in the marketplace?

3. Explain how the benefits were obtained.

4. Why don't most companies do what Southwest Airlines did?

5. Explain how these ideas could be used in other industry segments (e.g., retail, insurance, oil and gas, universities).

Case Study

About a year after the September 11,2001 disaster and the resulting plunge in airline revenues, Southwest Airlines was so pleased with the performance of its business Intelligence/DSS applications for financial management that it expanded deployment to include flight operations and maintenance. In the middle of a crisis, Southwest Airlines successfully deployed its Hyperion Solutions Corp. Essbase online analytical processing (OLAP) application and Pillar budgeting software. Southwest can accurately make financial forecasts in facing the severe market downturn. Southwest has exploited its business intelligence applications successfully.

PROBLEMS MANY COMPANIES FACE

Most companies do not adequately tie their financial applications into an OLAP system, analyze their data, and then meaningfully present it to business personnel. Southwest's success resulted from its ability to tie its enterprise resource planning applications to its OLAP software and then present relevant financial data and scenarios to its decision-makers.

THE S I T U A T I O N

Right after the terrorist attacks, the airline was operating "in a world of complete uncertainty," said Mike Van de Ven, vice president of financial planning and analysis at Southwest. "We were asked to give some sort of financial insight for a variety of decisions the company might make."

Prior to the roughly $1 million installation of Essbase from Hyperion (Sunnyvale, California) in 1999, Southwest analysis personnel wrote queries by hand, spending about a half hour running them, and then put the figures into spreadsheets for additional analysis. The total time could take up to four hours.

RESULTS

Essbase has cut the analysis time to as little as two minutes, leading to massive savings. After running worst- and best-case scenarios and creating forecasts, Southwest developed an action plan to stabilize its finances. It helped answer questions like, "How fast would we burn through our cash?" As of July 2002, the forecasts have been within

2 percent of actual values

Analysts can access both operational and financial data to analyze and identify the impact of one set on the other. Relationships can be found to improve forecasting. Overall, the application has paid for itself just through the savings from automating the data-collection processes.

Southwest has better control over its cost structure than the network carriers do. It is the largest airline that has remained profitable since the travel industry began to slump in 2001. The airlines overall lost $7 billion in 2001 and was expected to lose at least as much in 2002. Southwest Airlines may have been one of the only carriers to make a profit in 2002. Southwest Airlines is still growing (though cautiously), despite the massive market downturn and showed a $75 million profit in the fourth quarter of 2002. Southwest's new business intelligence tools help decision-makers accurately predict their markets and decide which ones to expand into.