Information Sharing in Buyer-Supplier Relationships in Libyan Airline Industry: Case Study of Afriqiyah Airways

 

Chapter 1 Introduction

            This study investigates the information sharing processes in buyer supplier relationships in the airline industry specifically the Libyan airline industry. This study will make use of Afriqiyah Airways as the case organization. This chapter starts with the background of the study, the problem statement, the questions and objectives of the study, the significance, scope and limitations of the study and the structure of the entire report.

Background of the Study

            Supply chain is defined as the alignment of firms in order to bring products or services to the market. It is a network of facilities and distribution options which functions for production, inventory, location, transportation and information. From this definition, we can now define supply chain management (SCM) as the systemic and strategic coordination of basic business functions within the supply chain (Hugos, 2006, pp. 2-6). Supply chain management also functions to achieve both longer and shorter term objectives through maximising the operations.

            Fundamental to business processes is the SCM as an important tool of securing a large market share. As the basis of providing superior service, through effective management of the supply chain, the organisation should obtain cost leadership, differentiation and focus on specific niche in terms of procurement, distribution strategies and delivery strategies (Morgan and Liker, 2006).

            Supply chain management is regarded as the coordination of information, manufacturing and logistics flow (Cohen and Roussel, 2004). Sharing and exchanges of information for supply chain actors are evidences of massive benefits of electronic connections including world wide websites (www) and extranets and intranets. Such digital enablement, however, might have different effects on particular industries, directly affecting the distribution and commercialisation functions of SCM.

            In SCM therefore, technologies that enable communication plays a critical and profound role in the way two firms interact particularly in the way activities are coordinated, how commerce is conducted, how people and machines communicate and how goods are made and delivered. Information and communication technologies facilitate the information flows, focusing on acquiring and sharing information in order to create knowledge (Rippa, 2005). Although the extent of the impact of technology’s influence on the process is otherwise unquantifiable, there is the need for airline operators to maintain competitive and effective decisions relating to buyer and supplier relations.

            In SCM, collaboration, coordination and integration are critical since these impact the organization’s capability to meet customer needs and reduce costs effectively. While information sharing is viewed as a major strategy in countering the bullwhip effect, the advances of technology make information sharing possible. Technology therefore is a key enabler of the supply chain. However, sharing information through interorganizational channels has brought new concerns to business management. How the business operates itself is competitive and adversarial in nature, and there is the tendency to overestimate and underestimate the possible risks and hence are reluctant to share information with trading partners including the supplier (Huang and Gangopadhyay, p. 44).

            Shah (2009, p. 227) emphasize that the bullwhip effect across the chain is created because of long lead time and order batching owing to high transaction costs in the chain. This can be only handled by improving operational efficiencies in the chain. As such, unequal and unrelated information across the supply chain leads to overreact to backlogs. According to Li (2007, p. 191), the bullwhip effect is an ineffective situation that happens due to lack of information sharing and communication in the supply chain. It essentially destroys significant value within the chain. Thereby, measures like sharing information across the chain will help in minimizing the value destructive behaviour of bullwhip effect.

            When it comes to information sharing, the most important point of sharing between a buyer and a supplier is that it always carries a business root to it. Informations are created to symbolize power between the two actors thus investing on intellectual capital and the consequent effort to transmit such provides bottomline benefits to the one sending the information and the one receiving the information. Intellectual capital forms part of knowledge management. Sharing the information about conditionals and competences should not only center on what should be shared but rather on how and why information will be shared. Information sharing within the supply chain goes beyond and between the sender and receiver systems (Fitz-Enz, 2005).

            Fitz-Enz (2005) also noted that information should not undermine the communication in value chain between the buyer and the supplier. Between the two, there is a need to develop sense of ownership of the shared information before these can be useful. This is also a way to build trust in buyer-supplier relationships. This is termed as the buyer-supplier relationship equity wherein the players are becoming more committed to share information and take information-sharing related risks if needed. The impetus of this equity could effectively connect the buyer and the supplier and eliminate misinformation and misunderstanding along the business-based information sharing processes. 

            As such, inter-company integration and coordination through information technology has become a key to improve the supply chain performance. How information sharing processes between the buyer and the supplier in the Libyan airline industry can be optimised using technologies can improve the supply chain performance of airline companies is not known. This research will evaluate how information flows in the Libyan airline industry within the SCM schema.  

Problem Statement

            Schwandt and Franklin (2010, pp. 201-202) mention that the main complexity drivers in the airline industry are interdependent operation structures which are combined with diverse customer needs and intense competition. Supply chain was able to cope with all these complexity drivers basically through synchronizing information flow. Between the airlines and the suppliers, for instance, they collaborate often to enhance the quality and availability of service which is essential for the overall efficiency of the value-creating process. Considering this, how the Libyan airline industry is strategizing to meet the challenges of the supply chain management specifically for the Afriqiyah Airlines. 

            According to Sigala (2005), competition had traditionally been highly intense in the airline industry which in turn forces the airlines to continually foster diverse collaborative practices. Information and communication technologies (ICT) had always been the backbone of the airline industry leading to a more facilitative collaborative supply chain and enhanced competitiveness. Time delays, distorted demand signals and poor visibility of exceptional conditions result in critical information gaps (Rippa, 2005). The question now is how intense is the competition in the Libyan airline industry and how Afriqiyah Airlines is addressing and coping with the competition. Is Afriqiyah Airlines competitive enough to rule the industry in the future?

            Such information gaps including misinformation and mistrust are not welcome in the airline industry since it deals with the lives of the travelers/passengers hence imposing serious challenges to the supply chain managers. Further, the criticality of these information gaps travels through the supply chain, also known as the bullwhip effect, which can paralyse the operation of the airlines hence affect the business in long-term. Afriqiyah Airlines is not an exemption wherein it is also vulnerable to misinformation and mistrust. In here, how does the airline company is addressing these issues?

            Nevertheless, the airline industry was an early adapter of electronic processes since the mid-1990s.  Information flows in the airline industry have gotten much better during the past 20 years with widespread information sharing through computer networks. Airlines of today have developed a dependency on technology for their operational and strategic management including the management of the supply chain (Buhalis, 2004). Hattendorf (2002p. 61), however, cautioned that information sharing processes suffer when there is an overemphasis on a single factor which is information technology. Technology frequently dominates other more important factors such as processes, structures or strategies.

            While these may be case for other airline industries, the Libyan airline industry is slowly catching up since its resumption in mid-2001. The UN imposed a sanction on Libya and air travel was prohibited between 1992 and 1999. The main reason for this were deteriorating aviation infrastructure and declining serviceability of many Libyan aircraft. An $80 million program has been approved to improve airport infrastructure and air control network. Aside from Libyan Arab Airlines and Buraq Air, Afriqiyah Airlines is one of the leading airline companies in Libya (Anima, 2010).  

            Afriqiyah Airlines is a Libyan airline based in Tripoli. Afriqiyah Airlines operates domestically and internationally via its services to over 25 countries in Europe, Africa, Asia and the Middle East. Afriqiyah comes from the Arabic language word for African and the 9.9.99 logo refers to the date of the Sirte Declaration that marked the establishment of African Union. Afriqiyah Airlines therefore desires to be the “Airline of Africa”.

Research Questions

            How can information sharing be fostered electronically among buyers and suppliers in the Libyan airline industry will be explored in this study. There is the need therefore to investigate the use of ICTs in the Libyan airline industry. The independent variable is the Libyan airline industry as represented by Afriqiyah Airlines while the dependent variable is the information sharing processes between buyers and suppliers. Another dependent variable is the application of ICTs between buyers and suppliers. How the information sharing processes affect the competitiveness of the airline will be also treated as dependent variable.

            In lieu with this, the following questions will be given answer to:

1)    How do buyers and suppliers exchange information within the Libyan airline industry? What are the roles of ICTs in the process?

2)    What are the most critical information sharing issues faced by the Libyan airline industry? How does ICTs contribute in these issues?

3)    How does electronic information sharing affect the competitiveness in the Libyan airline industry? Is the use of ICTs in sharing information strategic?

Research Objectives

            The main aim of the study is to investigate the nature and dynamics of electronic sharing of information between buyers and suppliers in the Libyan airline industry. With this, the following objectives will be addressed:

• Trace the information sharing processes of buyers and suppliers within the Libyan airline industry
• Explore the roles of ICTs as used by buyers and suppliers in the contemporary Libyan airline industry
• Investigate the different issues that surround the electronic information sharing of buyers and suppliers within the Libyan airline industry

Significance of the Study

            This study is undertaken to advance the awareness in various information sharing processes between buyers and suppliers which will provide greater efficiency to the airline industry. Understanding the information sharing schema between suppliers and buyers meant to uncover how the airline industry can further the process proactive and advantageous.

            Based on the findings of this research, the airline operators as well as the suppliers to the airlines will be provided with guidelines/recommendations in optimizing information sharing processes that will minimize the costs and time while also maximising the quality of the information being shared. Information sharing optimization could only be achieved if the airline operators as buyers and their suppliers are educated enough on what specific strategies will provide them with much efficiency. The study is also important as it can relate the factors affecting the likelihood of success in every buyer and supplier relationship. 

            On a more personal note, I am expecting a role in the global business environment in the future hence it is my role to contribute to literatures concerning understanding strategic relationships or how relationships can be made strategic. In addition, this study will be important for airline operators as buyers and suppliers to them because it will increase their understanding of strategic information sharing processes that develops strong relationships in the long term.

Scope and Limitations of the Study

            The study is limited on the elements of supply chain unique to the Libyan airline industry. The utilisation of a company as the basis of the case study is another limitation because of the fact that it cannot make generalisations. To compensate, a recommendation for future study will be provided so as to promote the continuous investigation on the issue. In this way, a continuum of learning through investigation on this issue could be promoted.

            Another limitation is the availability of related literatures about the information sharing processes in the airline industry particularly in Libya. An initial research on the internet was already conducted prior to this proposal and it was found that resources that exactly relates with the topic are scarce. However, a good contingency for this is by reviewing literatures on specific variables related to the study topic.

            Survey and interview are the primary means in the study in collecting data. The study is also limited only the pieces of information that the respondents and interviewees are willing to disclose. It is limited to the respondents’ capability to answer such questions. For the interviewees, notably, there are commercial information that may not be disclosed because of its commercial confidentiality.

Conceptual Framework

            The study adapted the model developed by Esposito and Raffa (1991) which is called the technology transfer model. Such a model aims to analyse the wide range of buyer-supplier relationships. In this model, the channels through which buyers and suppliers communicate hence share information are viewed as vehicles for transferring various data and/or intelligence components. Either buyer’s or supplier’s technology, these are perceived as knowledge embodied in systems and human resources. As the model implies the application of organisational rules, professional skills, machinery and information, there is a systematic exchange of information. There are different channels that can directly link to the information sharing process as identified below thereby representing the flow of exchange of information between the two entities.

            Further, Rippa (2005) noted that the model is able to measure the intensity of collaborative relationships between the buyer and the supplier. The degree of use of technology transfer channels demonstrates that the new buyer-supplier relationships are typified by the significant exchange of the technology categories. 

Figure 1 Technology Transfer Model (Adapted from Esposito and Raffa, 1991)

Organization of the Thesis

            The thesis shall be divided into five chapters in order to provide clarity and coherence on the discussion of the suppliers and buyers particularly when it comes to sharing information. The first part of the dissertation will be discussing the background, problem statement, questions and objectives and the significance and limitations.

            The second chapter shall be discussing the relevance of the study in the existing literature. It shall provide studies on information sharing processes, supply chain and buyer-supplier relationship. After the presentation of the existing related literature, the researcher shall provide a synthesis of the whole chapter in relation to the study.

            The third part of the study shall be discussing the methods and procedures used in the study. The chapter shall comprise of the presentation of the utilised techniques for data collection and research methodology. Similarly, it shall also contain a discussion on the used techniques in data analysis as well as the tools used to acquire the said data.

            The fourth chapter shall be discussion of the results of the study. Data to be presented will be statistically treated in order to uncover the relationship of the variable involved in the study. With the said data, the chapter seeks to address the statement of the problem noted in the first chapter.

            The last chapter shall comprise of two sections: the conclusions of the study, and the recommendations. With the three portions, the chapter shall be able to address the problem stated in the initial chapters of the study.

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