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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