The Impact of Business-to-Business e-marketplaces as Extended Media in the Procurement Supply Chain of Airlines

In recent years, a growing number of companies in many industry sectors have decided to include e-Business as an integral part of their strategy to enhance competitive advantage. The airline industry, having always been a great instigator and guarantor for innovative changes, is one of the industries where developments in Information and Communication Technology (ICT) in general have proven to be an inevitable factor of success. Among recent innovative developments are B2B e-Marketplaces, which have been hypothesised to optimise procurement processes and to add significant value in airlines’ supply chains. However, while e-Marketplaces have been analysed in more detail from an institutional perspective, very limited research has been undertaken to date in exploring the e-Marketplace adoption drivers and performance indicators, particularly from a diffusion-of-innovation (DOI) and innovation-organisation-environment (IOE) viewpoint. To address these issues, this research establishes a contingency framework and hypotheses are then developed that are subsequently subjected to empirical testing through quantitative methods. Methodological triangulation has been employed to address weaknesses and bias of using a single research method. Thus, extensive qualitative and quantitative data were collected by means of two survey instruments aiming at airlines (response rate 29%) and e-Marketplaces (response rate 65%). In addition, two explorative case studies were developed to qualitatively interlink the survey findings from both an e-Marketplace adopter and a non-adopter perspective. Results confirm that e-Marketplaces have gained momentum in the airline industry, following the typical S-curve pattern of technology adoption. As expected, e-Marketplaces have secured a relatively high degree of diffusion, with 65% of airlines already having used and e-Marketplace of some sort and 25% being financially involved in terms of ownership. Factors affecting the adoption of e-Marketplaces were investigated. The airline’s strategic classification has an impact on e-Marketplace adoption. 82% of full service airlines have adopted e-Marketplaces, followed by low-cost airlines with 79%, regional airlines with 50% and finally charter airlines with 27%. There is also a significant divide between large and small airlines, the latter of which often adhere to more traditional forms of purchasing. Other drivers or strategic ‘stimuli’ for e-Marketplace adoption in the airline industry include the extent of strategic partnerships, the level of overall ICT sophistication and the level of internet services used. In contrast to theoretically derived expectations, pressures from the business context, the level of resource/information sharing, the extent of outsourcing and joint procurement integration, and the purchasing organisation centralisation/decentralisation could not be confirmed as adoption drivers. In terms of performance indicators, this study confirms that e-Marketplace use is positively related to the overall satisfaction with an airline’s procurement practices and processes. Results suggest that e-Marketplaces do reduce search cost of airlines, mostly in the area of spares and repairs, tools/GSE and office supplies. Other benefits illustrated by the study typically occur in the facilitation of order processes, a higher transparency of suppliers, reduced inventories, product price reductions and a reduction in purchase order costs. Savings from e-Marketplace adoption, which occur more in process costs rather than product costs, tend to exceed the investment costs. However, results indicate that e-Marketplace adoption does not have a direct impact on overall airline performance, but on operational effectiveness and efficiency. The results also suggest that while the e-Marketplace diffusion level is relatively high among airlines, many airlines still make only rudimentary use of all offered services. There are still a number of challenges ahead for e-Marketplace implementation, such as further supplier integration, training and education of staff or the development of further e-Marketplace services, as the technology is often not yet ready to support the range of airline requirements. The primary contribution of the study is to provide an original starting point for a more structured focus to improve understanding of the adoption process and value creation of B2B e-Marketplaces. This foundation will allow for further investigation