TThe impact of electronic commerce on logistics functions is considerable. It will foster the necessity of coordinating particularly marketing and logistics functions. The use of electronic commerce will lead to significant reductions in cost and increased revenues
(sections 6 to 10). The most important being: significant reduction in distribution cost (section 9).
Incremental revenues through reduced inventory of seats (section 8)
The costs of implementing electronic commerce are significant, however savings in airline operations costs of up to 70% have been reported, depending on the share of electronic tickets. As long as this share remains low, short-term revenues cannot be expected (section 11).
Table of Contents
1. WHAT IS ELECTRONIC COMMERCE
2. DEVELOPMENTS IN ELECTRONIC COMMERCE
3. EC TECHNOLOGIES
4. SECURITY OF ELECTRONIC COMMERCE
5. STRATEGIC ISSUES OF ELECTRONIC COMMERCE
6. PURCHASING
7. ORDER PROCESSING/BILLING
8. INVENTORY
9. DISTRIBUTION
10. CUSTOMER SERVICE
11. COSTS & REVENUES OF EC
Objectives and Research Focus
This report examines the transformative impact of electronic commerce on the operational logistics functions of an airline company. The primary objective is to evaluate how digital integration can streamline business processes, reduce costs, and enhance revenue generation in the aviation industry.
- Strategic implementation of electronic commerce in airline operations
- Technological frameworks for process re-engineering
- Cost reduction opportunities in procurement, distribution, and inventory management
- Security challenges and regulatory requirements for digital transactions
- The evolution of customer service through personalized digital interfaces
Excerpt from the Book
3. EC TECHNOLOGIES
This section describes the key technologies of electronic commerce, currently available or under development. It will discuss which technology to use for what purpose, when to implement stand-alone or integrated systems as well as benefits and impediments of each technology. The crucial issue, however, will be the integration of existing and new systems in a seamless way. This is where additional value can be created and costs can be reduced.
A number of ‘core’ or ‘base’ technologies are underlying the system of electronic commerce. The combination of those provides another level of technologies, called capabilities below. These capabilities provide generic value. The base technologies and the generic values, as layed out in figure 1, remain the same across key electronic commerce technologies.
To estimate the value added by electronic commerce, the future development in those base technologies has to be observed very closely.
Specific technologies are also useful for a certain scope of relationships of our airline company. This can be for functional reasons, or related to cost. Again future developments, especially the reductions in price, have to be followed carefully to react to any changes in time. Consequently table 1 represents the current situation (mid 1998) and has to be adapted accordingly.
Summary of Chapters
1. WHAT IS ELECTRONIC COMMERCE: Defines electronic commerce as a business concept focused on digital transaction processes rather than specific technologies.
2. DEVELOPMENTS IN ELECTRONIC COMMERCE: Analyzes the growth trends in online ticket sales and the increasing role of web-based travel services.
3. EC TECHNOLOGIES: Discusses the necessity of integrating diverse base technologies to create seamless value-added operational systems.
4. SECURITY OF ELECTRONIC COMMERCE: Identifies security concerns and fraud as primary inhibitors to consumer trust and adoption.
5. STRATEGIC ISSUES OF ELECTRONIC COMMERCE: Explores the broad strategic implications of digital commerce on internal functions and external supply chains.
6. PURCHASING: Highlights cost-saving potentials through digital procurement, vendor integration, and improved maintenance procedures.
7. ORDER PROCESSING/BILLING: Examines how automation in ordering reduces administrative overhead and requires high system reliability.
8. INVENTORY: Details the transition toward dynamic pricing and the reduction of physical and seat-based inventory through electronic channels.
9. DISTRIBUTION: Assesses the impact of direct-to-consumer digital sales channels on commission structures and traditional intermediary costs.
10. CUSTOMER SERVICE: Outlines the shift toward mass-customization and productivity gains in handling flight information and service requests.
11. COSTS & REVENUES OF EC: Weighs the high initial investment costs against potential long-term operational savings and revenue growth.
Keywords
Electronic Commerce, Airline Industry, Logistics, Digital Transformation, Supply Chain, Procurement, Online Booking, Yield Management, Customer Service, Information Technology, Cost Reduction, Revenue Generation, Distribution, Security, Automation.
Frequently Asked Questions
What is the core focus of this report?
The report investigates how electronic commerce impacts the various logistics functions of an airline, ranging from procurement and maintenance to passenger distribution and customer service.
Which central topics are addressed?
Key topics include technology integration, security for digital payments, strategic management issues, and the economic impact on airline costs and revenues.
What is the primary goal of the study?
The primary goal is to provide an executive briefing on how electronic commerce acts as a conceptual framework to create win-win situations through process optimization and technological implementation.
Which scientific methodology is applied?
The research relies on an industry-wide analysis of technological capabilities, current digital market developments (as of 1998), and strategic management theory applied to logistics.
What is covered in the main section of the document?
The main section details specific logistics functions—purchasing, order processing, inventory, and distribution—and assesses their transformation potential through electronic commerce.
Which keywords best describe this research?
The research is best characterized by terms such as Electronic Commerce, Logistics, Airline Management, Digital Transformation, and Operational Efficiency.
How does electronic commerce change seat inventory management?
It allows for 'last-minute' dynamic pricing and auctions, enabling airlines to maximize revenue by reducing the inventory of unsold seats through more flexible fare structures.
What are the biggest barriers to implementing electronic commerce in airlines?
The report highlights high up-front development costs, technical integration complexities, and, most significantly, a lack of security that hinders full consumer adoption.
Why are airlines currently hesitant to fully commit to electronic sales?
Short-term profits are difficult to realize due to high initial investments; therefore, success requires long-term commitment and strategic vision from senior management.
What role does the legal environment play in this development?
The lack of a predictable international legal framework for electronic commerce creates uncertainty regarding taxation and contractual compliance, which currently hampers full-scale exploitation.
- Quote paper
- Paul Freudensprung (Author), 1998, The impact of e-commerce on the logistics function of an airline - Executive Brief, Munich, GRIN Verlag, https://www.grin.com/document/186330
