Understanding Organisational Change-- E-Commerce in the in-flight catering organisations
... lowering costs and increasing value. For example, Delta Airline, one of Gate Gourmet’s largest customers, flew about two and a half thousand flight legs every day from many different airports around the country. Brand and service management had become increasingly important. From the passenger’s perspective, required services included meals, beverages, and duty-free items, audio and video entertainment (By research in Delta Air Line 2002). On the other hand, behind-the-scene services such as cabin cleaning, equipment loading and supplies provisioning also needed to be coordinated. As a result, Gate Gourmet formed a subsidiary division, e-gatematrix, llc, to automate and improve the in-flight supply chain across the airline industry. The new service provided in e-gatematrix is a web-based B2B e-commerce application, which is named InFlight Exchange (IFx) by e-gatematrix. The organizational management has been restructured, after the e-commerce adopted by Gate Gourmet in reengineering the business process in the airline catering industry. Since the birth of e-gatematrix, it is the sign of the completion of the e-gatematrix’s decentralisation and the Delta’s outsourcing. As a consequence of these processes, the organisation structure of Gate Gourmet has been changed. Before the IFx was implemented in e-gatematrix, the organisation structure can be interpreted as a well organised top-down management structure (see figure 1) Figure 1.Organisation structure of Gate Gourmet (Source: www.gategourmate.com) After the e-gatematrix formed to carry the management of the supply chain in Gate Gourmet, the structure changed and this new business member of Gate Gourmet interacted among different management levels. From this new structure, it is very clear that the E-GateMatrix has become one major division in Gate Gourmet. However, e-gatematrix plays the role of providing the new technology platform to the whole company including all other regional divisions. Thus, the day-to-day business of the other three divisions have been migrated and integrated to the new established e-commerce information system. The figure below shows the new structure: Figure 2.New organisation structure with e-gatematrix. From this new structure, there is one important organisational issue greatly facilitated by the new technology of e-commerce; that is the cross-organisation collaboration. All divisions and all levels in organisation structure cooperate together through the Internet based platform and the new technology used in e-gatematrix. In addition, this structure has extended and enabled the cooperation accessing points all over the world and merely requires a computer and the internet access. Technology Change 1. Problems companied with the previous supply chain After the organizational structure change, poor supply chain visibility and demand information sharing was prevalent in the traditional supply chain which was the same problem to both catering corporation and Airline Company. Each airline provided demand signals for above-the-wing services by publishing flight schedules. However, the dissemination of this information was erratic and ranged from fifteen days to three months in advance of flight departure. The schedules were shared with supply chain partners through fax, email, post and EDI. However, this communication meant additional expenditure and time. The study conducted by SupplyTech, showed that process redundancies, antiquated procedures and internal inefficiencies were deteriorating quality and increasing costs of above-the-wing services. Due to the complicated environment, the provisioning of all the catering services in a consistent and predictable manner required substantial logistical and demand planning by supply chain participants. (Wareham, Rai and Khan, 2002) 2. Important changing issues on Information technology Infrastructure In the complicated airline catering service environment, Information communication between subdivisions and trading partners became more and more important. In 2000, a new business-to-business (B2B) e-marketplace was launched by Gate Gourmet and i2 Technologies, Inc. This was the most important organizational technology change of Gate Gourmet which brought the birth of e-gatematrix, a new business to business platform for managing all catering and related services for the airline and travel industry (Gate Gourmet Website). Powered by i2’s TradeMatrix™ marketplace platform, e-gatematrix originally was designed to help manage airline catering functions by providing service design recommendations based on customer demand, inventory availability across companies, planning collaboration, and supply chain coordination and optimization to the airlines and their suppliers. Thus, according to the web site introduction, a network community could be established by e-gatematrix and provided real-time, integrated information to its sister divisions and trading partners at every stage of the "Above-The-Wing" value chain. Establishing an integrated communication community and offering the participants a variety of systems, products and services were e-gatematrix’s major tasks. (E-gatematrix Website) 3. New Information Technology Improvement The establishment of e-gatematrix was a typical information technology application sample implemented in modern airline catering market. Originally, i2’s TradeMatrix offered e-gatematrix the broadest spectrum of solutions and hosted services, including procurement, commerce, fulfillment, customer care, retail, planning and product development enabling customers, partners, suppliers and service providers to conduct business in real time. Theses services are powered by i2’s advanced optimization and execution capabilities for improved decision-making. In the original plan, e-gatematrix was designed to manage Delta Air Lines’ global catering processes including menu design, sourcing and procurement, transportation and distribution, equipment ownership, inventory and distribution, and transaction management. (Gate Gourmet Website) However, it was found that the online ordering application on the portal didn’t have the capacity to handle large orders. According to related articles, (Higgins, 2002) an airline or supplier could select orders from e-gatematrix’s online catalogs with no problem, but when it came time to submit the final order, the user would have to endure the slow back-end processing phase or find that the order didn’t execute. It was found that the company’s ordering software, i2 Technologies’ TradeMatrix, was written for smaller orders, not ones with as many as 300 line items. So e-gatematrix, replaced the application with RightWorks, which i2 purchased in 2001.That application was able to better support the infrequent but crucial 300-line orders. Additionally, RightWorks supported the many-to-many relationships of InFlight exchange’s eMarketplace, while most packages were designed for one-to-many relationships in which the portal sells products to multiple buyers. With the support of many-to-many technology, efficient information communications could be well handled in transactions between up to four parties including e-gatematrix, the airline, the buyer [caterer] and the seller [supplier]. For instance, in order to provide powerful online support to its users, a combination of ISE and XML has been used to integrate airline’s back-end applications with e-gatematrix’s portal tools. E-gatematrix’s applications obtained real-time feeds from airlines on its flight schedules and passenger counts, on its marketing systems. Then, the given flight-scheduling tools on the portal let the airline forecast how many refreshment carts, meals, plates, headsets and sodas it would need for a particular flight. All the information could be simultaneously shared by the trading partners. (Higgins, 2002) E-gatematrix’s other technology solutions have been provided by SupplyTech (one of Gate Gourmet’s information technology support partners), such as the B2B exchange platform and procurement planning application, modules from SAP R/3 and other customized applications. The applications that allowed e-gatematrix to provide supply chain services were at the cutting edge. By adopting a multivendor modular architecture, it became possible for e-gatematrix to evolve the functionality, accuracy and automation of its IT applications. In 2001, the chief purchasing officer of e-gatematrix, Daniel Valencia, said “The development of our IT infrastructure has aimed at the objective of minimizing our marginal cost (time and money) of adding more airlines to our systems. We have done everything possible to make our side as flexible as possible. These include using Internet technologies for instant access from any web-enabled computer.” (Wareham, Rai and Khan, 2002) Generally, creating an advanced IT infrastructure that enhanced supply chain management would also create synergies for additional services to be provided by e-gatematrix, such as retail sales, industry quality and benchmarking reports, and personalized meal menus. The leverage for future business opportunities that could be obtained from IT infrastructure change was going to be immense. Part II. The Effects of Changes Effect on the business environment Some argue that the more unstable the environment, the more organisations need to be aware of it and understand it. (Baines, 1998) Hence, it is clear that the business environment is an important aspect for which organisations have to be under consideration and examined. Scherrer (2003) indicated that the business environment has been proven to be more dynamic than any time before and the less studying of the unpredictable business environment can lead the decline or disruption of the business. Therefore, the research of understanding organisational changes must study the impact on the environment as a concomitant. Another issue has been discovered during the research is that the business environment change can yield the organisational changes. On the other hand, the organisational changes sometimes can completely transform the environment of the entire industry. During these processes, IT plays the crucial role as facilitating both kinds of changes. 1. The Interaction of Environment and Organisational Changes Before e-commerce was brought into the inflight catering industry by Gate Gourmet, the IT infrastructure, as has been stated previously, was mainly focused on the transaction-oriented information systems. With the step of acquisitions and globalisation, the traditional IS can not perform the expected functional requirements. Thus, the business environment determines that there needs new technology to be adopted in the inflight catering industry to solve the urgent requirements. At the same time, Gate Gourmet noticed that the successful cases in other catering industries by using e-commerce seem to be a great choice for them. Therefore, the existing model produced by I2 became the choice. After the implementation of IFx system in e-gatematrix, the business environment of entire inflight catering industry now has been influenced by the technology change in Gate Gourmet. Since E-GateMatrix has developed a stable and mature B2B system running via the internet. Thus, this great innovation has driven the other rivals to consider the new IT infrastructure. 2. The Effect on Internal Environment The internal elements of business environment can be interpreted as the factors in finance, operations and marketing within an organisation. (Scherrer, 2003) However, some other researchers such as Doherty and King (1998) had put forward another element of internal environment, which is the IT infrastructure of the organisations. Concomitant with the organisational changes, these internal environment elements have been affected as well. For instance, after the business restructuring accomplished in Gate Gourmet, the operations of the previous transaction or business process has altered from distribute style to centralised process. This point will be discussed later in the third part of this section. Moreover, before the e-commerce was adopted in e-gatematrix, the IT infrastructure was mainly consist of intranet, but even there might be some web-sites of the company, the primary functions merely can be concluded as the introduction of the business and the information of their business services. Later on, Gate Gourmet migrate its primary business transactions into the internet and integrate the intranet with the internet. Hence, the technology change and the organisational change pushed the organisation to innovate and develop an advanced internal business environment. 3. The Effect on External Environment Scherrer (2003) also categorised a number of issues in the external business environment which includes the number of businesses entering and exiting the given industry, economic climate, and the legal and political issues. After the changes occurred in Gate Gourmet, some of the external elements had also been influenced as discussed below. The new technology used in the inflight catering industry which is first adopted by Gate Gourmet has significantly changed the way in doing business with the suppliers and airline companies. The new entrants of catering companies can not merely focus on the traditional way; they have to examine the ability of providing e-commerce services in prior to starting the business. On the other hand, the successful implementing of the IFx system yields the extending covered range of Gate Gourmet. As been said in the official website, Gate Gourmet now owns their services in 33 countries on six continents compared to the previously Europe located. The organisational changes give the capacity to merge or acquire the other smaller businesses. Hence, it throws the consideration to the new entrants and existing business that whether they can be more competitive than Gate Gourmet to survive or win a place in the market share, or they can start to think about the quit or the cooperation with the powerful syndicate. On the other hand, the growing of Gate Gourmet probably will cause the debate on the monopolisation and anti-monopolisation. An example which is well known is the case of Microsoft, which has been accused for monopolisation in IT industry since its business against the fair competition. Because of the leading position of Gate Gourmet and the remarkable market share rate in the inflight catering industry; and the innovation brings the opportunity and ability for it to control the whole industry. Accordingly, it is hard to say that no one might accuse Gate Gourmet since it is the first and only one to adopt new technology and hold the entire inflight catering market. Effect on organisation’s strategy The strategy of Gate Gourmet is focused on providing solutions and services to global airline customers for managing their inflight product and services supply chain. However, proceeding to this statement has been approved to be formidable since the inefficiency above-the-wing services management was identified in the airline companies and the urgent needs of the solution on global logistic management and the efficient services management. Nevertheless, Gate Gourmet realized this situation and found their way by establishing strategic allies all over the world to improve the catering services efficiency and effectiveness (www.egatematrix.com). This is also the strategic vision of the new born member – e-gatematrix llc., because they found that Delta Airline did not interest to invest a huge amount money and time to develop the suitable system to manage the in-flight supply services, and this is where e-gatematrix comes in. The following strategic effects have been identified in Gate Gourmet. 1. Improvement the in-flight supply chain E-gatematrix found out the hard way that the online ordering application on the portal did not have the capacity to handle large orders. Big food orders for in-flight meals each with hundreds of ingredients took more than 10 minutes to process and sometimes did not go through at all. Customers would get frustrated and cancel their orders or sometimes resubmit them. Then, it is creating a duplicate order in the system. To solve problem and increase the efficiency and profit of the services that the company’s use strategy by ordering software i2 Technologies’ TradeMatrix. This software was written for smaller orders and better supports the service efficiency. E-gatematrix configured the new ordering application to work asynchronously so the actual back-end transaction takes place behind the scenes rather than requiring the user to await confirmation of order (www.egatematrix.com). In addition, it also can handle more transaction volume and users so the database and application servers do not get overloaded a process. 2. Global Partnership Kuehne & Nagel The Kuehne & Nagel Group is one of the world’s leading logistics companies. Its strong market position lies in the sea-, airfreight and contract logistics businesses, with a clear focus on providing IT-based Supply Chain Management Services. E-gatematrix, llc E-gatematrix provides its solutions and services as a turnkey solution or as a customized airline solution by allowing airlines to select the modules that best address their current needs. e-gatematrix's solutions allow the entire inflight s...