Serguei Netessine - Faculty Research in Knowledge@Wharton

Will Customers Be the Excess Baggage of Airline Consolidation?

Wed, 28 Apr 2010 14:56:07 EST

After losing $60 billion in the last decade -- and billions more recently when a cloud of volcanic ash grounded flights across Europe -- airlines are looking to consolidate as a way to return to profitability amid continued struggles with high fuel prices, competition from low-cost carriers, and a limited customer pool that shriveled even more during the recession. But experts are skeptical about the "bigger is better" strategy. Many observers say the carriers have proved downright flighty at following through on making changes that improve operations and put the customer first.

Will Google's Nexus One Change the Wireless Industry?

Wed, 20 Jan 2010 16:35:09 EST

On January 5, Google launched the Nexus One -- its new "superphone" -- with a good deal of fanfare. Although the launch itself was quickly overshadowed by the online giant's surprise showdown with China over censorship, the company's attempt to rewrite the rules of the wireless industry has not gone unnoticed. Through its online store, Google is selling the Nexus One directly to consumers, sidestepping service providers that operate as device gatekeepers under the traditional sales model. The operation is off to a somewhat rocky start, leaving some observers to wonder whether Google can adapt to its new role in direct sales, but the bigger question is whether Google can alter consumer behavior and the economics of an entire industry.

Fit for the Holidays: Amazon Is Shaping Up and Shipping Out

Wed, 11 Nov 2009 16:18:47 EST

Amazon.com enters the holiday shopping season with enviable strength. The financials at the world's biggest online retailer are looking better than ever while it is finding new ways to muscle in on the competitive advantages traditionally enjoyed by conventional bricks-and-mortar retailers -- including its recent launch of same-day shipping in seven major U.S. cities. But as Amazon grows, competitors are still giving it a run for its money, according to e-commerce and marketing experts at Wharton.

Pay for What You Get: Putting Performance-based Contracting to the Test

Wed, 14 Oct 2009 15:33:51 EST

Every company wants to improve the efficiency and cost-effectiveness of its supply chain, but what's the best way? Since 2004, the United States Defense Department has required its suppliers to adopt performance-based contracting so that it pays them a fee based on the amount of time big-ticket items like F-22 fighter jets are in use without requiring repairs. But is that better value than more traditional contracts that charge customers for time and materials when products break down? According to a new study co-authored by Wharton researchers, the answer is yes.

Rethinking the Long Tail Theory: How to Define 'Hits' and 'Niches'

Wed, 16 Sep 2009 16:45:37 EST

The Long Tail theory suggests that the Internet drives demand away from hit products with mass appeal, and directs that demand to more obscure niche offerings. Yet a new research paper by Wharton professor Serguei Netessine and doctoral student Tom F. Tan challenges that theory using data from the movie rental company Netflix.

On the Clock: Are Retail Sales People Getting a Raw Deal?

Wed, 01 Oct 2008 17:54:21 EST

Ann Taylor Stores -- a New York-based retailer of upscale women's clothing -- is using a new computer scheduling system that assigns the busiest and most desirable hours to employees with the strongest sales numbers. Those with less success on the selling floor get far fewer and less desirable hours when new schedules are posted. While systems like these can help improve productivity, Wharton faculty and others warn that they are no substitute for hands-on management when it comes to dealing with workers.

Procurement -- Performance-based Logistics

Mon, 14 Jul 2008 11:13:41 EST

These days, when the U.S. Department of Defense buys a fighter jet from Lockheed Martin, it doesn't simply pay Lockheed for the physical product. Instead, the government has a "performance-based contract" with the defense supplier, according to Serguei Netessine, professor of operations and information management at Wharton. This contract says, in effect, that the government's reimbursement to Lockheed hinges on the jets' performance -- that is, how often the planes are able to fly. In this interview, Netessine describes how performance-based contracts are becoming more common in a variety of industries.

The Domino Effect: Will Airlines Follow One Another in the Consolidation Game?

Wed, 20 Feb 2008 15:18:03 EST

Delta Airlines is reportedly about to merge with Northwest Airlines in a deal that's likely to set off a major round of consolidation in the airline industry. Wharton experts say that other major airlines are likely to fall in line with their own consolidation plans. Or so the speculation goes. But this scenario has been talked about before. Is the latest consolidation dance for real? And what are the implications of such mergers for consumers, low-cost carriers and the economics of the airline industry overall?

Can Dell's Turnaround Strategy Keep HP at Bay?

Wed, 05 Sep 2007 15:46:23 EST

In an interview with Knowledge@Wharton one year ago, Michael Dell declared his support of then-CEO Kevin Rollins, indicated that supply chain efficiencies and direct sales gave the company a competitive edge, and added that his namesake company was making great strides in customer service. What a difference a year makes. Michael Dell took over the reins from Rollins on January 31 and set out to remake the $57 billion Round Rock, Tex., PC manufacturer. The effort comes as the company has lost its worldwide market share lead to Hewlett-Packard and faces competition from other PC manufacturers as well. While experts generally agree that Dell has made progress in some areas, questions about its turnaround remain.

Feel Free to Move About the Airport: Turbulence Continues to Roil the Airline Industry

Wed, 25 Jul 2007 14:40:29 EST

Wharton professor Serguei Netessine, who recently had to spend the night in an airport hotel after being kicked off an overbooked evening flight, is one of thousands of airline passengers this summer who have been stranded on runways or sleeping in airports. While airline service is no longer the white-glove experience it once was, it has recently gone beyond bad food and snappish flight attendants. "Previously, airlines worried about dissatisfied customers. Now I don't think they worry about it because the customer service at all airlines is so horrible," says Netessine. Knowledge@Wharton looks at the current state of the airline industry.

Why It's Unhealthy to Be a Man in Russia: Looming Crises in Health Care and Demographics

Tue, 24 Apr 2007 15:36:28 EST

For all of its economic advances, Russia remains mired in a demographic crisis brought on by a combination of low birthrates and premature deaths. Russians spend more of their lives sick than their peers in the United States, Western Europe and Japan. If current trends don't reverse, Russia's population will drop to about 100 million from its current level of about 143 million by 2050, causing a shortage of workers that would choke off the country's growth. By simply addressing preventable deaths and raising life expectancy to the average level of Western Europe, Russia could give its gross domestic product a huge boost, according to a World Bank report entitled, "Dying Too Young."

Russia: 'Floating on an Enormous Pool of Petrodollars'

Tue, 24 Apr 2007 15:36:32 EST

No one disputes that oil has fueled Russia's return to international prominence. The country has the world's second biggest oil reserves, behind Saudi Arabia, and its largest natural gas reserves. Each uptick in the price pumps billions of additional dollars into the Russian economy. The problem is, however, that oil-rich nations seldom transform their resource endowments into innovative market systems or branch out into other industries. Indeed, "petrostates" usually don't take steps to prepare for the day when their wells run dry. Will Russia be any different? Experts weigh in.

No Going Back: Russia Today Suggests Stability Instead of Chaos

Tue, 24 Apr 2007 15:36:52 EST

Twenty years ago, few would have predicted that Russia would soon experience an economic boom. The country's economy had been shackled for decades by Soviet rule. It managed to produce oil, nuclear warheads, Kalashnikov rifles and very little else of interest to the market economies in the West. Then came the reforms of former Soviet President Mikhail Gorbachev, perestroika, the revolution of former President Boris Yeltsin, free markets, and billion-dollar fortunes for at least a few. But how are average Russians faring under these changes, and what challenges lie ahead in areas like health care, education and employment?

Out of Stock? It Might Be Your Employee Payroll -- Not Your Supply Chain -- That's to Blame

Wed, 04 Apr 2007 15:13:23 EST

Attention, shoppers: Did you find everything you were looking for? Retail customers who answer "yes" to this question might very well represent the Holy Grail to retail operators who want to increase their sales with only a modest increase in costs or, in some cases, increase sales by merely reallocating staff within a store at no extra cost. Impossible? Not according to a new study on retail store execution by Wharton operations and information management professors Marshall L. Fisher and Serguei Netessine, and Wharton doctoral student Jayanth Krishnan.

'Power by the Hour': Can Paying Only for Performance Redefine How Products Are Sold and Serviced?

Wed, 21 Feb 2007 14:55:13 EST

Imagine paying for your car only when it works. Or your television. Or even your high-end toaster. That might sound far-fetched, but it could be the future model for purchases requiring service over time. According to research by two Wharton professors of operations and information management, Morris Cohen and Serguei Netessine, and doctoral student Sang-Hyun Kim, this new approach to service supply chains is already reshaping customer-supplier relationships in defense and aerospace contracting under the name "Performance-based Logistics" (PBL). It could have implications for certain retail sectors as well.

A Combined US Airways-Delta Air Lines Might Fly, but Consumers Could Face Unfriendly Skies

Wed, 29 Nov 2006 18:29:57 EST

Although far from a done deal, US Airways' hostile bid to acquire bankrupt Delta Air Lines would result in a strong combined company and would be a feather in the cap of the chief executive of US Airways. But it would also be a mixed blessing for passengers, resulting in more flight choices but most likely higher fares as well, according to faculty members at Wharton and industry analysts, who also note that the overture could lead to further consolidation in the industry.

Can't Find That Dress on the Rack? Retailers Are Pushing More Shoppers to the Web

Wed, 01 Nov 2006 15:04:42 EST

Shoppers with tastes, or sizes, that fall outside the mainstream may have more trouble finding what they want in stores as retailers attempt to shift low-volume items to Internet sales. According to Wharton faculty and industry analysts, retailers are paring back in-store selections in order to save inventory handling costs as well as precious floor space. The strategy, however, has its drawbacks.

Supply Chain Enterprise Systems: The Silver Bullet?

Wed, 06 Sep 2006 15:05:07 EST

Supply Chain Enterprise Systems -- information, communication and management technologies that support supply chain functions -- have quickly become a central element of supply chain management strategy. But, implementing these systems is often a difficult undertaking with an uncertain outcome. For application of supply chain technology to be successful, experts from BCG and Wharton argue that certain elements need to be in place: namely, a clearly defined need based on supply chain strategy, as well as clear expectations about what such technologies can and cannot do for a company.

Wal-Mart: Is There a Downside to Going Upscale?

Wed, 14 Jun 2006 15:41:34 EST

After saturating its target market of working class, bargain-hunting consumers, Wal-Mart is ratcheting up its low-price strategy to appeal to more upscale shoppers by expanding its merchandise lines to include organic foods, better wines, high-end consumer electronics and new fashion-oriented apparel. It's an approach that carries some risk, say Wharton faculty and analysts, but that is dictated by intense competition and the lack of other opportunities for growth.

Inventory Management: A Way to Give It a Grade

Wed, 22 Feb 2006 16:56:24 EST

Cell phones that do email, take photos and surf the web. Cars with options ranging from built-in satellite radio to rain-sensing wiper blades. While a seemingly endless variety of new products may delight consumers, it makes inventory management as dicey as predicting what a teenager will want for her birthday next year. The problem, say Wharton professor Serguei Netessine and Wharton doctoral student Serguei Roumiantsev, is that no one knows how to measure the quality of supply chain management using companies' publicly available financial data. In a recent paper entitled "Should Inventory Policy Be Lean or Responsive? Evidence for U.S. Public Companies," the two researchers provide "a statistical methodology that links managerial decisions related to inventory with accounting returns."

Christmas Creep: The Shopping Season Is Longer, but Is It Better?

Wed, 01 Mar 2006 17:04:17 EST

Call it "Christmas creep." Holiday decorations are going up earlier in stores with each passing year, seasonal merchandise gets stocked on shelves soon after Halloween, and Christmas-related commercials are appearing on TV long before Santa Claus makes his way through Manhattan in the Macy's Thanksgiving Day parade. But is a longer Christmas season good for retailers? The phenomenon of an ever-earlier Christmas season is a boon to the people responsible for supply-chain management, according to operations experts at Wharton. But Wharton marketing scholars and other analysts say an extended Christmas season is something of a mixed bag. It may hold advantages, disadvantages -- or even no advantages -- for store owners.

Around the World on $48 (or So): How High Can Discount Airlines Fly?

Wed, 05 Oct 2005 16:04:41 EST

As two more major U.S. airlines, Delta and Northwest, file for bankruptcy protection, it's the discount carriers that appear to be winning the battle for America's skies. But it's not only in the U.S. that discounters are giving the more established carriers a run for their money. Discounters are taking off in Mexico, India, China, Europe and points in between. What kind of competition do these discounters face, from the majors and from each other? And what obstacles, especially in countries like China, are governments and regulators putting in their way?

Delving into the Mystery of Customer Satisfaction: A Toyota for the Retail Market?

Wed, 10 Aug 2005 15:55:55 EST

It started out as an academic puzzle of sorts. The four researchers -- three of them from Wharton -- already knew that in the airline industry, customers and employees revere Southwest Airlines. In the computer industry, it's Dell, and in the auto industry it's Toyota. But when it comes to the retail industry, what company sets the standards for customer and employee satisfaction? It's a question that the four set out to answer earlier this year as part of two projects: The first, involving Wharton professors Serguei Netessine and Marshall Fisher and Wharton doctoral student Jayanth Krishnan, is called the "Wharton Project on Store Execution and the Quality of Customer Experience." The second, a closely-related initiative on the causes of stock outs, is being led by Daniel Corsten, from the University of St. Gallen in Switzerland. Both projects have already found some unexpected results relating to customer satisfaction and retail performance.

Few Survivors Predicted: Why Most Airlines Are Caught in a Tailspin

Wed, 09 Feb 2005 16:50:03 EST

Delta Airlines cuts fares in a price war that Merrill Lynch estimates will sap $2.5 billion in revenues from the six largest airlines. US Airways and United file for bankruptcy, and almost every other airline --Southwest is one of the exceptions -- reports significant losses. The cost of oil remains stubbornly high, adding significantly to cost pressures. The question is: How do you fix an industry littered with walking zombies? One answer, say Wharton faculty, is to let some of the sickest carriers die -- and stay dead.

Fare Wars: The 'Friendly Skies' Are More Cutthroat Than Ever

Wed, 16 Jun 2004 15:47:10 EST

The always-cyclical airline industry is passing through a particularly rocky time. Established carriers – hit hard by recession, terrorism, SARS, war and now skyrocketing fuel costs – face tough competition from a new generation of low-cost airlines whose business model doesn’t rely on the hub-and-spoke system and whose service has earned them accolades the big carriers can only dream about. But even the low-cost upstarts face an uncertain future as they expand into larger cities. Wharton faculty and other experts consider the airline industry’s future flight path.

Can E-tailers Find Fulfillment with Drop Shipping?

Wed, 17 Jul 2002 00:00:00 EST

Consider this scenario: You establish a website and advertise products on it. When customers send in orders, you forward them to your wholesaler or distributor, who ships the orders directly to customers� homes with your company�s label on them. You completely avoid the enormous costs and risks involved in inventory, warehousing, and fulfillment. Too good to be true? That depends, says a new paper by Wharton professor Serguei Netessine and two colleagues that looks at the pros and cons of drop shipping, which the authors also refer to as virtual order fulfillment.