Interaction of Electronic Commerce and Supply Chain Management ...

Proceedings of the 33rd Hawaii International Conference on System Sciences - 2000

Interaction of Electronic Commerce and Supply Chain Management – Insights from ‘The Swatch Group’ Rainer Alt University of St. Gallen [email protected]

Karl Maria Grünauer Christian Reichmayr University of St. Gallen University of St. Gallen [email protected] [email protected] Institute for Information Management University of St. Gallen Mueller-Friedberg-Str. 8 9000 St. Gallen, Switzerland

Abstract Electronic Commerce (EC) and Supply Chain Management (SCM) are fundamental strategic concepts when businesses are forging links with their suppliers and customers. This article argues that both concepts are inherently different and complementary at the same time. To illustrate the deductive classification approach, a case study undertaken at ETA SA provided necessary empirical evidence. ETA SA, part of ‘The Swatch Group’, has redesigned the distribution of spare parts and movements to brand manufacturers by pursuing an integrated approach of EC and SCM. The article describes the interaction of SCM and EC as well as the critical success factors which came up in the project.

1. Introduction One of the most fundamental developments companies face today is the deconstruction of existing value chains. Traditional hierarchical organizations are giving way to more flexible networked forms and concentration on core competencies is key in strategies such as outsourcing, virtual organizing and the like [1], [2]. What characterizes this development is the increased relevance of shaping relationships among independent business units. This trend towards Business Networking is reflected in the popularity of concepts which focus at the interaction of businesses such as Electronic Commerce (EC) and Supply Chain Management (SCM). Both concepts sustain the networking among businesses and are attracting significant management attention these days. Sales of goods via electronic channels are believed to grow significantly over the next couple of years. According to Forrester Research [3] five percent of all global sales will be done electronically by 2003.

While EC is often put on a level with such sales solutions as electronic product catalogs, electronic malls and electronic auctions, all sales involve supply chain activities as well. The latter cover the entire production process from procurement to distribution and for some products at least have reached a remarkable degree of sophistication. Examples are immaterial products (e.g. news and software) as well as some physical products, such as CDs, software, books or computers. Compared to the potential of physical products, electronic sales are still negligible. Prominent exceptions are computer maker Dell and Cisco Systems, provider of telecommunication equipment. These companies have achieved to closely link their EC and supply chain solutions. For many companies this is an intricate task since solutions for EC and SCM have evolved from different backgrounds. The former from sales and marketing and the latter from physical logistics, production and materials management. In the following, we will outline how industrial companies can reap benefits by jointly managing EC and SCM. We believe that pursuing integrated strategies which include both areas is vital for the expectations in electronic sales to materialize. As a first step, we will discuss both concepts and their interrelationships. With this in mind, we will present a case study to show how ETA SA has implemented an EC and SCM strategy. This will include a description of the solution and an evaluation of the major benefits for the participants. From this project important lessons and critical success factors emerged which will be presented in chapter four. Finally, chapter five offers some conclusions for managing the interrelationship between the two concepts.

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2. Analysis of Concepts 2.1. Supply Chain Management: Flow Perspective Compared to logistics, the discipline it developed from, SCM is a relatively new term. While overall logistical concepts have been around for many centuries [4], SCM did not make its appearance in the literature until the last decade. For a long time, logistics was a concept limited to the military sector and it is only since the middle of the 20th century that logistics has come to be accepted in the business sector. Today, SCM may be described as the “integrated management approach for planning and controlling the flow of materials from suppliers through the distribution channel to the end user” [5]. Compared to the internal focus of traditional logistic approaches, SCM emphasizes the management of upstream and downstream relationships and the role of supply chain optimization to increase customer value at less cost [4], [6]. Examples for SCM initiatives are just-in-time (JiT), zero inventory (ZI), efficient consumer response (ECR), vendor managed inventory (VMI) or continuous replenishment (CR) [7]. This involves three areas, which SCM has to deal with [8]:

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All order processing activities originating at the customer, i.e. order acceptance, input of orders into internal order processing system, calculation of production and material forecasts, All material activities of the supply chain directed towards the customer such as materials management, production, distribution and order fulfillment,

•

All order-related financial activities such as invoicing, billing and funds transfer. Unfortunately, many SCM definitions and projects are ignoring this area and, consequently, the benefits of close coordination of financial flows, e.g. the reduction of the amount of capital committed. Various models have been put forward by software vendors and industry organizations for modeling supply chains. A well-established model is the Supply Chain Operations Reference Model (SCOR) [9]1 from the Supply Chain Council, an American industry association with close to 500 member companies. In the first place, SCOR provides a standardized language for the description, analysis and measurement of supply chains 1

The Supply Chain Operations Reference Model (SCOR) is a process reference model and was first published as Version 1.0 in November 1996 by the Supply Chain Council (SCC) as a cross-sector standard from 73 Fortune 500 companies. The prime goal is to provide a language standard for intra and inter-company communication with SC partners. For further information see http://www.supply-chain.org.

among multiple partners. As shown in Figure 1, SCOR builds supply chains are built using the four generic supply chain functions, i.e. plan, source, make and deliver. The interorganizational aspect is reflected in two areas: First, source and deliver activities are located at the interface of internal and external organizational units. Second, SCOR envisages a planning hierarchy, i.e. the planning in two organizations can be linked via an additional planning activity which oversees and coordinates the individual plans. It is placed between two organizations in Figure 1 since this function can be performed by either organization A and B or by a third party which controls the supply chain. Supply Chain Management Organization A

Organization B Plan

Plan

Source

Make

Plan

Deliver

Source

Make

Deliver

Figure 1. SCOR Supply Chain Functions

2.2. Electronic Commerce: Transaction Perspective Similar to SCM, the field of EC has its roots in earlier concepts. Technologies, such as Videotex and Electronic Data Interchange (EDI), were developed back in the 1960s already. However, significant momentum was lacking until the emergence of Internettechnologies. Today, EC is omnipresent and attributed considerable economic impact. This is also reflected in the definitions which see EC “as the entire collection of actions that support commercial activities on a network” [10] or as „any form of economic activity conducted via electronic connections“ [11]. Additional characteristics of the EC concepts are obtained from transactionoriented definitions which have been used to specify electronic markets [12], [13], [14]. Transactions link the activities of buyers and sellers and can be broken down into various phases: During the information phase, customers make their choice among a variety of goods and vendors. This is followed by negotiation and decisionmaking concerning a specific product in the contracting phase. Finally, in the settlement phase, the selected goods are delivered to the customer who, in turn, pays a consideration for them. For EC to take place, it is necessary that at least one of these phases and order entry should rely on electronic means.

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Electronic Commerce Organization A (Sell-Side) ● Single Vendor ● ● ● ●

Catalogues Multi Vendor Catalogues Electronic Malls Electronic Auctions ....

Organization B (Buy-Side) Information

● Desktop Purchasing

Systems (indirect goods) ● Electronic Procurement of Contracting

direct goods ● ...

Settlement

Figure 2. Phase Model and Application Areas of EC In analogy with the two sides which are brought together in a transactions, EC systems have emerged primarily for electronically supporting sales processes on the one hand and buy or procurement processes on the other (Figure 2). Sell-side EC comprises electronic product catalogs which permit browsing through, configuring and ordering of goods from one or more vendors. Well known systems come from Intershop, Openmarket or Broadvision. Buyside EC systems bundle catalogs according to prenegotiated conditions with a vendor and are called Desktop Purchasing or eProcurement systems. Significant vendors are Ariba, Commerce One or Netscape. In the following, we will focus on single vendor catalogs as a form of Sell-side EC systems. We will mainly consider Business-to-Business transactions and, consequently, intraorganizational EC or Business-to-Consumer EC are outside the scope of this article.

2.3. Comparison of Concepts The theoretical analysis of EC and SCM reveals that both concepts have two aspects in common. First, buy-side and sell-side overlap with the source and sell activities that are core elements in supply chains. Second, information on supply chain planning processes is required within the contracting phase when the availability of goods or the scheduled delivery time for a specific configuration is to be determined. This functionality, called ‘Available to Promise’ (ATP), clearly requires information from the supply chain. ATP checks have become an important feature of SCM systems from i2, Manugistics and SAP. It is equally important that these systems make use of the information on EC transactions in determining demand forecasts. While both concepts have considerable overlaps in their functional focus, they are inherently different in the scope of design and the quality of the underlying relationships. In the first place EC takes a transactional perspective and aims at improving processes at a specific stage in the value chain, e.g. between a manufacturer and his dealers. It has close ties to the concept of the customer buying cycle [15] which conceives a transaction not as an isolated event but as the basis for further customer contacts.

Contrary to the transactional perspective of EC, SCM takes a flow perspective which is geared towards the optimization of flows along entire value chains and not only at certain stages. Both concepts are different since EC has a distinct focus on shaping information and contracting processes within transactions and SCM manages the underlying flow of goods which is reflected in supply chain planning, delivery and payment processes. From the transaction perspective the latter mainly take place within the settlement phase and, except for a slight overlap resulting from the exchange of availability information noted above, orders emerging from the contracting phase may be the trigger for SCM activities. Concerning the quality of the relationship it can be observed that SCM arrangements tend to occur in longterm relationships with a substantial intensity or depth of cooperation. Often, EC has opposite properties since exchanging catalog providers involves only little switching costs. Organization A

Organization B

EC

Organization C

EC

Supply Chain Management

Figure 3. Complementary Relationship between EC and SCM Thus, an analysis of the two concepts – EC and SCM – reveals a complementary relationship with some overlapping (Figure 3). EC concentrates on shaping information and contracting activities (e.g. design of electronic catalogs and matching functions) whereas SCM is primarily concerned with planning processes and the organization of various flows of goods. Specifically, SCM has developed techniques and methods for efficiently designing, implementing and operating settlement processes. Indeed, both concepts are bound to have an important impact on day-to-day business [7]: “The integration of electronic commerce and supply-chain management is changing the way businesses work internally and work with each other.”

3. Case Study: EC and SCM at ETA SA 3.1. Goals of EC and SCM at ETA SA ‘The Swatch Group’ is a globally operating producer of watches for Swatch brands, such as Blancpain, Omega, Rado, Longines, Tissot, Certina and Swatch. The group consists of a number of individual companies, which among others, focus on finished movements for watches, component production and research and development.

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Producing watches for the individual brands involves various group companies. ETA SA Fabriques d’Ebauches in Grenchen, Switzerland, employs more than 10.000 people worldwide and supplies the movements for watches to all Swatch brands which themselves organize production and distribution of the finished products. As the world’s third largest manufacturer of movements, ETA has over 15 production sites in Switzerland, Germany, France, Thailand, Malaysia and China. In 1998, ETA’s revenues exceeded one billion Swiss francs. In the case of ETA, Business Networking makes for increased customer-orientation, improved cost-efficiency, reliability and global presence. Together with the Institute for Information Management at the University of St. Gallen (IWI-HSG), ETA has conceived and introduced a new solution for the distribution of spare parts and movements which incorporate SCM and EC elements. The ETA case highlights the potential of both strategies for cutting costs and for streamlining customer service processes in a typical Business-to-Business setting.2

misunderstandings resulting in the delivery of wrong parts.

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3.2.2. Phase I: Re-Engineering the Supply Chain As shown in Figure 4, the distribution of the spare parts involves a complex network of warehouses both in-house and outside. Each brand orders spare parts from ETA-CS and delivers them to their customers, e.g. ‘The Swatch Group’-country organizations (CO) and independent agents. Brands receive the parts from ETA-CS and store them in their own warehouses. After analyzing the existing supply chain, it was found that direct deliveries to the brand’s customers would lead to major advantages:

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3.2. Description of Solution 3.2.1. Initial Problems at ETA SA When ETA started the project ‘Business Network Redesign’ in 1996, there were three main problems that were considered to be of strategic importance: 1. the redesign of the introduction process for new movements, 2. a new distribution strategy for movements and spare parts as well as 3. the installation of a new distribution channel for spare parts and movements. A two-phase project was set up to tackle these challenges: Phase I addressed the reengineering of the supply chain and phase II the introduction of the EC solution. To start with, a number of customer workshops and a customer relationship analysis were conducted in order to explore networking potentials and problems.3 The main problems reported were:

•

• •

2 3

Customers, i.e. mainly the different brands within ‘The Swatch Group’, were lacking information on the interchangeability of parts (one article may be used in several movements) and comprehensive up-to-date technical documentation for the assembly, the required storage, etc. of movements and spare parts. Specimen movements, spare parts and movementspecific tools were not available when new movements were coming on the market. Low level of customer service (ETA-CS) performance due to long cycle times for the repair of movements and the distribution of spare parts and frequent

For further description cf. [16] For the documentation of phase I cf. [17]

Rudimentary information on ETA customers, their sales history concerning spare and sales parts as well as their preferences.

•

•

Concentration of inventories at ETA. Today, ETA has about 12 different levels of in-house warehouses which are scattered all over the production process. A new high-bay warehouse has been installed to eliminate the need for small warehouses. Concentration of inventories not only reduced overall inventories at ETA but also enabled more efficient stock-keeping, i.e. quick retrieval of necessary parts. Elimination of warehouses at the brands. With spare parts delivered directly to the brand‘s customers, warehouses at the individual brands may become obsolete in some cases and outphasing them will result in reduced inventory costs and improved capacity utilization. Delivery guarantees. Eliminating warehouses also entails reduced bufferage within the distribution system. Brands that were reducing their warehouse capacities insisted that ETA should guarantee specific times for delivery. ETA-CS will establish two distribution channels, Distribution A & B with cycle times of 24 and 120 hours, respectively. ETA

ETA

Brand 1

Brand 2

Brand 3

Swatch Group country organizations and agents

Figure 4. Supply Chain Re-Engineering at ETA SA 3.2.3. Phase II: Introduction of EC Solution As explained in chapter 2, the main activities of EC are within the design of information and contracting processes. At ETA, orders were traditionally sent via fax,

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mail or telephone to ETA-CS. Their main problem was that consistent information on available products was lacking and orders often were for just ’40 gears with 14 teeth’. Translating this order into processing terms, i.e. finding out the relevant article number, was very time consuming for ETA-CS and it might take hours to identify the relevant article. After this matching process the order was finalized and entered into ETA’s ERP system.4 Obviously, incorrect matches would result in wrong parts being delivered. The project team indentified inconsistent product master data as the main problem and elaborated a homogeneous master data structure. This standardization effort will be finished for all ETA products in December 1999. Information on products was initially conceived for distribution via CD-ROMs which contained article numbers, part descriptions, and pictures. However, maintenance of this solution involved additional effort and order entry was still relying on conventional media, i.e. mail, fax, or telephone. Therefore, an EC solution was conceived which enabled the integrated support of information and contracting activities via the World Wide Web (Figure 5). It consists of an individual developed product catalog based on the Microsoft Site Server (Site Server Commerce Addition, Version 3) on a Microsoft SQL-Server (Version 6.5). Information phase

Paper

Fax

Contracting phase

•

CD ROM

Telephone

Electronic Commerce Solution

• •

Faster information and contracting Richer information on one channel Improved ease-of-use

Mail

Figure 5. Convergence of Information Flow The ETA Online Shop started in April 1999 with Swiss pilot customers and will become available to all customers in Autumn 1999. In the initial phase selected pilot customers will be able to order spare parts and in the further roll-out primary sales products (‘Flatline’ and ‘Normflatline’) will be added. This mainly concerns those individual Swatch brands which are responsible for the largest share of ETA’s revenue. Once registered in the EC solution, customers can browse the electronic catalog and obtain specific information about (new) products, prices, discounts, etc. Selected components are added to a shopping basket and the total order amount will be calculated. After choosing a specific payment method (e.g. credit card payment) the order process is completed. An (electronic) order acknowledgement is sent and order tracking is possible throughout the entire order cycle. The

4

ERP stands for Enterprise Resource Planning (ERP) and characterizes a company’s integrated transaction and administration system. Prominent examples are systems from Baan, SAP, Peoplesoft etc.

main benefits to be gained from implementing the EC solution are as follows:

•

•

Efficiency of information processes. The convergence of information in the EC solution (Figure 5) enables customers to obtain all relevant information on existing and new products (prices, technical descriptions, sales conditions, interchangeability) via one channel. Since the site is maintained centrally, ETA-CS can easily assure that information is up-todate and benefit from cost savings in producing and distributing catalogs, price lists and technical documents. Improved level of customer service. Additional, previously unavailable, features have been introduced with the EC solution and will yield significantly higher service levels. This includes electronic order payment options (credit card payments were unavailable before), technical document downloads and electronic order tracking. Additional functionalities are currently conceived and will include customer profiling, individual customer homepages, customer communities, frequently-asked-questions databases (FAQ), online complaint management as well as auctions to sell refurbished or old parts.

•

Efficiency of order processing. With the EC solution, order processing efficiency has increased remarkably. This has been mainly due to the homogenization of master data which reduces matching efforts and, consequently, eliminates misunderstandings as well. Increased efficiency allows ETA-CS to cope with an increased order volume and enables the personnel to concentrate on intensifying customer relationships (e.g. acquisition of new customers, answering individual questions). The EC solution consists of an individual developed product catalogue and several functionalities and is based on the Microsoft Site Server, Site Server Commerce Addition, Version 3 and a Microsoft SQL-Server, Version 6.5 database.

3.3. Complementarity of Concepts and Implementation The case of ETA SA shows the complementarity of EC and SCM which was elaborated in chapter 2. Supply chain activities were started by optimizing the ‘traditional’ flow of physical goods from ETA to the customer. A central aspect was establishing a direct delivery channel as well as enhanced capabilities for monitoring and controlling the distribution processes which has made it possible to offer guaranteed delivery times. The fact that no specific supply chain planning system was implemented shows that

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increased supply chain performance may be attained without setting-up complex planning systems. Direct customer contact has also been accomplished with the EC solution since customers are able to directly browse ETA’s catalog and use the same platform for order entry. Clearly, the main areas of EC were the design of the catalog and the order entry channel. EC implementation was accomplished via a proprietary, tailor-made solution. Linking the ERP and the EC system is first done manually with the integration of both systems being the object of the next step. The overlapping of both concepts was manifest from several aspects. First, the attactiveness of the EC solution increased as direct order entry and direct delivery became practical possibilities. This was mainly due to significantly reduced cycle times and reduced uncertainty of delivery. Before, the complex warehouse structure and incoherent master data impeded quick and reliable deliveries. Despite ETA’s business has a long tradition in business already, distribution structures comparable to Dell and Cisco could be obtained with the new electronic channel. Second, an analysis of the financial flow resulted in an additional payment method being introduced, i.e. credit card payments. Third, there are plans to integrate logistic functionalities from third party-distributors to track orders through the entire order cycle and to calculate prices including the accurate shipping costs.

been possible. Therefore, master data management has been recognized as a ‘hidden’ success factor.

4. Critical Success Factors for EC/SCM Projects

4.3. Communication of Win-Win Situation

From the ETA case several factors can be identified that are important for the success of introducing a SCM/EC solution.

4.1. Master Data Management as ‘Hidden Success Factor’ Both strategies, SCM and EC, were dependent on the standardization of processes and master data. This involved identifying the applicable standards for handling orders via the customer counter of ETA-CS and possible modifications of the existing master data scheme. It led to a far-reaching standardization and maintenance initiative in the area of product and customer master data. As explained earlier, the most time-consuming part of order processing was the conversion of an order into ETA’s article numbering system. This concerned mainly the processing of interchangeability information, consolidation of pricing information (for single originally packaged quantities) as well as the integrity of article and technical descriptions. Neither EC nor SCM includes this standardization activity in their scope, but without master data management the described benefits would not have

4.2. Strategic Alignment with Marketing Strategy EC and SCM represent a major intervention in the marketing strategy since they established a new (electronic) distribution channel with new functionalities (direct order entry and direct deliver). However, EC initiatives often originate in a company’s IT department and SCM on the production side. For this reason, the first step to be undertaken should be to sure that the marketing department is convinced of the initiative’s benefits and strongly believes in the necessity to act. In the case of ETA SA, the benefits of and possibilities for implementing the new distribution channel were clarified with the company’s top-management by demonstrating best practice EC solutions from Dell, Cisco and others. This offset an intensive discussion process during which the positive effects of the planned solution on the company’s marketing as well as customer’s sourcing strategy became more visible. This yielded a better understanding of the expected benefits, costs and project timescale. As a side effect, it was possible at an early stage of the project to clarify such upcoming questions as security issues and legal aspects of EC.

Contrary to EDI systems which large companies imposed upon their suppliers, it was clear from the beginning that customers would have to be convinced with (positive) incentives. For example, a win-win situation or reciprocity is not achieved until both supplier (e.g. ETA) and customers are able to increase their ROI [2]. Wellbalanced win-win situations increase the adoption of a Business Networking system and need to be laid down in a business model which can be easily communicated to the relevant partners. One possible graphical representation of the win-win situation between two partners is the Taguchi Loss Function [18]. In the project the first activity was to communicate the current status of development work to the partners on the basis of the isolated EC solution (no ERP integration) . This provided a pretty clear picture of the scope of the solution at this early stage and enabled the partners to assess their specific win-win situation. For this purpose, the project team conducted workshops where win-win situations were elaborated in terms of improved effectiveness (guaranteed delivery times, higher informationlevel, transparent order tracking information, interchangeability information for customers of the EC solution) and higher efficiency (lower order fulfillment

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costs for ETA SA and cost saving potentials for the brands local warehouses). It was decided that the ‘selling proposition’ for the EC solution should consist in superior supply chain performance, mainly guaranteed delivery times, rather than price incentives.

4.4. Common Basis for Communication As strategies for business networking, EC and SCM are inherently interorganizational in nature. In determining the scope of a joint solution and the degree of synchronization of processes among independent business units, it was important to establish a common basis for communication. At ETA, the previously mentioned SCOR model proved helpful in as much as it aims at improving communication among supply chain partners.5 SCOR distinguishes multiple analytical levels from which the upper three were used at ETA.

•

•

• 5

At level 1, management and relevant supply chain partners jointly elaborated a business network that enabled an overview of the internal and external organizational units for the product groups affected by the solution. Included was an overview of production and distribution locations on ETA’s procurement side as well as intermediate storage facilities, distribution centers, wholesalers, retailers and end customer groups on the distribution side. With the aid of this chart, ETA defined which distribution levels should have access to the EC solution in the future. At level 2, relevant business processes and exchanged outputs were defined using the generic SCOR distribution strategies such as ‘Make-to-Stock’, ‘Make-to-Order’, ‘Deliver Stocked Products’ and ‘Deliver Made-to-Order Products’. At ETA, this execution process network mainly consisted of execution and planning processes. For example, ‘Plan Make’ was used to coordinate the order-based production process with the order-based delivery process. For the case of spare parts only the process category D1 (Deliver stocked products) is present. For the distribution of sales products the process categories D1, D2 (Deliver Make-to-order products) and D3 (Deliver Engineer-to-order products) play a role. However, the vast majority of orders is of the D2type which is the reason why only this case is treated in the Electronic Customer solution.

such as product description, customer inquiries, order confirmations, etc. were specified. An important step was the application of the metrics provided in the SCOR model (e.g. lead times, number of perfect orders, etc.) since this forms the basis for measuring the performance of the SCM/EC solution in the future. SCOR clearly helped in rapidly mapping out processes and in compiling an unambiguous documentation of the future supply chain configuration. However, it turned out that SCOR was conceived for supply chains and, when applied to the modeling of an EC solution, it permitted only delivery processes in the settlement phase to be modeled with the predefined elements. Despite the shortcomings in the area of information and contracting activities, SCOR was chosen for the introduction of the EC solution since the ‘selling proposition’ consisted to a high degree of supply chain performance.

4.5. Method for Structured Procedure Managing projects involving EC and SCM in an interbusiness setting is a complex and challenging task. Success factors are technical and non-technical in nature. The latter include homogenized master data and clear responsibilities between marketing and IT for the design and operation of the EC solution, and have proved especially important. To manage the intricacies of Business Networking systematically and efficiently, a method is being developed in the ETA project which structures the critical steps in Business Networking projects. Methods have emerged from the Business Engineering discipline [19] and aim at effectively and efficiently building information systems. Following the principles of Method Engineering [20], methods consist of a procedure model, result documents, techniques, roles and tools. The method elaborated at ETA is validated on the basis of other EC and SCM projects as well [21] and includes the insights and findings of other existing methods which have been developed at IWI-HSG.6

At level 3, the process elements relevant to EC were analyzed and refined. For example, outputs exchanged,

The SCOR model comprises a standard description for management processes, a framework for relationships among the standard processes, standard metrics to measure process performance, management practices that produce best-in-class performance, and standard alignment to software features and functionality [9].

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Examples are PROMETBPR, a method for Business Process Redesign, PROMETI-NET, a method for the implementation of Internet-Technologies, and PROMETeBN, a method for distribution planning of business processes and standard software [22]. Currently, PROMETiBN is developed for inter-Business Networking.

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5. Conclusions and Next Steps 1 Preliminary Information 2

Procedure Model - iBN

Project Start 3 Potential/Benefit Analysis 4 Supply Chain Configuration 5

Implementation Planning and Execution

6 Win-Win Communication 7

Change Requests and Going Live

Figure 6. Phases of the Procedure Model The procedure model is at the heart of a method. Figure 6 depicts the model as a logic funnel from general conceptualization to specific implementation issues. In the first phase the management of the initiator and major external supply chain partners clarify their expectations and define a binding set of goals and timeframes on the basis of the anticipated win-win situation. Existing standards in the areas of processes and master data are identified and communicated. The appointment of the members of the project steering committee initializes the project (Phase 2). In Phase 3 the management of the initiator makes a selection of the affected products and markets. For example, this selection is based on the customers’ expectations regarding the scope of ECsupported products and a sound analysis of the quantifiable benefits for the initiator. Phase 4 includes a sketch of the material, information and finance flows which are relevant for the EC solution. It is followed by the configuration of the process network which consists of execution and planning processes. Afterwards the network of supporting information systems (ERP and EC applications) is designed. Phase 5 covers developing and executing an implementation plan for an isolated EC solution (no ERP integration) towards an integrated EC solution (full ERP integration). In Phase 6 the EC pilot is used to communicate benefits to the customers (see chapter 4.4). Change requests are collected and are successively implemented in Phase 7 after each major implementation step to meet not included customer requirements and to clarify the results. Furthermore, marketing activities are carried out to ensure a successful ‘Going Live’ of the EC solution.

The article presented the implementation of a business-tobusiness EC solution based on a redesign of the supply chain for industrial products at ETA SA. When the EC solution was implemented, the supply chain proved critical and direct delivery and direct order entry facilitated a direct link to the customer. The performance of the supply chain was, in fact, used as a selling proposition to foster the diffusion of the EC solution. At the same time, the EC system improves supply chain activities, such as order entry and payment. There are many other aspects, too, that underline the complementarity of EC and SCM, i.e. the flow perspective of SCM versus the transaction perspective of EC. More importantly, the project also reflected the intricacies of inter-business projects that involve multiple Business Networking strategies. It was crucial for the success of the project that it had management’s support and that not only IT and customer service were involved, but the marketing department, too. As far as external partners are concerned– the individual brands at ETA – here is a case that bears witness to the importance of reciprocity, i.e. win-win-situations. Addressing these challenges and the hidden success factors that became apparent in the course of the project, is a complex task. The method adopted provided a structured procedure model and systematic guidance for identifying roles, problems, success factors, milestones, budgets and other key elements. It should be pointed out, however, that work on both the method and the EC/SCM solution is ongoing. We believe that the action research approach [23] chosen for this paper yields valuable insights for the next steps. This mainly concerns an extended cost-benefit analysis and defining metrics for determining the performance of the EC/SCM solution as well as establishing a link towards relationship management functionalities, such as complaint management, customer communities or self information services.

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