SPECIAL SECTION: ELECTRONIC COMMERCE AND LOGISTICS , g A b s t r a c t n i Business Networking in the Swatch k r o As part of ’The Swatch Group’ ETA SA w t supplies watch movements and spare Group e n n g s parts to all Swatch brands and other i s s e e n customers such as retailers and watch- d i s e ¨ r RAINER ALT, HUBERT OSTERLE, CHRISTIAN REICHMAYR AND u makers. To improve the quality and the l b e , RUDOLF ZURMU¨ HLEN n t efficiency of the customer relationships n n a e h ETA started a Business Networking pro- m c e g n ject in cooperation with the University a o i n t a of St Gallen. This project focused on u b m i r the complementary application of two n t i s i a Business Networking strategies that are d h c , l e usually treated separately: supply chain y l d p o p management and electronic commerce m u s e (e-commerce). Both concepts allow for , c e n c e r establishing direct relationships to the r e e f m customers. Supply chain management e r m o s enables direct deliveries to the custo- c n o c i i mers at lower costs and improved t n a r o r reliability. E-commerce provides centra- e t p c o e lized catalogues and order entry proce- l n e i : a dures with significant advantages in s ESSENCE AND RELEVANCE OF Networking. Business Networking as- h d c r time and cost. This highlights the im- o y BUSINESS NETWORKING sumes that production occurs not l w p portance of understanding the interrela- y p within large vertically integrated com- e u K s tions between both strategies in ‘The Swatch Group’ is a globally panies but in networks where different creating mutual benefits between ETA operating producer of watches such as partners concentrate on their core and their customers. Blancpain, Omega, Rado, Longines, activities. Higher coordination re- Tissot, Certina and the Swatch quirements are met by information watches. The group consists of a age technologies, which enable inter- number of individual companies, facing among various ERP systems, which focus among others on finished efficient and distributed management watches movements and component of large information volumes and the production and research and develop- like. ment. Producing watches for the in- In the case of ETA, Business Net- A u t h o r s dividual brands involves various group working enables increased customer- Dr Rainer Alt ([email protected]) is companies. ETA SA Fabriques orientation, cost-efficiency, reliability Project Manager of the Competence Center Downloaded By: [German National Licence 2007] At: 14:31 11 March 2010 d’Ebauches in Grenchen, Switzerland and global presence. This was g inter-Business Networking (CC iBN) at the r supplies the movements for watches – achieved by using two Business Net- o . Institute for Information Management, s t calibers in the industry’s jargon – to working strategies, which are closely e University of St Gallen, Switzerland. His k r all Swatch brands. As the world’s interrelated: supply chain manage- a research focuses on business networking, m third largest manufacturer of move- ment and e-commerce. Although, c i electronic commerce, and supply chain s n t o ments, ETA has over 15 production both strategies are often used inde- e r management. k t r c a ¨ sites in Switzerland, Germany, France, pendently from each other, the ex- e Dr Hubert Osterle (Hubert.Oesterle@ l e M . unisg.ch) is Professor for Information Thailand, Malaysia and China. In ample of ETA shows the potential c w i n w Management at the University of St Gallen 1997, ETA produced more than 135 of both strategies to cut costs and o w r t . and concentrates his research on business c million movements with more than to streamline customer-service pro- 3 e 7 l 1 engineering, business networking and E 10,000 employees. cesses. Together with the Institute – 9 9 business knowledge management. 9 6 In order to ensure a customer- for Information Management, Uni- 1 9 Christian Reichmayr (Christian. 1 : ) oriented and efficient production of versity of St Gallen (IWI-HSG), 3 © ( [email protected]) is the Research t watches, a coherent management of ETA has conceived and is launching 9 h Assistant responsible for the ETA project g e i the relationships among the relevant a new solution for the procurement r m y within ccibn. u p l group companies is one key success of spare parts and sales products o o Dr Rudolf Zurmu¨hlen (Rudolf. C V [email protected]) is Head of Customer factor. We will refer to the manage- (i.e. calibers) which encompasses Service at ETA SA Fabriques d’Ebauches, ment of internal and external relation- supply chain management on the Switzerland and responsible for the ships and the development of one hand and e-commerce on the business networking project. cooperation strategies as Business other. ELEMENTS OF BUSINESS NETWORKING: ELECTRONIC COMMERCE, SUPPLY CHAIN MANAGEMENT In view of the flurry that has been surrounding e- commerce (EC) and supply chain management (SCM), it appears appropriate to define how these concepts inter- relate and complement each other. Since they both support the management of business relationships, they represent practical strategies for Business Networking. Following Ellram (1991), SCM may be described as the Figure 1. How EC and SCM connect ‘integrated management approach for planning and con- trolling the flow of materials from suppliers through the distribution channel to the end user.’ All major SCM How does EC relate to SCM? In the first place, a initiatives, such as just-in-time (JiT), zero inventory (ZI), product’s entire supply chain consists of a number of efficient consumer response (ECR), vendor managed in- individual supply chains on the way from the supplier of ventory (VMI), and continuous replenishment (CR) aim raw materials to the end consumer. In general the transac- at providing efficient management of the supply chain tions linking the supply chains of individual companies are (Kalakota and Whinston, 1997: 286). As Klaus (1998: used to define EC. For further analysis the transactions are 434–41) shows, this involves three areas that have to deal broken down into various activities. During the informa- with by SCM: tion phase, customers make their choice among a variety of goods and vendors. This is followed by negotiation and · All order processing activities originating at the custo- decision-making on a specific product in the contracting mer: order acceptance, input of orders into internal phase. Finally, in the settlement phase, the selected goods order processing systems, calculation of production and are delivered to the customer who, in turn, pays a material forecasts. consideration for them. For EC to take place, it is · All material activities of the supply chain directed necessary that at least one of these phases rely on electro- towards the customer: materials management, produc- nic means. Apart from this functional criterion, EC- tion, distribution and order fulfillment. systems are classified according to the context in which · All order-related financial activities: invoicing, billing they are used. A distinction is made between inter- and funds transfer. Unfortunately, many SCM defini- organizational (B2B), intra-organizational (EC within a tions and projects are ignoring this area and, conse- company) and business-to-consumer (B2C) EC-systems. quently, the benefits of close coordination of financial There are four essential aspects where SCM differs from flows, e.g. the reduction of the amount of capital EC (Table 1). First, all major SCM solutions, such as JiT committed. in the automotive industry or ECR in the retail industry, Various models from software vendors and industry orga- are based on the cooperation between (internal or exter- nizations exist for the modeling of supply chains. An nal) business units. SCM usually does not involve direct established model is the Supply Chain Operations Refer- arrangements with end-customers. For instance, a CR- p u o ence Model (SCOR) from the Supply Chain Council, an scheme operates at the interface to the customer, but r Downloaded By: [German National Licence 2007] At: 14:31 11 March 2010 contractual arrangements are made between the retailer G American industry association with 73 member companies. h c and the supplier. Second, with SCM designed to stream- t In the first place, SCOR provides a standardized language a w for the description, analysis and measurement of supply line order processing, material management and financial S e chains among multiple partners. As shown in Figure 1, in processes, the starting point of an SCM solution is an h t existing order. Consequently, while settlement processes n the SCOR model supply chains are built using the four i are at the heart of SCM, EC centres on the design of g generic supply chain functions, viz. plan, source, make and n i 1 k deliver. information and contracting processes. This is also r o w t e N s s Table 1. Differentiation between EC and SCM e n i s u Electronic Commerce Supply Chain Management B . Activities Information, Contracting, Settlement Plan, Source, Make, Deliver l a t Scope Inter-business relationships and customer relations Inter-business relationships only e t Perspective Transaction Business functions l A Focus Design of information and contracting activities Design of planning processes and flow of goods Cooperation intensity Low High Duration Short-term relation Mid to long-term relation 170 reflected in the SCOR model, which does not include ship analysis were conducted at the beginning of the first distinct sales or marketing activities.