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Electronic commerce, supply chain management, customer relationship management, and other forms of Business Networking will fundamentally change the way business will be conducted in the information age. We will see close collaboration between processes of different enterprises, and above all, new enterprises and new processes. Business Networking offers exceptional opportunities for fast innovators and harbors fundamental risks for slowpokes. Business Networking proposes a process-oriented model for Business Networking and the concept of networkability to develop realistic strategies for managing enterprise relationships in the Internet economy. It is written to serve academic and professional audiences and formulate key success factors and management guidelines. All ideas were developed in close cooperation of research and practice and are documented in numerous original case examples.



Introduction — Chances and Challenges in Business Networking

1. Introduction — Chances and Challenges in Business Networking

We see that many businesses today are hoping to find the rules which govern the new economy [cf. Kelly 1998], also referred to as the digital economy (cf. [Negroponte 1995], [Tapscott 1995]), the networked economy [cf. Shaprio/Varian 1999], the information economy [cf. Varian 1994], the Internet economy [cf. Zerdick et al. 1999] or the information age [cf. Lane 1998]. Information and communication technology (IT)1 enables and shapes the new economy in the same way that steam, gas, and electricity transformed the agricultural economy into the industrial economy a hundred years ago.
Rainer Alt, Elgar Fleisch, Hubert Österle

Building the Foundation


2. Enterprise in the Information Age

Business is undergoing a transformation from the industrial to the information age. Information technology (IT) opens up possibilities for new business solutions; it offers exceptional opportunities for fast innovators and harbors fundamental risks for laggards.
Hubert Österle

3. The Networked Enterprise

In the early 90s enterprises started to improve internal efficiency and customer responsiveness with aligning their organization along business processes. They realized, that business processes do not end at the boundaries of a cubicle, subsidiary or division. With the help of ERP systems as the main instrument for process integration, they teard down internal organizational walls and achieved remarkable results.
Elgar Fleisch, Hubert Österle

Business Concepts


4. Strategies for Business Networking

As the networking scenarios in Chapter 3 revealed, Business Networking provides a strategic concept enabling new and/or more efficient processes to be introduced by extending the application of IT to relationships a company has with its partners. A broad variety of strategies are under discussion, such as outsourcing, virtual organizing, electronic commerce or supply chain management. Apart from clarifying the value added of each conceptual approach, differentiation of strategies helps in deciding how strategic goals, such as strengthening an existing market position, can be achieved.
Rainer Alt, Thomas Puschmann, Christian Reichmayr

5. Business Networking Lessons Learned: Supply Chain Management at Riverwood International

In 1996 the management of Riverwood International, an integrated paperboard and packaging supplier with head quarters in Atlanta, GA, USA, set out to create a new level of customer service within the industry. Riverwood wanted to enhance its competitive position by improving the flow of information to and from the customer. This information flow will be determined by the uniqueness of the commercial relationships between each customer, and in some cases each ‘ship to’ location of each customer. Riverwood has developed capabilities that enable small customers to process orders, inquire into order status, and monitor global inventory position with direct access to Riverwood’s information system via an Internet based solution. In the case of large customers, Riverwood is implementing new global materials management strategies, negotiated delivery and production schedules and shared sales and purchasing forecasts. Implementing these strategies, Riverwood and their customers will realize the benefits in the areas of inventory reductions, lower process costs, and greater flexibility for retail market response.1
Elgar Fleisch, Hubert Österle, Robert Betts

6. Electronic Commerce and Supply Chain Management at ‘The Swatch Group’

Electronic commerce (EC) and supply chain management (SCM) are two Business Networking strategies that are enjoying widespread popularity. As mentioned in Chapter 4 both are concepts designed to sustain networking among businesses and as such are attracting considerable management attention these days. This is explained by the substantial growth in electronic sales that is expected to take place in the coming years. According to [Forrester 1998] five percent of all global sales will be through electronic media by 2003. While EC is often put on a level with such sales solutions as electronic catalogs, malls and 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, books or computers. Compared to the potential of physical products, electronic sales are still negligible. Prominent exceptions such as Dell or Cisco have had a measure of success due to their efficient link to EC and supply chain solutions. But for many companies this still remains an intricate task. Reasons for that are:
  • 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.
  • Companies are faced with the trade-off problem to quick develop an EC solution to be present on the market and to integrate transaction data in the backend systems which is a time-consuming and expensive task (cf. Chap. 17).
Rainer Alt, Karl-Maria Grünauer, Christian Reichmayr, Rudolf Zurmühlen

7. Knowledge Enabled Customer Relationship Management

The redesign of business processes and the implementation of standard software for enterprise resource planning (ERP) in recent years has led to significant improvements in both process performance and service quality (cf. Chap. 2.3.1). Now that the classic reengineering trend is slowing down, companies have come to realize that efficiency in itself is no longer sufficient if they are to compete for customers in the 21st century. In many markets we are currently witnessing a major move away from market and product centricity towards a complete realignment of business processes in order to integrate with customer processes, which creates additional customer values and finally leads to lasting customer relations. The efforts directed at building and maintaining long-term relationships with customers are usually summarized as ‘customer relationship management (CRM)’. CRM represents one of the networking strategies in Business Networking (cf. Chap. 4.3.3) and is driven by both business and technology:
Jens Schulze, Volker Bach, Hubert Österle, Frédéric Thiesse

Information System Concepts


8. Future Application Architecture for the Pharmaceutical Industry

As described in Chapter 2 profound changes are taking place in the way business is being done in the information age. An excellent example is provided by Cisco, the leading supplier of Internet-equipment, such as routers, switches and the like. Sales amounting to some USD 8 billion, highlight that only few companies have better understood the far-reaching management consequences of new technologies than Cisco. The company has been in the front line whenever it came to transforming management practices through the use of the new technologies. Cisco is thoroughly organized as a network. Existing and prospective customers, suppliers, other business partners and employees are tightly interlinked. This year, Cisco expects to sell products for more than USD 5 billion (more than half of its total sales) via the Internet. Cisco’s Business Networking solution links the systems of suppliers, contract manufacturers and assemblers to Cisco’s production processes. To the outside world, i.e. to customers, Cisco appears as a single enterprise. Through the Cisco Intranet, the contract partners directly process the orders placed by Cisco’s customers and deliver the selection of items ordered directly to the buyer, frequently without Cisco seeing the items at all. Outsourcing of 70% of production has enabled Cisco to boost its sales four times without the need for additional facihties and, on top of this, Cisco has succeeded in shortening the time to market for new products by two thirds. At the same time, seven out of ten customer requests for technical assistance are dealt with electronically; and this at high degrees of customer satisfaction.
Thomas Huber, Rainer Alt, Vladimir Barak, Hubert Österle

9. Overview on Supply Chain Management Systems

For decades industry has been trying to match supply with demand. Supply chain management (SCM) is process-oriented management of the complete logistics network through the planning and control of material, information and funds flows on the basis of new information and communication technology. This gives rise to the question of ‘old logistics wine in new IT bottles’. At the end of the eighties, the CIM concept (computer integrated manufacturing [cf. Scheer 1990a]) was already based on the idea of an integrated, holistic view of logistics from order creceipt to shipment, thus “building a bridge from work flows based on the division of labor to integrated processes” [cf. Bothe 1998, 33].
Karl-Maria Grünauer, Elgar Fleisch, Hubert Österle

10. Electronic Commerce in the Procurement of Indirect Goods

This article looks at a rather new and innovative class of Business Networking appHcations, referred to as desktop purchasing systems (DPSs). In recent years the face of many businesses has been changed radically by business process redesign and/or through the introduction of integrated standard software, referred to as ERP systems (cf. Chap. 2.3.1), e.g. SAP R/3, Oracle Applications or Baan IV. BPR projects essentially deal with the interface to external customers and rarely encompass the organization’s procurement function.
Ralph Dolmetsch, Elgar Fleisch, Hubert Österle

11. Templates: Standardization for Business Networking

Business in the information age depends to a large extend on the availabihty of accepted standards [cf. e.g. OECD 1996]. They significantly reduce the coordination requirements between business partners and are the basis for establishing integrated information flows. The availability of Internet standards, such as HTML or TCP/IP, has been a main enabler in the evolution of electronic commerce (EC) since the early 1990s. In providing specifications for the interconnectivity of information systems, which stretch across system platforms and user communities, they allowed the integration of heterogeneous sectors within an economy. Generally, we can distinguish two main thrusts towards standardization: business requirements and technological integration [cf. Venkatraman 1991].
Thomas Huber, Rainer Alt, Günter Lehmann

12. eServices for Integrating eMarkets

Integration is a key element for Business Networking applications. First, many companies have introduced initiatives to restructure internal processes and integrate information systems by merging individual subprocesses into integrated information systems, such as desktop purchasing systems (cf. Chaps. 10 and 14.2). Second, the rapid evolution of new eMarkets, such Covisint in the automotive sector or ChemConnect in the chemical industry, as well as external eServices providers, such as inet-logistics in logistics or Deutsche Merchant in factoring. As partners of the businesses are concerned, these new business models take over subprocesses or replace business processes with new high-quality IT-supported processes which ideally should represent a seamless extension of company processes. This means integrating the ERP systems of companies and the infrastructures of eMarkets and eServices.
Norbert Kaltenmorgen, Roland Klüber, Florian Leser, Rainer Alt

Key Success Factors


13. Key Success Factors for Business Networking Systems

Relationships among business units have recently been gaining momentum in a broad variety of industries. Previous chapters have shown that Business Networking leads to process efficiency, such as reduced cycle times, reduced process costs, increased customer service, and new distribution channels (cf. Chaps. 5 and 6). The current figures for business-to-business EC, which forecast a growth from USD 43 bilHon in 1998 to USD 1,300 bilUon in 2003 [cf. Forrester 1998] witness to these strategic developments. In view of the major relevant management trends (cf. Chaps. 2 and 8) estabUshing networkability (cf. Chap. 1) is one of the most important determinants of a company’s future competitiveness.
Rainer Alt, Elgar Fleisch

14. Towards a Method for Business Networking

Translating the key success factors developed in Chapter 13 into implemented processes and appUcations represents a major challenge. In order to reach Business Networking goals, such as improved customer care or reduced inventories, business partners have to be convinced, business processes among the partners have to be agreed upon, and the strategic and process scenario has to be translated into enabUng IT applications. Some of the specific questions which arose in the various cases discussed in previous chapters are:
  • What is a proven sequence for proceeding in a Business Networking project? What are the major steps and what are suitable techniques for ensuring quick and successful implementation?
  • Which networking scenario (cf. Chap. 3.3) and strategy (cf. Chap. 4) meets our goals? What is the return on investment of this solution?
  • Are partners needed to realize the solution? How is the participation of future users ensured and how are partner relationships organized
  • What applications are chosen and how can they be integrated into existing system landscapes? What are the implications of the networking solution for the overall application and service architecture?
Rainer Alt, Robert Betts, Karl-Maria Grünauer, Roland Klüber, Karl-Heinz Schelhas

15. Application of the Business Networking Method at SAP

Chapter 4 describes different Business Networking strategies based on three levels of the Business Engineering Model. In reality these strategies do not normally appear in their original form. Existing strategies, IT applications and their functionaUties tend to mix them. Examples of this fact are businesses that:
  • Use ‘outsourcing’, ‘insourcing’ or ‘virtual organizing’ in parallel according to their business processes. For example, a corporation runs a virtual organization in procurement, operates insourcing in sales by taking over an eMarket and outsources all fulfillment activities.
  • Realize integrated electronic transactions. In the long-term it makes no sense to inform customers about new products, prices, specific product information, availabilities, etc. without giving them the chance to order. And without a selection of products and more or less individual negotiation no physical supply chain can be triggered and no order entry occurs.
  • Use different Business Networking systems at the same time. For example, decentralized eProcurement applications and eMarkets are used in parallel for procurement, and process portals support the entire customer needs on the sell side.
Christian Reichmayr, Rainer Alt, Thomas Reiss, Andreas Pfadenhauer

16. Architecture Planning for Global Networked Enterprises

An international chemicals group decides to introduce the packaged software SAP R/3 throughout the organization. This decision will affect eight divisions, 200 legally independent companies and some 150 different countries. Initial implementations were based on individual companies within the group. However, an investigation of the global supply chain revealed a lack of consistency in core processes. This investigation made it clear that future implementations will have to be coordinated throughout the group. The first question to be clarified is the significance which the legal entities, divisions and regions are to have for the group in the future and the dependencies which will result. The integration requirements can then be derived from this analysis of the business relationships involved.
Sven Pohland, Elgar Fleisch

17. Business Networking — Summary and Outlook

This book has described Business Networking as one of the seven trends companies have to address in order to remain competitive (cf. Chap. 2.3). Its relevance is growing and many brick-and-mortar companies are investing substantially in Business Networking (or eBusiness) projects. Estabhshed companies, such as Bayer, Deutsche Post, DaimlerChrysler or Deutsche Telekom are being transformed: new organizational units are being formed for eBusiness, traditional channels for procurement, marketing and sales redesigned, and new ‘eCompanies’ (co-) founded (e.g. Covisint by DaimlerChrysler, CheMatch by Bayer or emaro by Deutsche Bank and SAP. The goals behind these developments are twofold:
  • Increased process efficiencies. Business Networking is an efficient strategy for improving the interaction with customers and suppliers. A large number of the eMarkets (e.g. e2open, Covisint, Globalnetexchange, Chemconnect) have been founded in order to reduce the costs of the procurement process by using a common standard. IBM provides an illustration of the cost-saving potential: although increased electronic sales brought savings of USD 1 billion in 1999, this only corresponds to 17% of IBM’s total turnover. In comparison, Dell handles 50% of its turnover via the Net [cf. Sager 2000]. Another example of the cost-saving potential is the EC solution at ETA SA (cf. Chap. 6) which achieved a tenfold reduction in handling costs.
  • New business opportunities. Business Networking can support companies in developing innovative business models and new opportunities in the market. This mainly refers to new intermediaries, such as Amazon, Dell, Market-Site. net or the Ariba network (cf. Chaps. 3 and 4.2). An example described in more detail was the supply chain integration center that Riverwood is planning to develop from their VMI solution (cf. Chap. 5.7) or the procurement service offered by Deutsche Telekom (cf. Chap. 14.2).
Rainer Alt, Elgar Fleisch, Hubert Österle


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