Background
Baggenstos was founded by August Baggenstos in 1925 and since then has been active in the areas of sales and services for office equipment. Until 1985, typewriters and photocopiers were its most important products; from 1985, PCs and PC products were added. Baggenstos is a family firm headed today by Thomas Baggenstos. The corporate credo of “Best Products – Best Service – Best Price!” has been faithfully followed for over 75 years and has enabled the firm to assume a major market position in German-speaking Switzerland.

In 2000, Baggenstos generated a turnover of CHF 25 million, 75% of which was earned through trading and 25% through services. The company employs 60 people, 25 of whom are IT specialists.

Over 14,000 articles with a complex terms model are offered on the market. In the services segment, Baggenstos realises turnkey IT infrastructure solutions (including maintenance and technology leasing) for small- and medium-sized companies.


Industry
The market for IT infrastructure components and complementary services was a growth market in the last 15 years. That growth has fallen off since mid-2000.
A three-stage marketing model with manufacturers, IT logistics service providers and resellers has been established for trading, whereby each stage also sells directly to ultimate buyers.

• Some manufacturers have their own IT shops in the internet and supply end consumers directly (e.g. Dell Computer, Hewlett-Packard)
• As wholesalers, IT logistics service providers mainly supply resellers. There are only a few large distributors (e.g. ALSO ABC Trading AG) in Switzerland.
• The reseller market is heavily fragmented and ranges from the smallest companies to warehouses.

The services market also shows heavy fragmentation. Here, the smallest firms compete besides very large enterprises (e.g. Compaq, Siemens Business Services). It has been established that increasing numbers of business customers are turning to complete IT infrastructure solutions (i.e. equipment, installation and maintenance). To respond to this trend, service providers offer tailor-made shops which the customer company’s employees use to process direct procurement, inventory management, technology leasing and maintenance and support.


Offer and target group
Baggenstos acts as a trader and service provider of complete IT infrastructures for small- and medium-sized businesses. Baggenstos does not hold its own stocks but purchases all the goods it requires from specialised IT logistics service providers. The company has an excellent reputation on the market for quality and price. Baggenstos’ ITshop is characterised by an extensive offering with a differentiated terms model. Its range comprises products in the IT infrastructure domain (PCs, network components, printers etc.), peripherals, PDAs as well as office equipment such as typewriters, dictating and fax machines. All 14,000 articles can also be ordered online. Use is simplified by a special promotion shop. Private individuals are served by the Itshop, too. Their share of sales in B2C, however, is slight.

Baggenstos’ e-business vision is based on the company credo "Best Products - Best Service - Best Price!". At the same time it is a measure to counter the extraordinary pressure on prices on the market. To achieve this, it was necessary to effect a high degree of integration of the order process into the settlement process, and to present the entire product range with latest prices via the marketing channel called the internet.

With its e-commerce solution, Baggenstos seeks to counter the extraordinary pressure on prices on the market and support its company credo "Best Products - Best Service - Best Price!".

Baggenstos wanted a lean and attractive sales solutions and close integration with existing processes. A condition was that no additional personnel for operations and content management would be required. Its IT Jokes was a sweetener that other market players did not have.


Strategy
The following sections describe Baggenstos’ approach in developing its e-commerce solution.


The provider’s e-commerce concept
Baggenstos & Co already had an internet site with a shopping basket function back in 1996. Although the customer could order articles, they had to be manually entered into the ERP system. Similarly, there was no integration with the stock list. In June 1999, Thomas Baggenstos therefore decided on a new e-commerce solution that in contrast to the existing one would be integrated with the ERP system.

Information procurement and access to the entire product range and ordering is entirely in the customer’s hands. As a supplementary sales channel to the existing one, this order option is characterised by its simplicity and topicality. It improves the quality of the ordering process and reduces lead times. The complex terms and topical promotions are all covered, while order processing is automatically performed wherever possible. Geographic market expansion was not targeted.


Scope of services
The application offers your business customers the following functions [Scope of functions]:

• Up-to-date special promotions and industry news
• Shopping
• Product range – all products in the complete range are described in detail (incl. photograph)
• Recommendations – promotion of selected products with high availability and advantageous terms
• Power Search – comprehensive search function with filters, groups, articles numbers, by changes etc.
• Printer accessories – comprehensive catalogue of printer accessories
• Memory Configurator – conveniently located memory modules for around 7000 PCs, servers, printers etc.
• Customer data
• Orders – status of current orders (also from other order channels) is displayed
• Customer-specific range – this function enables graphic depiction of a customer’s product-range strategy and allows her/him to decentralise procurement.
• Data – modification of customer data
• Sales – displays sales in the preceding periods
• Services – call centre via call-me-back button, repair orders etc.

The “Current” and “Recommendations” sections are updated daily by the product management. The database is automatically synchronised twice daily with the stock lists of the two main suppliers ALSO ABC Trading AG and Ecomedia AG (printer accessories).

Fig. 2.1: Transaction phases

The Baggenstos ITshop covers a large part of the following transaction models (Fig. 2.1). Customer orders are only interrupted by a manual verification as they pass directly to the two fulfilment partners ALSO ABC Trading and Ecomedia. If all order position are supplied by one distributor, delivery is made directly to the customer. In other cases, the delivery is consolidated at Baggenstos. Orders arriving before 5 p.m. for goods on stock are delivered the next day.


Partners
The choice of partners became quickly clear for Baggenstos since all partners used had proved their experience and competence in earlier projects with Baggenstos.

Fulfilment partners
ALSO ABC Trading AG is Baggenstos’ most important fulfilment partner. The IT logistics firm is characterised by top-quality commodity control and a comprehensive product database available for use by Baggenstos. ALSO ABC Trading deploys the ERP system by J.D. Edwards and its own sales information system. The ALSO Holding AG operation achieved turnover of CHF 1070 million in 2000 with 334 employees.

Ecomedia AG is the fulfilment partner in the printer accessories sub-range. The company has specialised in consumer articles for printers and typewriters (turnover in 2000: CHF 120 million; employees: 50). Ecomedia AG also makes its extensive product database available.

ERP supplier / existing IT partner
Polynorm has been active as an IT operation in Switzerland for over 15 years and has a workforce of around 50. The basis of its business operation is its i/2 standard software, developed entirely in-house. It is deployed at Baggenstos and over 70 other small- and medium-sized companies as an ERP solution. In the last few years, Polynorm has implemented various e-commerce applications based on i/2 in which a variety of internet agencies were responsible for design and navigation.

i/2 is based on the 4th-generation Progress programming language and its database management system. Together with WebSpeed, Progress offers an additional product for web solutions that enables simple access to Progress applications. It means that available functions and data in the i/2 solutions can be integrated into the web application.
Polynorm set up the shop functions at Baggenstos, integration with the i/2 solution and the fulfilment partners. Its outstanding industry expertise and comprehensive experience ensured optimal coverage of the desired processes.

Internet AgencyInternet Agency
INM Inter Network Marketing AG was founded in 1995 and, with a staff of 14, develops internet and intranet solutions for companies. Since the outset, ColdFusion has been used as a basis tool. This Allaire product (now Macromedia) enables INM to draw on a huge store of knowledge and experience. INM backs competence and moderate growth, achieving a considerable part of its sales from follow-up projects commissioned by satisfied customers.

The company realised Baggenstos’ first internet website. In this project, INM was responsible for web design and the promotion shop.

Selection of partners
Given that both the fulfilment partners and software companies were already established Baggenstos business partners, an actual evaluation was not conducted. Thomas Baggenstos obtained and negotiated offers. It was decided not to offer the role of principal contractor to any one supplier. T. Baggenstos also assumed complete responsibility for implementation and actively coordinated the participating partners. Polynorm Software and INM acted supportively in all areas of the project.

The customer locates his products using the product navigation, the recommendations and the power search. If the customer is already known to Baggenstos and has a login, he can also access his individual range and history data. Individual prices and terms are displayed, too. Standard terms appear for anonymous customers; they can pay by credit card or cash in advance. The customer has moreover the choice between collection or delivery with costs, partial or consolidated delivery. Prices include deductions for recycling based on Swico guidelines.

Once the order has been dispatched, the shopping basket is automatically recorded as an order in i/2 and validated by a Baggenstos employee. This results in a reduction in the number of erroneous orders, a step that’s not required by the system. Details of new customers are manually validated, a credit check is performed and the customer is entered into the customer database.

Fig. 3.1: Order process with a participating supplier

The delivery is dispatched the following day if all products in the order are on stock at a distributor’s (Fig. 3.1). The fulfilment partners print the Baggenstos logo on the dispatch documents while themselves remaining anonymous. The process is slightly more complex if the order includes products from both suppliers (Abb. 4.1). As part of validation, the order is forwarded automatically to the individual subcontractors. In this case, delivery is made to Baggenstos, where the parcels are made up and dispatched.

The project was launched in August 1999 with Polynorm’s appointment as prime contractor. The aim was to open the ITshop in the internet in late December 1999. This ambitious plan was not quite kept to, however, with publication in the internet occurring after a pilot phase at the end of January 2000.

Fig. 4.1: Order process with several participating suppliers

In the first phase, the ITshop’s functions were defined between Baggenstos and Polynorm. INM joined them as web-design partner in October 1999. In this phase, the focus was on defining the graphic design and site navigation.

Cooperation between contractors and customer was highly interactive. The customer had access to the test system and was able to immediately communicate feedback and decisions to the contractors. Once the test was over, a two-week pilot phase with 20 customers was conducted. Baggenstos’ customers made poor use of this option, however, and virtually no feedback was received.

Throughout the project life, the contractor, 3 Polynorm and 3 INM employees were involved; the product managers at Baggenstos joined them during the closing phase.


Processes / redesign
In the fulfilment process at Baggenstos only the role of product managers has changed to any degree. They are responsible for content and pricing and to this end now work exclusively with i/2 and the content management tool provided by INM.

Order placement with ALSO ABC Trading is carried out by means of a fax created automatically in i/2. The fact that the order has to be recorded a second time does not represent any reduction in efficiency in Baggenstos’ opinion.

A substantial improvement was achieved with the automatic synchronisation of product master data and customised pricing. Every day, the latest product data, inventory statistics and net prices from the distributors’ master product stock lists are uploaded. The product managers can use this daily updated data to achieve highly differentiated pricing.


Architecture / software solution / programming [system architecture]
Fig. 4.2 shows the solution architecture. Database access is available using special WebSpeed tags on the HTML page. This enabled INM to design the appropriate HTML pages with ColdFusion and for Polynorm to program the i/2 connection in parallel. The HTML pages prepared by INM were handed over to Polynorm for integration. Polynorm then performed integration on a 1:1 environment, and enabled Baggenstos to perform the tests on the integration system. This course of procedure assured fast interaction between the partners.

A coordinating meeting with all partners was held every week. In the meantime, the teams worked at the various locations.

At the same time, the content management section of the system was created by INM and the product managers were trained. This part of the system can be operated using a web interface.


Costs
The entire investment for the solution, including equipment, software, advertising and training, amounted to some CHF 400,000. One of its principal aims was achieved: to develop a solution without an additional personnel being required.

Fig. 4.2: Technical architecture

Once the solution had been introduced it was important to test the extent of customer acceptance of the ITshop and the scope of benefits for Baggenstos. After 15 months’ operation, customer use of the ITshop has been brisk and Baggenstos can now ascertain the latest daily figures with the WebTrend tool.

Fifteen percent of trade turnover is processed via the ITshop, which registers some 700 visitors a day. User figures continue to rise steadily.

Baggenstos is responsible for operation. The company has budgeted an annual CHF 200,000 for running costs including advertising. It includes minor adjustments. The largest outlay is for content maintenance by the product managers. Outlays for effective operation of equipment and software is marginal.

The Baggenstos ITshop is presented as a supply source on various manufacturers’ web pages (HP, IBM etc.). In this way, Baggenstos has been able to acquire some new customers.

Project success factors

• The professionalism of all partners was the prime factor behind the project’s success as far as meeting deadlines, costs and functional requirements were concerned. The following aspects illustrate this claim:
• The contractor was closely involved in the project and provided the partners with qualified feedback. Decisions were made quickly and precisely.
• Both INM and Polynorm have complete command of their deployed technologies, already having performed similar projects with the same technologies.
• The following points failed to find an ideal solution in this project:
• The Polynorm project manager was switched during the project, which meant that his successor had to expend considerable time and effort in becoming familiar with his new task.
• INM was first included in the project from the end of October 1999. Its earlier inclusion would have probably speeded up realisation of the navigation.

ITshop success factors
From the contractor’s standpoint, the ITshop is a success. The following aspects were principle in assuring this success:

• Name and reputation of the Baggenstos company
• The differentiated terms model
• Topicality of product and price data
• Lean and simple solution
• Service quality (orders received by 5 p.m. are processed on the same day; e-mails are answered within four hours)