1 chapter 11 edi, supply chain management, and global information systems
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Learning Objectives
When you finish this chapter, you will be able to: Explain the difference between vertical and horizontal markets. Describe vertical and horizontal information integration among
companies. Communicate the role electronic data interchange plays in
saving costs on business operations. Recognize the benefits of supply chain management systems Explain the role of global information systems. List the legal, cultural, and other challenges to implementing
information exchange systems.
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Sharing Information Systems: The Rise of E-Commerce Interorganizational Information Systems
Systems shared by two or more organizations to transfer data electronically.
Built and owned by only one organization Increases efficiency and effectiveness Organizations use similar systems to serve
international sites
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Vertical Information Exchange
Vertically relatedOutput of one organization used in processes
of another Integrating ISs between vertically related
organizations highly beneficial Saves time and money Better serves customers
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Horizontal Information Interchange Horizontal Information Interchange
Organizations performing similar activities share information
Real estate agencies maintain multiple listing service Financial institutions share financial information Airlines share reservation systems
Oldest type of electronic horizontal information interchange still takes place among financial institutions
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Electronic Data Interchange
What is EDI?Utilization of telecommunications to exchange
electronic data using interorganizational information systems
Set of hardware, software, and standards that accommodate the EDI process
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Electronic Data Interchange
Figure 11.4 Suppliers, manufacturers, and retailers cooperate in some of the most successful applications of EDI.
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Electronic Data Exchange
How does EDI work? Supplier’s proposal sent electronically to purchasing
organization. Electronic contract approved over network. Supplier manufactures and packages goods,
attaching shipping data recorded on a bar code. Quantities shipped and prices entered in system and
flowed to invoicing program; invoices transmitted to purchasing organization.
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Electronic Data Exchange
Manufacturer ships order. Purchasing organization receives packages, scans
bar code, and compares data to invoices actual items received.
Payment approval transferred electronically if there are no discrepancies.
Bank transfers funds from purchaser to supplier’s account using electronic fund transfer (EFT).
None of the documents involved in the process is on paper.
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Electronic Data Interchange
EDI is conducted in two major forms:Value-added networks (VAN)The Web
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Electronic Data Interchange
Value Added Network EDI (VAN) To use VAN EDI, business partners subscribe to the
service and use: VAN’s private communication lines Mailboxes Special software
Software translating business documents to and from EDI convention strictly conforms to EDI standards
Codes for address lines and product prices and length of text comments in an invoice
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Electronic Data Interchange
VAN EDI provides several advantages:Transaction integrityPrivacy and securityNo repudiationSolid standards
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Electronic Data Interchange
Web EDI Internet is a natural vehicle for EDI
Ease of access Inexpensive implementation
Success largely attributed to XML standards Extranet EDI offers several advantages over VAN
EDI, including: Lower cost More familiar software Worldwide connectivity Fast communication
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Supply Chain Management
Supply Chain Management (SCM)Coordination of purchasing, manufacturing, shipping,
and billing operations Often supported by an enterprise resource planning system ISs that support this type management are called supply
chain management systems SCM applications streamline operations from suppliers to
customers Lower inventories, decrease production costs, and improve
responsiveness to suppliers and clients
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International and Multinational Organizations For effective management of an international
corporation, executives need: Flow of information across borders essential A number of surveys find that managers are
increasing attention to international IS integration
Some large multinational corporations build their own international ISs. Example: EDS
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Figure 11.8 The importance of international integration to companies with international operations
International and Multinational Organizations
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Using the Web for International Commerce International Web Commerce Benefits
Increased revenues Increased international Web participation Potential Web participation
Cost savings Printing and shipping costs Customer service costs
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Challenges to Global Information Systems Technological Challenges
Some countries have inadequate information technology infrastructures
Language: how characters are represented There are other points that might sound trivial, but
wreak havoc Example: fields such as telephone numbers (variable
lengths)
Payment Mechanisms Non-uniform preferred payment method
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Challenges to Global Information Systems Language Differences
Translation delaysLaws forbid foreign language accounting and
other systems Cultural Differences
Cultural imperialism
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Challenges to Global Information Systems Conflicting Economic, Scientific, and Security
Interests Government restriction on sharing sensitive
information Varying treatment of trade secrets, patents, and
copyrights
Political Challenges Fear that access to information threatens sovereignty Government pressure to buy only national software
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Challenges to Global Information Systems Lack of standards
Varying standards for date format, measurements, etc.
Legal Barriers Incompatible data privacy laws in U.S. and
many other countries
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The Latecomer Benefit
Countries and companies on the bleeding edge of technologyOften take longer, more expensive road to
advanced technologies Latecomers are more privileged
Learning from predecessors’ mistakesOften taking shortcuts to more advanced
solutions
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