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  • 1. Chapter 11 EDI, Supply Chain Management, and Global Information Systems
  • 2. 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.
  • 3. 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
  • 4. Vertical Information Exchange
    • Vertically related
      • Output of one organization used in processes of another
      • Integrating ISs between vertically related organizations highly beneficial
        • Saves time and money
        • Better serves customers
  • 5. Vertical Information Interchange Figure 11.1 Vertical relationships among organizations
  • 6. 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
  • 7. Horizontal Information Interchange Figure 11.2 Horizontal information interchange
  • 8. 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
  • 9. Electronic Data Interchange Figure 11.3 Benefits of EDI
  • 10. Electronic Data Interchange Figure 11.4 Suppliers, manufacturers, and retailers cooperate in some of the most successful applications of EDI.
  • 11. 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.
  • 12. 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.
  • 13. Electronic Data Interchange Figure 11.5 How EDI works
  • 14. Electronic Data Interchange
    • EDI is conducted in two major forms:
      • Value-added networks (VAN)
      • The Web
  • 15. 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
  • 16. Electronic Data Interchange
    • VAN EDI provides several advantages:
      • Transaction integrity
      • Privacy and security
      • No repudiation
      • Solid standards
  • 17. 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
  • 18. Electronic Data Interchange
  • 19. 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
  • 20. Supply Chain Management
  • 21. 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
  • 22. International and Multinational Organizations Figure 11.8 The importance of international integration to companies with international operations
  • 23. 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
  • 24. Using the Web for International Commerce
  • 25. 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
  • 26. Challenges to Global Information Systems
    • Language Differences
      • Translation delays
      • Laws forbid foreign language accounting and other systems
    • Cultural Differences
      • Cultural imperialism
  • 27. 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
  • 28. 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
  • 29. The Latecomer Benefit
    • Countries and companies on the bleeding edge of technology
      • Often take longer, more expensive road to advanced technologies
    • Latecomers are more privileged
      • Learning from predecessors’ mistakes
      • Often taking shortcuts to more advanced solutions
  • 30. Ethical and Societal Issues Legal Jurisdictions in Cyberspace
    • Legal challenges faced in today’s electronic global markets are numerous
      • Global Free Speech
      • Consumer Protection by Whom?
      • Two Approaches to Jurisdiction
        • Country of origin principle
        • Country of destination principle

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