1. CHAPTER 8 INTERORGANIZATIONAL AND GLOBAL INFORMATION SYSTEMS

2. Learning Objectives
Describe the role, benefits and structure of interorganizational systems
Distinguish between interorganizational and global information systems
Describe EDI and compare a traditional EDI with an Internet-base EDI
Define extranets and explain their infrastructure, types and benefits
Describe planning and other issues related to interorganizational and global systems

3. Chapter Overview
Electronic Data Inerchange and Electronic Funds Transfer
EDI and IOS
EFT and IOS
Interorganizational Information Systems
Response to
Business
Pressures
Types of
Interorganizational
systems
Global Information Systems
Who Needs Global
Systems?
Benefits of Global IS
Issues in Electronic
Global Trading
Global E-Commerce
Implementing IOS
Security
Ethical and Social
Issues
Planning
Extranets
Components
and Structure
Types
Benefits

4. Case: The Harper Group Collaborates With Honda in International Trade
The Problem
highly competitive environment where hundreds of freight moving companies in the United States and abroad operate
large amounts of information flow among several trading partners and support services
HOW TO EFFECTIVELY MANAGE THE INFORMATION?
HOW TO DO IT AT COMPETITIVE PRICES?

5. Case (continued…) The Solution The Results
Use information technology that links the computers of involved organizations, resulting in a paperless flow of routine information
The Results
allows cheaper, faster, and more reliable information to flow among all business partners
supports Harper’s global business
maintains the company’s position as the second largest trading facilitator in the United States
operates the company with thin profit margins
adopted an intranet for improving the internal operations in 1997

6. Case (continued…) What have we learned from this case??
Global information system - EDI
enables efficient flow of large amounts of transactional information among several business partners around the globe
keeps current customers
attracts new customers

7. Interorganizational Information Systems (IOS)
Objective
efficient processing of transactions, such as transmitting orders, bills, and payments
Major Characteristics
determine customer-supplier relationship in advance
built around privately or publicly accessible networks
employ value-added networks (VANs) when use telecommunications companies for communication
use the Internet with either an electronic data interchange (EDI), with extranets, or with EDI/Internet

8. IOS (continued …) IOS Response to Business Pressures
reduce the costs of routine business transactions
improve the quality of the information flow by reducing or eliminating errors
compress cycle time in the fulfilment of business transactions, regardless of geographical distance
eliminate paper processing and its associated inefficiencies and costs
make the transfer and processing of information easy for users

9. IOS (continued …) Types of Interorganizational Systems
Global systems - information systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) - the electronic movement of standard business documents between business partners
Electronic funds transfer (EFT) - the transfer of money using telecommunication networks
Extranets - link the intranets of business partners
Shared databases - databases that can be shared by trading partners, often used to reduce time in communicating information between parties as well as arranging cooperative activities
Integrated messaging - delivery of electronic mail and fax documents through a single transmission system that can combine electronic mail and electronic business documents

10. Global Information System
connect companies located in two or more countries
Who Uses Global Systems?
Multinational Companies
companies that operate in several countries
International Companies
companies that do business with other companies in different countries
Virtual Global Corporations
joint ventures whose partners are form different countries

11. Benefits of Global Information System
Effective communication at a reasonable cost
Effective collaboration with groupware software, Group DSS, extranets, and teleconferencing devices
Organizations access each other’s databases and frequently work on the same projects while their members are in different locations

12. Issues in Electronic Global Information System
Cultural Differences
many different aspects ranging from legal and ethical issues to what information is considered offensive
localization - use different names, colors, sizes, and packaging for overseas products and services
Economic and Legal Differences
differ considerably in their economical and legal environments
Transfer of Data Across International Borders
cross-border data transfer - several countries impose strict laws to control the flow of corporate data across their borders; to protect the privacy of their citizens

13. Global Electronic Commerce
Access to larger markets, the possibility of saving on taxes, and the flexibility to employ workers and manufacture products anywhere using a world telecommuting workforce
Benefits
the Internet and the extranets resulted in an inexpensive and flexible infrastructure
can do business anytime and from anywhere
can do it rapidly at a reasonable cost

14. Global Electronic Commerce (continued …)
Barriers
Legal barriers
jurisdiction issues, export/import regulations and compliance; contacts
Intellectual property (enforcement of ), privacy, and content issues
Cryptography (encryption), security, authentication procedures, and notarized documents
Cross-border transactions, as described earlier
Consumer protection (e.g. liability for wrong transactions)
Market access barriers
building a telecommunications infrastructure capable of accommodating all users and all types of data is a necessity

15. Global Electronic Commerce (continued …)
Barriers
Financial barriers
including taxation, customs and electronic payment systems, different currencies
Others
need to match buyers and sellers across international borders and establish trust between them
existence of cultural diversity
lack of sufficient international agreements
deciding on the collection of sales and other taxes
compliance with diversified export/import regulations and fees
need for language translation (the Web page, transactions)

16. Electronic Data Interchange (EDI)
Elements of EDI
Data formatting standards
to shorten the length of the messages, reducing long distance telephone charges and eliminating data entry errors
EDI translators
conversion of data into standard format
Private line (VANs) versus the Internet
VANs-based EDI - expensive, high security and capacity, incompatible hardware and software of the telecommunication companies
Internet-based EDI - less security and capacity as compare to VAN-based EDI, but cheaper; requires coordination and integration with the company’s back-end processing systems

17. Order-delivery Cycle With and Without EDI
Start
Specifier
Purchasing
Accounting
Mailroom
Shipping
Receiving
Buyer
P.O. delivery
Order confirmation
Bill delivery
Sales
Seller
With EDI
Receiving
Buyer
Seller
Start
Specifier PO
Standardized PO Form
Invoice
Flash
report
Shipping
EDI transmissions
Computer Generates Standardized P.O. Form
Instant data to :
Sales
Manufacturing
Engineering
Automatic billing
Automatic order confirmation
Approval
Prices
Availability

18. How the Benefit is Achieved?
Benefits of EDI
Benefits
How the Benefit is Achieved?
Speed, volume
EDI enables companies to send and receive large amounts of routine transaction information quickly around the globe in a paperless environment
Sales and other information is delivered to manufacturers, shippers, and warehouse almost in real time
Once EDI documents are received ,they are automatically forwarded to the appropriate department for processing
Accuracy
There are very few errors in the transformed data as a result of computer-to-computer data transfer. Information is also consistent

19. Benefits of EDI (continued …)
How to Benefit is Achieved?
Collaboration
Companies can access partners databases to retrieve and store standard transactions
Commitment
EDI fosters true (and strategic) partnership relationships, since it involves a commitment to a long-term investment and the refinement of the system over time
Profit
The time for collecting payments can be shortened by several weeks, benefiting the recipients of payments
Cost saving
EDI creates a complete paperless transfer processing environment, saving money and increasing efficiency
EDI enables a just-in-time environment, which means lower (or no) inventories for manufacturers

20. EDI Applications
Manufacturing - to communicate with suppliers, customers, and other business partners
Retailing - to streamline deliveries of goods from the suppliers to the stores and reduce inventories
Global trade - to shorten the elapse time by 70% or more and to reduce administrative expenses by 30%
Service Industry - used EDI and its companion, electronic funds transfer, for a long time
Large trading networks - provide efficient and effective trading environments (e.g. TradeNet)

21. Electronic Funds Transfer (EFT)
transfer of money to and from financial institutions using telecommunication networks
used as an IOS, a global system, and a communication system among organizations and to individuals
fast - reduces delays associated with sending hard-copy documents and it eliminates returned checks
security issues - how can a business ensure that a hacker is not bilking corporate accounts by electronically transferring funds to his account, or that competitive snoops are not gaining a complete picture of corporate financial assets?

22. TradeNet (Singapore) Trader
(1) Trader fills up Inward declaration form on the terminal.
(2) TDB retrieves and approves Inward declaration (It is an import permit).
TDB
(3) TradeNet automatically forwards approved Inward declaration to Customers
Tradenet
(4) Customers retrieves and approves Inward declaration (It is a customs permit).
(5) Trader prints a form for Customs clearance (trader may inquire status of declaration at any time).
(6) Port Authority retrieves data required for delivery of cargo.
Port Authority
Trader
Customers

23. customers, suppliers, contractors, distributors, government
Extranet
A network that links business partners to one another over the Internet by providing access to certain areas of each other’s corporate intranets
Components
Servers
TCP/IP protocols
Web browsers as the Internet
Structure
Extranet
Company A
Intranet
corporate data, ,
orders, customer data,
inventory, documents
Company B
Other users
customers, suppliers, contractors, distributors, government
Corporate employees
travelling or at home
Internet

24. Types of Extranet A company and its dealers, customers, or suppliers
centered around one company
An industry’s extranet (Trading Network)
teamed up and created by the major players in an industry (e.g. the automotive industry)
Joint ventures and other business partnerships
used as a vehicle for communications and collaboration among several companies partnering in a joint venture

25. Benefits of Extranets (continues …)
Fewer help-desk employees are needed
Improved quality
Lower communications and travel costs
Lower administrative and other overhead costs
Faster processes and information flow
Reductions in paperwork and delivery of accurate information in a timely manner
Improved order entry and customer service
Better communication

26. Implementing Interorganizational Information System
Security
protection mechanisms : firewalls and VPNs
Ethical and Societal Issues
takes a great risk for its trade secrets, the privacy of the employees and the controlling of some processes
Planning
complex IT planning when involving several organizations
several IT planning teams should be created and supported by , extranets,and groupware

27. What’s in IT for Me? For Accounting For Finance
procedures in multinational corporations and issues in taxation include data collection and transfer and auditing
For Finance
EDI and EFT have been the pioneering systems for over 20 years; now global financial services and trading
For Human Resource Management
recruitment, HR development and training in a local and multinational corporations can be improved by using IT

28. What’s in IT for Me?(continued …)
For Marketing
marketing and sales in global markets can be enhanced by appropriate information systems
For Production/Operations Management
the logistics systems can be greatly improved by using IOSs
For Non-Business
everyone will encounter interorganizational systems in almost any organization, public or private