1. EDI, Supply Chain Management, and Global Information Systems
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
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