management information systems, 4 th edition 1 i. sharing information systems vertical market a...

Management Information Systems, 4th Edition 1

I. Sharing Information Systems

• Vertical market– A market in which the goods of one business are

used as raw materials or components in the production or sale process of another business

• Horizontal market– All players in the market buy or sell the same

products; they are in competition

Chapter 11Supply Chain Management and Global

Information Systems


Vertical Information Interchange


Horizontal Information Systems


II. Electronic Data Interchange

• What is EDI? (p.441)

– Exchange of electronic data using interorganizational information systems

– Set of hardware, software, and standards that accommodate the EDI process


What are benefits of EDI p. 441

• Cost Savings

• Speed

• Accuracy

• Security

• System Integration

• Just-in-time Support


1. Supplier’s proposal sent electronically to purchasing organization

2. Electronic contract approved over network

3. Supplier manufactures and packages goods, attaching shipping data recorded on a bar code

4. Quantities shipped and prices entered in system and flowed to invoicing program; invoices transmitted to purchasing organization

How does EDI work?P. 442


5. Manufacturer ships order6. Purchasing organization receives packages, scans

bar code, and compares data to invoices actual items received

7. Payment approval transferred electronically8. Bank transfers funds from purchaser to supplier’s

account using electronic fund transfer (EFT)

How does EDI work? (Cont.)


How does EDI work? (Cont.)


• Business partners subscribe to service and use VAN’s private communication lines, mailboxes, and special software

• VAN mediates EDI communication, translates business documents into EDI documents

• Batches transmitted several times per day

Two Types of EDI:Value Added Network EDI


• Advantages:

– Transaction integrity

– Privacy and security

– Nonrepudiation

– Solid standards

Value Added Network EDI (Cont.)


• Majority of EDI still done through VAN lines

• Decreasing rapidly in favor of the Web

• All new EDI implementations use Web technologies

• Reduces cost

• Use of XML standards allows business partners to create their own tags

Two Types of EDI:Web EDI


• WEB EDI Advantages

– Lower cost

– More familiar software

– Worldwide connectivity

– Fast communication

– Real time information exchange

Web EDI (Cont.)


III. Supply Chain Management

• Less money being tied to inventory

• Management of supplies throughout the manufacturing process, from one organization to the next

• Monitoring and controlling the supply chain is Supply Chain Management (SCM)


Supply Chain Management (Cont.)• Monitoring and controlling the supply chain is Supply

Chain Management (SCM)

• SCM applications streamline operations from suppliers to customers (p. 447)

– Reduction in inventories

– Reduction in cycle time

– Reduction in production cost


• SCM systems most effective when all businesses in the chain link their systems and share all information pertinent to planning production and shipment

• Not all organizations are willing

• Systems can be used beyond the sale (after-the-sale services)

The Importance of Trustp. 448


• RFID: Radio Frequency Identification

• Very small microprocessor with antennas

• With lower cost, will be embedded in many products for tracking

• Microchips communicate with wi-fi devices when in production lines, packed, shipped, unloaded and more

The Future of SCM: RFID


IV. Multinational Organizations

• Headquarters in a single country, operation of divisions and subsidiaries in different countries

• A company’s nationality is not clear

• NAFTA may result in the internationalization of many corporations


Using the Web for International Commerce

• The Web is important for both B2B and B2C commerce

• Opportunities for businesses all over the world

• Organizations must be sensitive to local audiences (globalization)


International Web Commerce:Designing Web Sites


Challenges to Global Information Systems

• Technological Challenges– Non-uniform information infrastructures

• Regulations and Tariffs– Executives concerned about hassle-factor– Software can reduce confusion

• Differences in Payment Mechanisms– Non-uniform preferred payment method


Challenges to Global Information Systems (Cont.)

• Language Differences

– Translation delays

– Laws forbid foreign language accounting and other systems

• Cultural Differences

– Cultural imperialism


Challenges to Global Information Systems (Cont.)

• 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


Challenges to Global Information Systems

• Different Standards

– Varying standards for date format, measurements, etc.

• Legal Barriers

– Incompatible data privacy laws in U.S. and Europe


Summary• Markets can be viewed as either vertical or

horizontal, or both

• There are differences between traditional and Web-based EDI

• Supply chain management systems have various benefits

• Global information systems play an important role in business

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