1. Chapter 9
Interorganizational and
Global Information
Systems
1

2. Learning Objectives
 Define and Classify Interorganizational and virtual
organizations information systems
 Describe interorganizational activities, particularly
order fulfillment
 Define and classify global information systems
 Present the major issues surrounding global
information systems
2

3.  Describe Demand-driven networks and RFID as
supply chain factors
 Describe B2B exchanges, hubs, and directories
 Describe Interorganizational integration issues
 Describe EDI and EDI/Internet
 Describe extranets, XML and Web services
3

4. Terms related to new business
environment
 On-demand enterprise
 Manufacturing will start only after an order is received.
 Build-to-order
 On-Demand/Real-time
 No production step would be ahead or behind as the
fulfillment cycle would be primed to respond to real-
time conditions.
 No backorders
4
 No safety stock, lag time

5. Common Interorganizational activities
 Buying and Selling
 Finding a partner
 Viewing catalogs
 Negotiating
 Order taking
 Order fulfillment
 Billing
 Payment
 After sales services n more..
5

6. Common Interorganizational activities
 Joint Ventures
 A contractual arrangement whereby two or more
parties undertake an economic activity that is subject to
joint control.
 Collaboration
 It just means the coming together of 2 or more parties
for the purpose of brainstorming and sharing of
expertise.
6

7. Common Interorganizational activities
 Other
 Working jointly on standards
 Conducting research etc.
7

8. Order Fulfillment
It is:
 Providing customer with what they have ordered
 On time
 With all related customer services
Delivery of materials / services at the right time, to the
right place and at the right cost
Sometimes includes:
 Exchange or return of product
8

9. Order Fulfillment
 Part of Back-office operations (supporting activities,
e.g. accounting, inventory mgmt)
 Also related to Front-office operations (visible to
customers, e.g. sales n advertising)
9

10. Typical order fulfillment process
 Step 1: Making sure the customer will pay
 Depending on payment method & prior arrangements,
validity of each payment is determined.
 In B2B: company’s finance department will do it.
 In B2C: customer usually prepay.
 Any hold up may cause shipment delay, loss of
goodwill or loss of customer.
10

11.  Step 2: Checking for availability
 Order information needs to be connected to the
information about in-stock inventory availability.
 For small orders, intelligent s/w agent may be
used
 Buyers can also check availability
11

12.  Step 3: Arranging Shipments
 If product (digital/physical) available ship to the
customer otherwise go to step 5.
 Whether product is available or unavailable
corresponding information needs to flow among
several partners
12

13.  Step 4: Insurance
 Sometimes contents of a shipment need to be
insured.
 Information should flow inside the company as
well as to and from customer & insurance agent.
13

14.  Step 5: Replenishment
 Some manufacturing or assembly operations may
be required to satisfy needs of customized orders.
 If standard items are out of stock they need to be
procured or produced.
 Production can be in-house or by contractors/
suppliers.
14

15.  Step 6: In-house production
 Requires planning of –
 People & material
 Components & machines.
 Financial resources
 Suppliers n subcontractors
 Also includes services such as collaboration with
business partners, scheduling of people n
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equipments etc.

16.  Step 7: Use suppliers
 Buy products /subassemblies from suppliers
 If supplier is retailer, he must purchase products
from manufacturers.
 Appropriate receiving and quality assurance is
needed
16

17.  Step 8: Customer contacts
 Constant contacts with customers are required
 Starting with notification of order received , ending
with notification of shipment or change in delivery
date
17

18.  Step 9: Returns
 Customer may want to return or exchange items
 Movement of returns from customers back to
vendors is called Reverse Logistics.
18

19. Problems
 Delays and transportation
 Human errors / misunderstanding
 Over / Under Inventories
 Misdirected Shipments
 Late / Incorrect delivery reporting
 Slow / Incorrect Billing
 Difficult / Complex Production
 Incompatibility of systems (communication)
 High cost of expenditures / shipments
19

20. Why these problems occur?
 It involves
 material,
 information,
 money and
 many people-
Located at different places.
20

21. Solution
 Automate as many of the activities as
possible using IT
 Results:
 Increased speed
 Reduced cost of administering the process
 Reduced errors
 Minimized delays
 Reduced inventories
21

22. InterOrganizational Information System (IOS)
 Connects two or more organizations.
 Mostly sellers and buyers.
 Ordering, billing and payment done
electronically.
 Local or global
 Dedicated to one activity (transfer of funds) or
supporting several activities (trade, research,
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communication & collaboration)

23. 23

24. Purpose of IOS
 To reduce cost
 To improve the effectiveness and timeliness
of business processes
24

25. Advantages of IOS
 Reduce cost of routine business transaction.
 Improve quality of information flow by reducing or
eliminating errors
 Compress cycle time in the fulfillment of business
transaction
 Eliminates paper processing and its associated
inefficiencies and cost
 Makes the transfer and processing of information
easy to users
 Customer-supplier relationship is determined in
advance
25

26. Virtual Corporation
 Category of IOS
 Two or more business partners at different locations
share cost and produce product / service
 Can be temporary or permanent
 Each partner creates a portion of product / service
in which they have special advantage
 Resources of business partners remain in their
location but are integrated for use 26

27. Types of IOS
 B2B trading systems
 Facilitate trading between business partners located in same /
different countries
 B2B support systems
 Nontrading systems like hubs directories and other services
 Global systems
 Connect two or more companies in one or more countries
 Electronics fund transfer (EFT)
 Telecommunication networks transfer money among financial 27

28.  Groupware
 Facilitate communication and collaboration
between organizations (email, fax etc.)
 Shared databases
 Trading partners share databases and other
information to reduce time in communicating
information
 System that support virtual companies 28

29. IOS Infrastructure Technologies
 Electronic Data Interchange (EDI)
 Extranets
 XML
 Web Services
29

30. Electronic Data Interchange (EDI)
 Communication standard that enables
electronic transfer of routine documents (e.g.
purchase order)
 the structured transmission of data between
organizations by electronic means
 Documents are formatted according to agreed
upon standards
30

31. Components of EDI
 EDI Translators
 Convert data into standard format before
transmitting and from standard to original format
after receiving
 Business Translation Messages
 Include purchase orders, invoices, credit
approvals, shipping notices, confirmation etc.
 Data Formatting Standards
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 E.g. ANSI X.12

32. Process of EDI
 Messages are coded using standards before
transmitting them
 These coded messages travel over a Value
Added Network (VAN) or internet
 When received, message is automatically
translated into business language.
32

33. Benefits of EDI
 Data entry errors are minimized
 Length of messages can be shorter and secured
 Reduced cost and delay
 Enhanced customer services
 Minimized paper usage and storage
 Increased cash flow
33

34. Limitations of traditional EDI
 Significant initial investment
 High operating cost due to use of expensive private
VANs
 Cost of converter
 Not flexible – difficult to make quick changes such as
adding business partners, long start up period
34

35.  Business processes must be sometimes restructured
to fit EDI requirements
 Multiple EDI standards exist. So one company may
have to use several standards to communicate with
different business partners
35

36. Internet based EDI
 Solution to traditional EDI- Better infrastructure
 Accessibility
 Publicly accessible
 Large scale connectivity
 Reach
 Global n/w connections makes it to reach widest
possible no. of business partners
 Cost
 40 to 70% lower than VAN
36

37.  Use of Web Technology
 Consistent with the growing interest of business in
delivering ever increasing variety of products and
services via web
 Ease of use
 Browsers and search engines are user friendly
 Sensitive data can be transmitted with security
37

38. Types of Internet based EDI
 Email
 Extranet
 Web based EDI hosting service
38

39. Prospects of Internet based EDI
 Cheaper
 Affordable for small transactions
39

40. Extranet
 Necessary to connect internal systems of different
business partners which are usually connected to the
partner’s corporate intranet
 Intranet of partners accessed via internet
 They link business partners over the internet by providing
access to certain areas of each others intranets
 Uses virtual private network (VPN) to make
communication over internet more secure
40

41.  Extranet is open to selected B2B suppliers,
customers and other business partners
 Enables them to enter the corporate intranet
via the internet to access data, place orders,
check status, communicate and collaborate
41

42. The structure of extranet
42

43. Types of Extranet
 A company , its dealers , customers, suppliers
 Centered around one company
 An industry’s extranet
 Major players in industry team up to benefit all
 Joint venture of other business partnerships
 Partners in joint venture use it for communication and
collaboration
43

44. Benefits of extranet
 Faster processes and information flow
 Improved order entry and customer services
 Lower cost (for communication, travel,
administrative overhead)
 Overall improvement in business
effectiveness
44

45. XML (eXtensible Markup Language)
 Extensible Markup Language (XML) is a markup
language that defines a set of rules for encoding
documents in a format that is both human-
readable and machine-readable.
 Improves compatibility between disparate systems of
business partners by defining the meaning of data in
business documents
 It is extensible because the markup symbols are
unlimited and self defining 45

46.  Difference between HTML and XML
 HTML helps to build web pages and display
data on web pages (how data can be
displayed)
 XML describes data and information (what
data can be send)
46

47. Benefits of XML
 Flexibility
 Allows new requirements and changes to be
incorporated into messages
 Hence not rigid as EDI
 Understandability
 Message contents can be easily read and
understood using standard browsers
 Thus no need of special translators 47

48. Benefits of XML (Contd…)
 Less specialized
 Requires less specialized skills in contrast to EDI
(requires highly specialized knowledge of EDI
translators)
48

49. Web services
 Universal prefabricated business process s/w
modules delivered over internet
 Users can select and combine them through
almost any device, enabling disparate
systems to share data and services
 Support IOS by providing easy integration for
different internal and external systems
49

50. Global Information System (GIS)
 Category of IOS
 Needed by
 Multinational companies
 International companies
 Virtual global companies
50

51.  Multi-national company- company which operates in
more than one country i.e.
 Company may have sales offices and/or production
facilities in several countries
 International company- company that does business
with other companies in different countries
51

52.  MNCs conduct operations where
 factory workers are plentiful and inexpensive
 Highly skilled employees available at low cost
 There is a need to be close to the market
52

53.  Virtual global companies
 Joint venture whose business partners are located
in different countries
 Formed for the specific purpose of producing a
product/service
 Temporary/Permanent
53

54. Benefits of GIS
 Effective communication at reasonable cost
 Through email, EDI, web services and
extranet
 Intelligent IT systems can provide automatic
language and web page translation
54

55. Benefits of GIS (Contd..)
 Effective collaboration to overcome
differences in distance, time, language and
culture
 With the help of groupware software, group
decision support system, extranets and
teleconferencing devices
55

56. Benefits of GIS (Contd..)
 Access to database of business partners and
ability to work on same projects while their
members are in different locations
 E.g. video conferencing
56

57. Issues in GIS design & Implementation
 Differences in
 cultures,
 regulations,
 economics &
 politics among parties in different countries.
57

58.  Cultural Differences:
 Culture consists of objects, values & other
characteristics of a particular society
 Ranging from traditional to legal & ethical issues
58

59.  Localization:
 Localization is the process of adapting a product or
service to a particular language, culture, and desired
local "look-and-feel."
 Use of different names, colors, sizes and packaging
for overseas products and services
 Also should be followed in the design and operation
of supporting IS
59

60.  E.g. Offer different languages and/ or currency
options as well as special contents
 Extensive research and survey is usually done
before launching the product, in order to assess
the opportunities and the obstacles.
60

61. Localization (continued..)
 Variables considered in localization:
 Pricing
 Promotions (types, discount level)
 Vendor policies
 Management programs
 Consumer characteristics
 Special demand drivers
 Competitor characteristics
 Company’s own stores’ characteristics vs. others
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62.  Economic and political differences:
 Results in different information infrastructure from
country to country
 Compliance with software copyright is also a major
issue.
 Gross violation- illegal copying and use of
software.
 Some countries control the contents of internet,
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some may restrict the language

63.  Legal issues:
 Legal systems differ considerably
 E.g. copyrights, patents, computer crimes, file sharing,
privacy and data transfer
 This affects what is transmitted via Global
IS(transfer of data across international borders)
63

64. Legal issues (cond..)
 Countries justify their laws as protecting privacy of
their citizens.
 Intellectual property protection
 Keeping job within country by requiring that data
processing be done there
 Whose laws have jurisdiction when records are in
different countries for reprocessing and
retransmission purpose? 64

65.  Designing web sites for global audience:
 60% of all internet users are non English speaking
 Hence, doing business on internet must include
localization
 Globalization and offshoring of s/w and other IT
activities:
 Initially offshore outsourcing of programming
 Now other activities ranging from call centers to s/
65
w research and development

66.  Globalization and personnel issues:
 Orientation and training of personnel/ hiring them
 Companies may need to send their employees to
other countries and also hire local personnel
 Use of special s/w for training personnel across
the globe.
66

67. Global Supply Chain
 Supply chain that involve suppliers and/or customers
in other countries
 Longer and more complex than domestic ones
 Issues in GSC are:
 Legal issues
 Custom fees and taxes
 Language and cultural differences
 Fast changes in currency exchange rate
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 Political instabilities

68. How IT helps?
 IT provides EDI and other communication infrastructures,
online expertise
 IT helps to solve language problems through use of
automatic web page translation
 E.g. Infoscope : a device by IBM
 composed of a digital camera and wireless internet access.
 Translate foreign languages by photographing the text then
sending the image to a remote computer via the internet for
translation.
68

69. Demand Driven Supply Networks
 Traditional supply chain
 Is driven from back- by producers and manufacturers
 Driving products to market
 Dominant actions are
 Forecast demand
 Make-to-stock
 Push products downstream toward end customer
 No view into true market demands
69

70.  Demand could be unpredictable and hence hard to
predict
 Items could undergo under stock or overstock
(bullwhip effect)
 No timely and accurate information
70

71. DDSN (Contd..)
 Driven from front- by customer demand
 Products are pulled to market by customers
 DDSN defines that companies in a supply chain will work
more closely to shape market demand by sharing and
collaborating information
 DDSN, uses a system of technologies and processes to
sense demand and react to it in real time, across a
network of linked customers, suppliers, and employees.
71

72. Benefits of DDSN
 More accurate and detailed demand forecasting
 Lower supply chain cost (with reduced inventories)
 Order is delivered complete, accurate, on time and in
perfect condition
 Reduced days of inventory
 avg. days of inventory on hand including raw
materials, components; work in process and
finished goods 72

73.  Improved cash to cash performance
 Length of time between company spends cash
to buy raw material and the time the cash
flows back into company
 Provides customer centric approach and not
factory centric approach
 Provides agility, adaptability and alignment
73

74.  Alignment is Key
 DDSN is not something one company can do in isolation.
 Some methods businesses can use to promote alignment:
1. Exchange information and knowledge freely with vendors
and customers.
2. Lay down roles, tasks, and responsibilities clearly for
suppliers and customers.
3. Equitably share risks, costs, and gains of improvement
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initiatives.

75. Real time Demand Driven Manufacturing
 Organizations must respond quickly and efficiently on
demand
 Provides customers with what exactly they want,
when and where they want it
 Partnership must be focused on
 reducing costs through shared quality goals,
 shared design responsibilities,
 on time deliveries and
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 continuous performance reviews

76. What is RFID?
 Radio-frequency identification (RFID) is an automatic
identification method using radio waves.
RFID also began to see use in wildlife monitoring and research.
RFID tags can be used to monitor animal movement without
adversely affecting the animal,

77. Applications
 Supply chain automation
 Asset tracking
 Medical applications
 People tracking
 Manufacturing
 Retail
 Warehouses
 Livestock
 Timing
77

78. The RFID System
n Tag.
n Reader.
n Reader antenna.
n Controller.
n Host and software system.
n Communication infrastructure.

79. Tag
An RFID tag is a device that can store and transmit
data to a reader in a contact less manner using radio
waves.
RFID tags can be classified in three different ways.
Passive

80. Reader????
An RFID reader can read from and write data to
compatible RFID tags.
A reader thus doubles up as a writer. The act of writing
the tag data by a reader is called creating a tag.

81. A reader has the following main components:
Transmitter
Receiver
Microprocessor
Memory
Controller (which may reside as an external
component)
Communication interface
Power

82. Working
 A radio device called a tag is attached to the
object that needs to be identified.
 When this tagged object is presented in front of
a suitable RFID reader, the tag transmits this
data to the reader (via the reader antenna).
82

83.  The reader then reads the data and has the
capability to forward it over suitable
communication channels.
 This application can then use this unique data
to identify the object presented to the reader.
 It can then perform a variety of actions
83

84. RFID in manufacturer-retailer supply chain
84

85. B2B Exchanges
 A B2B exchange is an online marketplace, where
buyers, sellers and intermediaries form communities,
exchange views, offer products and services, and
conduct business transactions.
 Support B2B supply chains
 Can be private (one buyer and many sellers or one
seller and many buyers)
 Can be public ( many sellers and many buyers)
85

86.  In private exchange IOS is controlled by sole
seller or buyer, usually using extranet or EDI
 In public exchange IOS can be extranet or
internet
86

87. Interconnected public exchanges
87

88. Electronic hubs
 Definition
 Commercial website that provides coordination and
synchronization services to electronic commerce (e-
commerce) its users or partners.
 Facilitate communication and collaboration among
business partners along the supply chain
 Each partner can access website usually a portal for an
exchange of information
 Each partner can deposit new information, make changes
88

89. 89

90. Directory services
 Helps buyers and sellers to find potential
partners
 Usually include catalogues of product offered by
each sellers, list of buyers and what they want
and other industry or general information
 Appear as B2B information portal
 Also offering additional services that support
trading 90

91. Interorganizational information integration
 Most of the companies’ technologies are
proprietary
 Hence difficult to connect IS of different
organizations and transfer data in IOS and GIS
 Things to be followed while integrating IS are..
91

92.  Establish an IT leadership team to direct the
integration
 For customer facing applications select the option
with lowest business integration risks
 Customer facing applications must have priority over
back-office applications
92

93.  Offer generous retention package for top talented
IT personnel to ensure they don’t leave
 Maintain high morale among IT personnel
 Increase the company’s normal level of project
risk to achieve aggressive business integration
goals
93

94. Facilitating IS integration
 Steps:
 Check the business processes, understand them and
make improvements if necessary
 Plan necessary IT infrastructure
 Various technologies available for integration are:
 EDI, EDI/Internet
 Extranet
 XML and related Web services
 Portals, converters etc. 94

95. Partner Relationship Management
 Definition:
 Business strategy that recognizes the need to
 develop long term relationships with business
partners ,
 by providing each partner with the services that
are most beneficial to that partner
95

96.  PRM solutions connect companies with their business
partners (suppliers, customers, services ) using web
technology to securely distribute and manage
information
96

97.  Specific functions of PRM are
 Partner profile
 Partner communications
 Management of customer leads
 to generate new potential business clientele
 Targeted information distribution etc.
97

98.  include key features for
 selling,
 commission,
 opportunity,
 marketing campaigns,
 inventory access, and
 other features designed to facilitate the relationship
between manufacturers and their channel partners.
98

99. Supplier Relationship Management (SRM)
 major category of PRM where partners are
suppliers
 The supply chain processes are connected,
 decisions are made collectively,
 performance metrics are based on common
understanding,
 information flows in real time
99

100. Major steps of SRM Model
100

101. 101

102. Steps in SRM
 Access :
 Identify all the resources required to meet the product
or service needs of the enterprise
 Identify suppliers:
 Availability of large pool of suppliers improve options
down the road
 Access supplier performance:
 Check past performance, testimonials and stated 102
capabilities

103.  Negotiate:
 Prices and other relevant terms count only
when combined
 Contract:
 Identify and register trading partners. Award
contracts to the appropriate suppliers
103

104.  Connect:
 Bridge the enterprise and supplier through
procurement procedures. Facilitate
collaboration.
104

105.  Engage and share:
 Enable interaction between enterprise and
suppliers.
 Show suppliers your forecasted needs and
their performance ratings
 Look at their inventory and projections.
 Transmit purchase orders using tendering and
105
RFQ

106.  Transact:
 Collect orders from across the enterprise.
Create purchase orders and check them
against budgets
106

107.  Deliver:
 Goods are pulled from supplier’s stock
 Wireless barcode readers update inventory level
 Shipping invoices are generated
 Goods are delivered
107

108.  Receive:
 Wireless devices help in determining whether
everything ordered arrives as planned, in good
conditions and right quantities
108

109.  Resolve:
 Resolve any disputes and pay only if satisfied
 Explain why payment is withheld
 Pay:
 Settle up with the supplier and check actual cost
against projected cost
 Analyze:
 Access results, design improvements and decide
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which suppliers to keep

110. Collaborative Commerce (C-Commerce)
 Non-selling/buying electronic transactions within,
between and among the organizations
 E.g. company collaborating electronically with vendor
that is designing a product or part for the company
 Communication, collaboration information sharing
done electronically by means of tools such as
groupware and specially designed collaboration tools
110

111. Some areas of collaboration using IS
 Retailer-supplier
 Large retailers collaborate with their major supplier to
conduct production and inventory planning and
forecasting of demand
 Product design
 Parties involved in a specific product design may use s/w
tools that enable them to share data and collaborate in
product design
 E.g. of such tool is screen sharing 111

112.  Collaborative manufacturing
 Dynamic collaborative production networks can be
created by manufacturers
112