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Interorganizational Announcements Systems Chapter 11 What is an IOS? Systems shared by two or more organizations to transfer data electronically Examples? Two types of markets Vertical Extended supply chain. Output from one business is input to another buy or sell the same product -- competitors Horizontal All Advantages of IOS Integrating ISs between vertically related organizations highly beneficial Saves time and money Better serves customers Integrating ISs between horizontally related organizations also beneficial Organizations performing similar activities share information Real estate agencies maintain multiple listing service Financial institutions share financial information Airlines share reservation systems Achieve Vertical Integration via Supply Chain Management Conventional Focus view of SCM on core competencies Reduce number of suppliers Develop strong partnership relationships built on shared information and trust What s wrong with this approach? Using SCM to Reduce Costs Cost Reduction Fail to yield sustainable competitive advantage Lower production cost of suppliers Improve quality conformance Material/location substitution Lower transaction costs Transaction-cost Supplier reduction approaches selection decisions Automate transactions (EDI) EDI What is EDI? Exchange of electronic data using interorganizational information systems Set of hardware, software, and standards that accommodate the EDI process Both sender and receiver must agree on format Now have translators -- convert proprietary format into an agreed upon standards How does EDI work? Start with trading partner agreement Which standard to use (ansi X.12) Which documents to exchange Which VAN carrier to use When information is to be sent (hourly, nightly, etc.) How does EDI work? (cont.) To transmit document: Create document within business application EDI translator reformats into agreed EDI standard Attach to VAN -- send packet To receive document: Call VAN -- retrieve documents from mailbox EDI translator reformats so it can be processed by your application Figure 11.5 How EDI works Cost Factors Number of documents and trading partners EDI translator Expandability -- cost more Annual maintenance fees -- upgrades VAN fees Implementation 11.3 Figure Benefits of EDI EDI on the WEB? Web-based Peregrine Lower EDI software is available from multiple sources Systems cost More familiar software Worldwide connectivity Low Advantages of Web EDI Disadvantages speed Poor security of Web EDI Legal Problems of EDI Increased risk of unauthorized interception Contractual responsibility for incomplete or corrupted telecommunications Questionable validity of digital contracts Protection against the ease of collaborative pricing and other activities that may violate antitrust laws The Importance of EDI Need for timely, reliable data exchange in response to rapidly changing markets Emergence of standards and guidelines Spread of information into many organizational units Greater reliability of information technology Globalization of organizations Using the Web for International Commerce Benefits Increased revenues Increased international Web participation Potential Web participation Cost savings Printing and shipping costs Customer service costs International Web Challenges Technological Non-uniform Challenges information infrastructures preferred payment method Payment Mechanisms Differences Non-uniform Language Translation delays Laws forbid foreign language accounting and other systems International Web Challenges (cont d) Cultural Differences Scientific, and Security Interests Cultural imperialism Economic, 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 International Web Challenges (cont d) Standards Varying standards for date format, measurements, etc. Legal Barriers to International Data Transfer data privacy laws in U.S. and Incompatible Europe Discussion Questions One example of an Horizontal IOS is Orbitz. Can this type of collusion hurt consumers? Given the availability of the Web, why do VANs still exist? Case, General Mills What is the issue in the case? Why are logistics complex to manage? Classify the relationships with the trucking companies: horizontal or vertical Nisevo is an intermediary. What are the advantages to General Mills of using this intermediary. Disadvantages?

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