Chapter 9 – Software Evolution Chapter 9 Software Evolution1.
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Interorganizational and Global Information Systems
Chapter 9
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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
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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
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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
No safety stock, lag time
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Common Interorganizational activities
Buying and Selling
Finding a partner
Viewing catalogs
Negotiating
Order taking
Order fulfillment
Billing
Payment
After sales services n more..
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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.
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Common Interorganizational activities
Other
Working jointly on standards
Conducting research etc.
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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
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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)
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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.
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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
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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
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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.
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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.
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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 equipments
etc.
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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
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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
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Step 9: Returns
Customer may want to return or exchange items
Movement of returns from customers back to
vendors is called Reverse Logistics.
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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
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Why these problems occur?
It involves material, information, money and many people-
Located at different places.
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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
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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,
communication & collaboration)
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Purpose of IOS
To reduce cost
To improve the effectiveness and timeliness
of business processes
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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
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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
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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 institutions
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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 companies28
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IOS Infrastructure Technologies
Electronic Data Interchange (EDI)
Extranets
XML
Web Services
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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
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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
E.g. ANSI X.12
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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.
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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
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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
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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
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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
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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
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Types of Internet based EDI
Email Extranet Web based EDI hosting service
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Prospects of Internet based EDI
Cheaper
Affordable for small transactions
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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
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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
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The structure of extranet
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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
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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
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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
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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)
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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
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Benefits of XML (Contd…)
Less specialized
Requires less specialized skills in contrast to EDI
(requires highly specialized knowledge of EDI
translators)
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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
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Global Information System (GIS)
Category of IOS
Needed by
Multinational companies
International companies
Virtual global companies
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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
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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
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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
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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
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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
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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
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Issues in GIS design & Implementation
Differences in cultures, regulations, economics & politics among parties in different countries.
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Cultural Differences:
Culture consists of objects, values & other
characteristics of a particular society
Ranging from traditional to legal & ethical issues
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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
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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.
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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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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,
some may restrict the language
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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)
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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?
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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/w
research and development
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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.
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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
Political instabilities
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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.
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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
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Demand could be unpredictable and hence hard to
predict
Items could undergo under stock or overstock
(bullwhip effect)
No timely and accurate information
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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.
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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
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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
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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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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
continuous performance reviews
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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,
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Applications Supply chain automation Asset tracking Medical applications People tracking Manufacturing Retail Warehouses Livestock Timing
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The RFID System1. Tag.
2. Reader.
3. Reader antenna.
4. Controller.
5. Host and software system.
6. Communication infrastructure.
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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
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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.
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A reader has the following main components:TransmitterReceiverMicroprocessorMemoryController (which may reside as an external component)Communication interfacePower
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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).
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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
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RFID in manufacturer-retailer supply chain
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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)
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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
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Interconnected public exchanges
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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 and
receive or leave messages
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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
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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..
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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
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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
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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.
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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
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PRM solutions connect companies with their business
partners (suppliers, customers, services ) using web
technology to securely distribute and manage
information
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Specific functions of PRM are
Partner profile
Partner communications
Management of customer leads
to generate new potential business clientele
Targeted information distribution etc.
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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.
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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
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Major steps of SRM Model
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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 capabilities
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Negotiate:
Prices and other relevant terms count only
when combined
Contract:
Identify and register trading partners. Award
contracts to the appropriate suppliers
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Connect:
Bridge the enterprise and supplier through
procurement procedures. Facilitate
collaboration.
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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 RFQ
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Transact:
Collect orders from across the enterprise.
Create purchase orders and check them
against budgets
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Deliver:
Goods are pulled from supplier’s stock
Wireless barcode readers update inventory level
Shipping invoices are generated
Goods are delivered
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Receive:
Wireless devices help in determining whether
everything ordered arrives as planned, in good
conditions and right quantities
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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 which
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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
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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
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Collaborative manufacturing
Dynamic collaborative production networks can be
created by manufacturers
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