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Information Systems
for Business Integration
BUS3500 - Abdou Illia, Spring 2007
(Week 13, Thursday 4/5/2007)
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LEARNING GOALS
Explain the difference between horizontal and
vertical business integration.
Describe how Enterprise Resource Planning
systems integrate internal business processes.
Describe how businesses can use Supply Chain
Management systems to improve balance
product demand with supply.
Describe how businesses can use Customer
Relationship Management systems to improve
the customer experience.
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Traditional File System:
Integration problem
Each system uses its own programs and files
When systems are not integrated
Inability to share data
Difficulties in maintaining
Allows data duplication (i.e. redundancy)
System 1 Program 1
File 1 File 2 File 3
Program 2 File 1 File 2 File 3
System 2 Program 1
File 1 File 2 File 3
Program 2 File 1 File 2 File 3
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Database Systems: A Solution to
Integration problem
Systems share the same database
Database allows systems integration
Systems share the same data
Systems are easy to maintain
No (or less) redundancy
System 1
Program 1 Program 2 System 2
Program 1 Program 2
DBMS
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Business Integration?
Sales
Department Logistics Department Production
Department
Horizontal Integration V
e r t i c a l
I n t e g r a t i o n
Suppliers
Customers
Why Horizontal Integration?
Possible consequences of bad horizontal integration:
Delivery personnel not available when needed
Sold products not delivered on time
Etc.
Sales
Information System Operation & Delivery Information System
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Systems for Horizontal Integration
Enterprise Resource Planning (ERP) systems
integrate all the internal processes through a common information system
ERP system Sales
Department Logistics
Department Production
Department Warehousing
Marketing
Department Accounting
Department
Common Database
Process1 Process2 Process1 Process2
Process1 Process2 Process1 Process2
Process1 Process2 Process1 Process2
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Integrating Internal Processes
with ERP
ERP systems integrate all the functions and
departments within an organization through a
common information system
Most common modules for an ERP system
Finance
Manufacturing: helps from product development to production
Human resources:Handles all HR functions
Procurement:helps manage the purchase of office supply & raw material
Marketing:manage relationship with customers
ERP mainly used by medium and large businesses
Average lifetime cost: $15 Million (2003 surveys)
Implementation process: up to 5 years
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Integrating Internal Processes
with ERP
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Factors in ERP System Success
Active support of upper management
Having the best people on the
implementation team
Managing the time line well
Soliciting user involvement
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Vertical Integration with suppliers
Possible consequences of bad vertical integration
with suppliers:
Raw material shortage
Receiving more raw material than needed
Etc.
Suppliers
Company’s Internal processes
Lack of good integration
Q: What kind of solution can provide business integration in this specific case?
Sales Department Process1 Process2
Delivery Department Process1 Process2 Production
Department Process1 Process2
Systems for Vertical Integration
Electronic Data Interchange (EDI):
Direct computer-to-computer transfer of
business documents in electronic form
Suppliers
Value Added Network (VAN) or Private network connection
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Electronic Data Interchange (EDI)
Allows automatic transfer of electronic order
forms and their automatic processing
EDI relies on a pair of message standards
ANSI X12 – used in North America
EDIFACT – international, but widely used in Europe
Advantages:
Eliminates paperwork
Reduces errors
Speeds supply process
Disadvantages:
Provides connection only between two companies
Limits freedom of comparing prices.
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Systems for Vertical Integration
Supply chain management (SCM) system
provide a direct electronic connection with suppliers
Company’s Internal processes Sales Department Process1 Process2
Delivery Department Process1 Process2 Production
Department Process1 Process2
SCM System
Network connection Suppliers
- Forecast demand - Handle purchase of supply - Manage storage + shipping
Three main functions
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Supply Chain Management (SCM)
Stages of SCM (SC Council’s Reference Model):
1) Planning: develop and implement processes that attempt to forecast demand for products and services
Goal: Balance demand with supply of raw material 2) Sourcing: determine who should supply the items
required
Goal: Be supplied on time, within budget 3) Production: make the product
1)Schedule production
2)Ensure raw materials are on hand when needed 4) Product delivery (logistics)
1)Everything from receiving a customer inquiry to invoicing 2)Warehouse management is one very important factor 5) Returns: managing returns of raw materials as well as
finished goods
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Vertical Integration with customers
Possible consequences of bad vertical integration
with customers:
Out of product
Poor customer support
Etc.
Customers
Lack of good integration
Q: What kind of solution can provide business integration in this specific case?
Company’s Internal processes Sales Department Process1 Process2
Delivery Department Process1 Process2 Production
Department Process1 Process2
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Systems for Vertical Integration
Customer Relationship Management (CRM)
information system for managing all of the functions that deal with customers
Goal of CRM is to increase sales and repeat
business by learning the customer
Remember the customer’s needs and preferences
Determine the customer’s satisfaction with service
Determine which customers are in the magic 20 percent (or have the potential to become part of it)
CRM software
CRM software modules include
Personalization
Marketing automation
Sales force automation
Service and support
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CRM Module Functions
Personalization
One-to-one marketing through personalized products and services
Marketing automation
Determine market segments
Planning and implementing campaigns
Analyzing results
Segment customers
Demographics
Past purchases
Preferred method of shopping
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CRM Module Functions
(continued)
Sales force automation
Managing contacts and leads by storing customers’ basic demographic data
Provide to-do lists and calendars
Recognize early customer trends
Forecasts of future sales
Service and support
After-sales support
Complaint resolution
Returns
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Summary Questions
5) What is a SCM system? What is the main goal of an SCM system?
5) What is a CRM software used for? What is their goal?
4) What is EDI? What kind of network connections are usually used in EDI? What is the EDI message standard used in the U.S.?
3) (a) What are the common modules found in ERP systems? (b) Name few ERP software vendors. (c) What are the success factors of ERP implementation?
2) (a) What kind of IS could be used for horizontal integration of business processes? (b) What kind of IS could be used for vertical integration of business processes?
1) What is the difference between Horizontal integration and Vertical integration?
Notes Malaga