Theoretical Application of Integrated Information Systems

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Abstract

This paper presents an analysis of the theoretical application of integrated information systems in various organizations around the world. As businesses expand from small and medium sized firm to large cross-border enterprises, the operations become more complex.

Large organizations often encounter tough challenges, especially when it comes to managing the complexity of operations involving many stakeholders and diverse units. The effective management and coordination of the operations of the mega enterprises requires a smooth flow of reliable information. Traditionally, firms utilize orthodox systems that do not provide timely and inclusive information.

This paper seeks to investigate and reinforce the significance of employing Integrated Information Systems (IIS) to help managers run the large enterprises better from a central point. The essay reveals that the integrated information systems include the automation software platforms that have been developed to help managers control organizational data with a view of establishing a perfect position to supervise each unit.

Introduction

Information is one of the most valuable resources of a firm around which business processes unfold. The overall performance of a firm is contingent on its ability to manage the flow of information between its constituent elements.

Managerial decisions largely depend on the carefully analyzed information including on-going projects, distribution, demand forecasting, customer communication, production, stock levels, and supplier information among many other constituents of a business firm.

In the advent of rapid globalization, technological dynamics, and inter-organizational dependency that shape the modern-day business, the need for appropriate information management systems is inevitable to handle the plethora of complex operations. The term ‘digital firm’ has gained popularity to define this emerging trend in contemporary business.

In the last one decade, a new class of integrated software applications has emerged with a view of enabling the digital firm to manage the complexity of the information involved effectively. This paper critically analyzes the integrated information systems that can help the digital firm manage flow of information efficiently to promote the smooth flow of the organizational processes and profitability.

Review

Over the past decade, rapid changes in technology that have greatly affected the way modern business is conducted have been witnessed. There has been notable advancement in technology, especially in the facilitation of information flow and sharing between the different stakeholders of the modern business firms (Laudon & Laudon, 2013).

The impact of digitization on business can be exemplified by looking at the current functionality of the stakeholders. The utilization of integrated information systems that have been catapulted through digitization, the modern firm now has an unlimited power of information sharing and dissemination across its stakeholders regardless of the complexity and distance involved.

For instance, the digitization technology has reshaped various business models by lowering the barriers to the entry and expansion of markets by enterprises across the globe. For instance, it is possible for an organization to engage over 500 million Skype users using the Voice-Over-Internet Protocol (VoIP) technology today (Alaa & Fitzgerald, 2013).

This business communication model has fundamentally disrupted the traditional business strategies. As a result, many companies have opted to follow suit in the fear of missing the competitive advantage brought about the technology.

Currently, firms rely heavily on the social media for the creation of brands, launching of products, and communication with customers among many other service provisions surrounding the marketing activities. Consumers also use the internet to search information regarding products that they can even be bought offline.

They compare products and prices besides involving other online groups in discussions and views on particular brands (Laudon & Laudon, 2013). It is the role of the digital firm to act in response to this emerging consumer behavior by adopting the appropriate integrated information systems to capture the changing customer needs. The strategy can help the firms gain a competitive edge over their rivals.

Today, the web plays a key role in the retail channel that has ultimately disrupted traditional business practice. Digitization has led to the emergence of new winners and losers.

Firms such as the Amazon Inc., whose annual sales totaled US$3.2 Billion in 2001, skyrocketed to approximately US$49 billion in 2011. The firm emerged as a winner in its industry while the losers including the brick-and-mortar retailers and Borders lost their market shares. This situation led to the dissolution of such firms.

The primary role of information is to merge all business operations and functions for proving the base for managerial decisions. The goal of managing information is to achieve the intended enterprise objectives including improving the firm’s performance and sustaining growth.

Some of the benefits of the effective information systems include better understanding of the business functions, appropriate problem analysis, and value-added communication among the different constituents of an enterprise. Other advantages include the formulation of prompt and informed decisions for better firm control. The performance of businesses is largely based on the implemented information systems.

Efficient information systems are compared to a library system that provides useful data to all the management levels in the firm. The library plays a critical role in the collection, classification, and archiving of data that the whole community relies on to retrieve the information required guiding various decisions.

The decisions on different tasks bring about an improved overall performance of the firm when they are implemented appropriately (Laudon & Laudon, 2013).

Enterprises need efficient and properly integrated information systems to evade losing the ground in the rapidly changing business environment. The information provides enterprises with numerous competencies including the realization of low-cost production and excellent customer services.

The Disconnect of the Traditional Information Systems

The traditional business models face the problem of non-conformity to the changing business environment. Traditional firms utilize the orthodox information management systems and tools that do not match the contemporary business demands. A substantial amount of literature puts forward numerous problems associated with the traditional information systems.

Firstly, they adopt a top-down decision-making process where senior managers formulate orders for the less informed subordinates to implement (Laudon & Laudon, 2013).

The lack of proper coordination of information due to the burdening hierarchical management system, the firms fail to notice the changes in the organization. Secondly, they lack information systems to link the departments. This disconnection leads to failed functions, duplication of reports, and delayed communication, a situation that affects the overall performance of the enterprise.

In most organizations, the separate departments including the accounting, human resources (HR), marketing, sales, and production had independent information systems (Laudon & Laudon, 2013). In the orthodox management plan, strategic decision-making was challenging since the acquisition of information for analysis involved long processes.

Data regarding the various departments was availed in the form of separate files with different versions that the general manager had to spend several days to analyze before making decisions. With each department having separate computer programs to operate, it implied that there were multiple files created.

In a five or ten-year span, the size of files created can be enormous, giving the management the burden of handling and loss of time. These problems can be a source of demotivation, fatigue, and increased turnover rates.

Firms that utilize the traditional information handling methods are prone to failure owing to the lack of coordination and duplication of roles that result in resource wastage and untapped opportunities (Mabry, Chengho, & Bigler, 2014). The planning process conducted without up-to-date information results in recurring failure in the enterprise.

Some researchers argue that planning cycles in the traditional firms can be too long, and do not match the pace of the changing business environment. Such problems make the management of firms hard because they rely on the traditional methods concentrating on past scenarios. The traditional data handling systems are also faced with the problem of data redundancy and inconsistency (Laudon & Laudon, 2013).

Such instances and adverse trends can be resolved using the modern integrated information systems that communicate between the internal and external environments of the enterprise. The modern management practice also boosts the coordination of the operations with a view of establishing a central information system to oversee each unit.

Organizing the Information Systems in a Digital Firm

Many modern firms have acknowledged the role of information as an ingredient of the organizational communication function. The IT department in most companies manages the organization of information (Mabry et al., 2014). Its governance entails the policies and strategies that govern the utilization of technology to handle the company information. It guides the decision-making processes (Laudon & Laudon, 2013).

Furthermore, it draws the accountability framework to ensure that the appropriate technology is executed to facilitate the smooth flow of information in the organization. The systems form a part of a series of value-adding activities for acquisition, transformation, and distribution of information that can be utilized by the managers to improve decision-making.

Organizations face challenges that stem from both the internal and external environments. Information systems are designed to offer reliable solutions to such organizational challenges (Mabry et al., 2014). The information systems transform data into meaningful knowledge to guide decision-making with an aim of improving the performance of the enterprise.

According to Mabry et al. (2014), the realization of the organization’s strategic goals is derailed in situations where they fail to adopt management information systems. The systems help the organization improve the customer relations, functional superiority, value-added decisions, and market effectiveness among others.

Technically, the systems help in the collection of data, storage, and timely dissemination of information from the external and internal environments of the firm with a goal of supporting the organizational functions (Balfe, Sharples, & Wilson, 2015). These operations can be classified as input, processing, and output. They play a central role in the provision of solutions to problems facing the business initiatives of the enterprises.

Organizing the information systems involves the adoption of viable business models, shaping a culture that supports it, and generating the political will through the appropriate leadership models to convert the efforts into a prosperous organization.

To obtain a meaningful value of the information systems, organizations ought to show the support for the technology investment, suitable complementary investments, and proactive management styles.

The complementary investments include the relevant corporate culture, employee behavior, new business models and processes, high technology standards, favorable regulation and legislation, and the will to maintain an up-to-date information system. Some scenarios involve the fortification of the managerial and organizational structure, especially during the introduction of new technology (Bafe et al., 2015).

Theoretical Application of the Integrated Information Systems

The digital firm embraces integrated information systems that promote an accurate handling of information to ensure that the different departments in an enterprise receive and share timely information from a central point (Durugbo & Riedel, 2013).

To achieve this transformation, numerous technological developments have been tested and proven efficient in the management of information. They mostly revolve around the utilization of computer software as discussed extensively in this section.

Enterprise Resource Planning

One of the most proactive and proven IIS software is the Enterprise Resource Planning (ERP) system. This software helps business firms integrate a range of business functions and processes with a view of establishing a central system for managing the overall business errands (Durugbo & Riedel, 2013). This software has been adopted mainly by not only the multinationals but also small and medium-sized enterprises (SMEs).

This move has enabled them cut the unnecessary operational costs. The ERP concept can be discussed from different viewpoints. At the outset, it is a marketed product sold as computer application software. Secondly, the ERP can be seen as a development goal mapping all enterprise data and processes into a comprehensive and integral structure.

Thirdly, it can be viewed as a key component of an infrastructure that provides apt business solutions (Uçaktürk & Villard, 2013). The ERP system is designed to promote an aggressive and efficient business strategy with a view of enabling firms to manage their resources including the materials, workforce, suppliers, customers, and finance.

It provides a wholesome and integrated solution for the enterprise’s information processing needs. The ERP also provides the standardization of the business processes across the firm.

It is known for its business revolutionizing capabilities including the automation and integration of the firm’s processes, sharing of common data and practices across the entire business, and providing access to information in a real-time environment.

The ERP can improve the business processes while cutting the perceived operational costs. The two significant frontiers for the software include the supply chain management and e-commerce (Drnevich & Croson, 2013). The capabilities and effectiveness of the ERP have been tested through its widespread application in the supply chain management whereby it is linked with other business functions.

Firms can slash the cycle times and reduce the inventory with the help of the ERP. Despite its widely cited implementation costs, the ERP has evaded expensive errors that enterprises make with the traditional handling processes.

A substantial amount literature also provides the evidence-based success factors for the ERP in spite of its expensive installation costs. The ERP concept is represented in figure 1.0 showing how the information from the different constituents of an enterprise can be controlled from a central point.

Figure 1.0 The ERP systems concept

The ERP systems concept

The successful implementation and functionality of the ERP system is contingent on its alignment with the organizational processes and correspondence to the enterprise culture, strategy, and organizational structure (Uçaktürk & Villard, 2013). The system seeks to improve both the fundamental and front-end functions of the enterprise simultaneously.

Various reports indicate that the ERP has gained substantial market popularity due to its capability to include additional business functions such as the Internet-based transactions and communications. The users are reaping the benefits of managing the information from a system that permits more processes to be included in addition to the ones configured initially.

Evidence-Based Application of the ERP System as an Integrated Information Tool

Numerous companies that are among the leading firms worldwide have applied the ERP system. The main enterprise software vendors include the Oracle, SAP, and SSA Global. Currently, there are versions of the ERP software packages designed for small and medium-sized enterprises (SMEs) obtainable via the webs offered by various service providers (Durugbo & Riedel, 2013).

These systems can communicate with the external business elements including the customers, suppliers, and other organizations alongside the initial design for the internal operations of the firm. The ERP framework provides value to the firms by increasing the operational efficiency. It also integrates firm’s information into the system thereby underpinning the formulation of decisions that are more informed.

Large companies whose operations are highly complex involving long supply chain, distant units, and numerous management departments have attested the effectiveness of the ERP (Laudon & Laudon, 2013). The system helps the companies by providing them with standardized data that is used by all the stakeholders regardless of their different locations.

For instance, the implementation of the SAP enterprise software enabled the Coca-Cola Company to standardize and coordinate its business processes in over 200 countries around the globe.

Before the adoption of the SAP enterprise software, the company was having trouble leveraging its global business processes. The implementation of the ERP system led to an increased worldwide buying power of the company’s products and response to the rapid market changes (Durugbo & Riedel, 2013).

The ERP systems help firms respond timely to requests and orders from the customers since the software facilitates the integration of information on the incoming orders, manufacturing processes, and delivery of data. In this way, the firm manufactures in response to the orders made by the customers (Drnevich & Croson, 2013).

In addition, this integration enables the procurement process to determine the amount of the raw materials to be acquired in response to the manufacturing needs of refilling the actual orders (Drnevich & Croson, 2013). Similarly, the Alcoa Company made a groundbreaking reduction of the transaction costs after implementing the Oracle enterprise software.

The software also resulted in the decrease of the redundant processes and systems. Prior to the implementation of the ERP, the company took exceedingly long before receiving the payments for delivered products due to the absence of a system to process the receipts (Balfe et al., 2015).

Following the successful acquisition and implementation of the Oracle ERP system, the Alcoa Company accounts payable transaction processing saw an 89% sharp drop.

The Impact of Integrated Information System on Supply Chain Management

The effectiveness of the ERP system has been proved to have significant effects on the supply chain management, especially in the mega companies where the operations can get more complex (Uçaktürk & Villard, 2013). The supply chain of any business is made up of various components that include the business processes, resource goods, production means, and distribution networks.

It involves many players such as the firm, suppliers, distribution channels, and customers (Blessing Mavengere, 2014). These constituents are involved in the core functions of the business that are associated with the financial transactions. Managing the functions in a multinational organization can be tricky (Balfe et al., 2015). At this stage, the integrated information systems such as the ERP come into play.

A system is needed to control the procurement of raw materials, transform them into intermediate and finished commodities, and coordinate the distribution of the finished products to the customers.

The management needs to have access to the information about each unit in the complex supply chain to support the formulation of better decisions for the firm. This acquaintance will also help in the evaluation of the economic position of the activities at any point in time.

Inefficiencies in the supply chain management can occur due to the absence of an appropriately integrated system that can avail the information on each of the complex units involved.

Major inefficiencies observed in the supply chain include component shortages, underutilized plant capacity, deficient or surplus finished products inventory, exorbitant transport costs, delayed deliveries, and little customer information coordination among other crucial errors. Instances such as the manufacturers keeping excessive inventory due to the lacking information about shipping are common.

As a result, the stock level increases. This situation escalates the stocking costs. The enterprise system software helps evade a scenario that can waste up to 25% of the operational costs of the firm. The system enables the manufacturer gain access to information on the exact number of units of a particular product that the customers require and exact time of production and delivery.

The ERP has been proven to promote the just-in-time strategy for manufacturers whereby the production perfectly corresponds to the customer needs and delivery time (Blessing Mavengere, 2014).

Information systems facilitate the supply chain management in many ways. At the outset, it helps firms decide when and what to produce, store, and distribute (Blessing Mavengere, 2014). In addition, it promoted rapid communication and tracking of order requests from the clients and checking inventory levels and availability. The ERP systems have contributed to reducing costs of inventory, transportation, and warehousing.

It facilitates the tracking of shipment for raw materials from the suppliers. Besides, it monitors the distribution of finished products to the retail outlets and customers in different regions and countries around the globe, particularly for the global business firms.

The integrated information systems help manufacturers plan production activities by scheduling the production activities in line with the customer demands (Drnevich & Croson, 2013). Moreover, the systems provide a rapid communication framework for product design changes in response to the customer tastes and shifting market forces.

The supply chain system is designed to help firms plan and execute manufacturing procedures successfully. Furthermore, they underpin the modeling of the supply chain, creation of demand projections, and coordination of supplies and manufacturing decisions. On the other hand, the supply execution systems help firms manage the flow of products from the manufacturing and distribution channels to the right destinations.

The information systems also assist in the tracking of the physical conditions of products, management of materials, warehousing, and transportation operations. Besides, they confirm the financial information associated with the above operations.

The major software vendors for supply chain management include the Manugistics and i2 Technologies. In addition, the enterprise software vendors including the SAP and Oracle-PeopleSoft provide various supply chain management modules.

A perfect example of the utilization of the supply chain systems is demonstrated by the Dubai Ports (DP) World, a leading terminal operator in the world. It adopts a customer-centric approach that supports its supply chains in more than 50 terminals located in over 40 countries globally. The system helps the DP World provide excellent innovative services in the handling of bulk, container, and terminal cargos.

The firm gives customers priority by heavily investing in tech-savvy resources to provide quality services. The DP World helps shippers around the globe handle the complex supply chains involving container handling. Through the adoption of the ERP systems, the DP World has managed to ease congestion challenges rampant in the container terminals (Drnevich & Croson, 2013).

It utilizes numerous information technology-based solutions that have improved the terminal capacity use significantly. The automated system conducts functions such as the recording, analysis, authentication, reporting, and clearance of the shipment using the Electronic Data Interchange (EDI) interface.

The information system also offers an opportunity for both traders and consumers to manage orders and deliveries online. The introduction of the Radio Frequency Identification (RFID) technology has led to various advantages. At the outset, the management of the distribution logistics has been improved owing to the faster clearance of the shipment.

This situation has significantly increased the flow of traffic thereby reducing congestion at the facility. The DP World customers can boast of the easier cargo clearance and transportation to the offshore destinations. This strategy was achieved through the upgraded truck management that saw the prevention of queues in the terminals thereby reducing the number of trucks on the public roads.

Application of Integrated Information Systems in Customer Relationship Management

Marketing researchers have more often contended that establishing a knowledge base about a firm’s customers is the most competitive phenomenon in the modern-day business environment. The traditional assumption of gaining a competitive edge by moving the highest quantity of products or demonstrating the best innovation has been recently challenged by the notion of understanding customer analysis.

A sustainable firm’s growth and profitability do not only depend on constant innovation but also the proper understanding of the consumer dynamics. This situation can be achieved by the utilization of the best information systems in the customer relationship management (CRM) strategy (Laudon & Laudon, 2013).

Developing a system that enables the realization of the consumer needs and their consumption behaviors among others is the focus of the CRM. For large companies with diverse market niches, it is not an easy task to know the consumers closely.

This situation creates a need to come up with the best strategic information systems to facilitate an accurate synthesis of all the information incoming from different channels including telephone, websites, social media, and face-to-face communication.

The CRM seeks to gather and integrate, consolidate, analyze, and redistribute consumer data to various contact points that include communication through e-mails, telephone, websites, wireless devices, and/or retail sites. Advanced CRM packages have modules for partner relationship management (PRM) and employee relationship management (ERM).

The PRM software helps promote the association between the firm and its partners including suppliers, shareholders, and sponsors. On the other hand, the ERM software deals with the workforce issues such as employee performance, formulation of goals, compensation, appraisals, recruitment, and training among others.

Software such as the Sales Force Automation (SFA) utilized in the CRM systems help the sales workforce to speed up the production processes by directing more efforts towards the most valuable and profitable customers. The SFA generates information on the sales prospects, contact, and configuration of the best candidates for substantial prospective purchases.

It communicates this information to the sales personnel to underpin the formulation of better decisions. The CRM systems generate useful information including the amount of revenue made against the costs incurred in servicing the customer (Laudon & Laudon, 2013). This analytical CRM function is geared towards establishing the customer lifetime value (CLTV) that portrays the long-term firm-consumer relationship.

Conclusion

This paper stresses the role of integrating information into a firm. It is evident that poor handling of information can result in a massive company failure due to the lack of appropriate coordination of the different operational units.

The paper has presented how the integrated information systems can be utilized to manage the digital firm to eradicate a plethora of problems that accrue due to the continued use of the orthodox systems. The size of information involved escalates as businesses become more complex, especially with the effect of globalization where firms engage in cross-border transactions.

As a result, the firms face a tough challenge of ensuring that the crucial information is disseminated timely to the complex units. In response to this complexity, various innovative software-based technologies have been developed to ease the challenge.

Reference List

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Blessing Mavengere, Nicholas. (2014). Role of Information Systems for Strategic Agility in Supply Chain Setting: Telecommunication Industry Study. Electronic Journal of Information Systems Evaluation, 17(1), 100-112.

Drnevich, P., & Croson, D. (2013). Information technology and business-level strategy: toward an integrated theoretical perspective. MIS Quarterly, 37(2), 483-509.

Durugbo, C., & Riedel, J. (2013). Readiness assessment of collaborative networked organizations for integrated product and service delivery. International Journal of Production Research, 51(2), 598-613.

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