Integration of Internal and External Information Systems and Their Effect on the Supply Chain

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need manually, utilizing complicated multi-line item spreadsheets giving possibility of introducing human errors in reporting (Parcells, 2014). This manual processing forces accounting and finance to take a step back utilizing a paper-intensive process that contradicts implementation of the ERP systems.

While ERP systems integrate internal business functions for processing and reporting, SCM and CRM systems integrate intra-business information allowing businesses to manage and control the interface between buyers, suppliers, and customers. Figure 1, distinguished the application by the level of functionality and the direction of linkages of both of these systems (Monczka, Handfield, Guinipero, & Patterson (2011). Businesses specializing in CRM and SRM tend to provide higher levels of functionality than businesss that solely rely on ERP systems which as a result, many suppliers chose a standard ERP package with CRM and SRM add on modules to manage external relationships (Monczka, et. al, 2011). Implementing an information system that integrates internal and external business functions is often costly and many smaller businesses find themselves unable to implement the whole package. Therefore, companies implement specific modules of these information systems depending on the requirement of the company and the functionality they need to satisfy the business objective (Shatat & Udin, 2012).

In addition to system integration, lack of management buy in and incorrect usage can prevent a business to gain the full benefit they expect. Lack of management buy in and company culture transforms established ERP systems into a silo based system preventing the information sharing value they are intended to create (Folinas & Daniel, 2012). The removal of these silos would eliminate the redundancy and potential roadblocks created by use of the legal systems previously used (Hwang & Min, 2013). Lack of education can also contribute these system to not reach their full potential. By depending on the speed of information gathering, the agility of these systems is overlooked, preventing business decision makers from responding correctly to dynamic market conditions. Despite some misstep and implementation failure, the popularity of internal and external information systems continue to increase; the market grew from $28.8 billion in 2006 to $47.5 billion in 2011 and is expected to grow to an estimated $67.7 billion by 2017 (Hwang & Min, 2013). With this kind of growth, it is clearly evident that the benefits businesses gain in cost savings, business function alignment, and profitability outweigh the limitations and obstacle encountered during the early stages of implementation.

Solutions

It is important for businesses to understand the relationship and limitations between internal and external information systems. To do so it is recommended that businesses conduct a feasibility study to verify the suitability of these system as it relate to the current business culture and supply chain needs. The result of this study will enable businesses to create a roadmap with tangible milestones for implementation. It could take businesses years to successfully transition from the legacy systems to the internal and external business systems of choice. During this transition, specific metrics such as cash to cash cycle time, inventory turn-over, and customer responsiveness need to be tracked to determine the success rate of implementation (Hwang & Min, 2013). In additional to feasibility studies and metric tracking, end user training will enhance familiarity with these systems, reducing uncertainty and risk during transition from the legacy systems. Consistent application of data derived from internal and external information systems transforms the businesses’ value creation process but unfortunately few firm effectively apply their data to create value for decision making (Smith et al., 2013). Training will eliminate this misuse of data application ensuring of full beneficial functionally of the information system suites.

Conclusion

Integration between ERP, SCM, and CRM systems are integral to today’s business, enabling companies to improve their performance as the supply chain function evolves into a more global, strategic business partner in today’s business environment. Rather than focusing on their internal needs, businesses need to participate through the supply chain in order to have an effective relationship with all parties involved in the procurement, productions, and final product delivery process (Mekawie & Elragal, 2013). End user training and initiating feasibility studies to substantiate the suitability of these system as it relate to the current business culture and supply chain needs are important first steps in limiting system integration failure. Considered one of the most important and powerful management strategies that has significant impact on business performance, the supply chain function in today’s business is adding value by implementing ERP, SCM, and CRM system by improving the strategic analysis and decision making process.