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ACCA Strategic Professional · Strategic Business Leader · E-business: value chain

Calder Logistics integrates its order system with those of its main customers through electronic data interchange so that orders flow without re-keying. The board is concerned about the implementation issue that, once customers embed this link, Calder gains a stable relationship. A director notes the same integration also brings a drawback. Which is the most relevant drawback of such tight integration?

The most relevant drawback is greater dependence on partners' systems. When ordering systems are tightly linked, an outage or security breach at one organisation can spread to the others. Integration normally cuts errors, speeds information and raises switching costs, so those options describe benefits rather than drawbacks.

  1. AGreater dependence on partners' systems, so failures or security breaches can spread across the linked organisationsCorrect
  2. BInability to reduce order processing errors
  3. CHigher inventory holding caused by slower order information
  4. DReduced switching costs for customers

Explanation

Tight integration shares systems and data, so a failure or breach at one party can affect the others. Integration normally reduces errors and speeds information, lowering inventory, and it raises, not lowers, switching costs. Hence the dependence and contagion risk is the genuine drawback.

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