What Is Business Integration?

The digitization of supply chains has potentially huge benefits for businesses. Research has shown that
greater levels of digitization can boost fill rates (i.e. the amount of customer demand that is met through
stock availability) by up to 80%, and shorten cash-to-cash (C2C) cycle times (i.e. the time between when
a company sends cash to suppliers and receives cash from customers), which is shown to lead to greater
profitability in 75% of cases. Further research from McKinsey estimates that, on average, companies
with highly-digitized supply chains can expect to boost their annual growth of EBIT (earnings before
interest and taxes) by 3.2% – the largest increase from digitizing any area of business – and annual
revenue growth by 2.3%. The benefits are indeed clear – but how do companies go about realizing
them? The answer is business integration. Put simply, business integration (also known as B2B
integration, or just B2Bi) refers to the comprehensive digital strategy that enables the integration,
automation and optimization of key business processes that connect an organization with its trading
partners – customers, suppliers, logistics companies, and financial institutions.

Why Do We Need Business Integration?

The foundations of business integration stem from companies needing a way to exchange information
quickly and efficiently. The simple fact of the matter is that in the digital world, faxes and emails don’t
cut the mustard anymore. But of course, as organizations have moved along their own digital
transformation journeys, they each have taken their own approach to exchanging messages and files
with trading partners. However, this results in each business in a supply chain using its own distinct
blend of applications, cloud resources, and various other systems, all of which rely on differing formats
and platforms, and are subject to different security, compliance and governance considerations. These
disparate systems don’t necessarily communicate with one another, and it is simply too inefficient and
costly to deploy a multitude of solutions to contend with the sheer diversity of communication
standards, data formats and security frameworks each business deals with. And so, business integration
solutions, strategies and technologies are required to manage the chaos, and enable separate
companies to seamlessly communicate and exchange business-critical information between each other
quickly and efficiently.

The ultimate goal of business integration, then, is to improve upon the speed and productivity of
conducting digital transactions across the supply chain and value chain. In addition, business integration
reduces the need for error-prone, costly, and time-consuming manual processes.

For example, most companies now receive purchase orders from other businesses electronically, often
via email. In the past, processing these purchase orders was a manual affair – an employee had to
conduct a review, and then manually enter the information into an order fulfilment system of some
kind. But with a business integration solution, when the company receives a purchase order, it is
automatically reviewed and passed along into the order fulfillment system, minimizing delays for orders
being fulfilled.

What’s more, for the company that submitted the purchase order, there is no more uncertainty as to
whether or not the order was received, as the business integration system allows the submitting
company to view this information and confirm that the order is being processed.
The Benefits of Business Integration
Such transparency offers great benefits to businesses. From business process management (BPM) to
supply chain visibility and global community management, business integration gives companies
comprehensive control, ensuring its trading partner operations flow smoothly and efficiently. With
business integration, organizations can reduce shipment delays, foresee supply chain bottlenecks, and
gain comprehensive visibility via a centralized view of revenue-driving B2B processes, enabling more
end-to-end responsiveness and better customer service.

Beyond visibility improvements, however, the major benefits of business

integration strategies revolve around the collaborative relationships and new
work practices that are enabled.

For example, car manufacturers typically rely on a complex network of

suppliers to produce up to 85% of the parts for a vehicle’s internal systems.
What’s more, as we move into the area of the connected
vehicle (with driverless technology also rearing its head above the horizon),
more than for just engine parts, car manufacturers are increasingly relying on
whole new swathes of strategic supplier partnerships to provide them with the
electronics and technologies they need to make their vehicles smart and get
them online.

In China, for instance, 98 carmakers, universities and institutes have joined

forces to create a strategic alliance to promote crossover collaboration and
improve national industrial standards as the country’s connected vehicle
industry matures. According to Kurt Lehmann, former CTO of Continental,
vehicle users spend 91 hours connected to the internet during their journeys
each year, so cooperation between carmakers and telecommunication service
providers is a must.
To support any new collaborative business processes, business integration
strategies are required that allow for the fast and secure sharing of digital
information between all parties in a supply chain ecosystem. According to IDC
Manufacturing Insights, “By 2020, 60% of manufacturers will rely on digital
platforms that enhance their investments in ecosystems and experiences and
support as much as 30% of their overall revenue.”
How Business Integration Works

For a company to get started with business integration, it needs to first decide
on the technology platform it will use. The choices essentially boil down into
four categories – on-premises, hosted, cloud, and hybrid.

On-premises business integration solutions means that the necessary

integration software is installed on-site at the organization’s premises. Hosted
integration means that the software is installed at an off-site location, cloud
integration means that the software is delivered As-a-Service over the internet,
and hybrid approaches combine two or more of the previous three strategies.

No matter which a company uses for its own purposes, there are four
components that make up a standard business integration process.

1. Source Application: To begin, data must be extracted from an

organization’s front-end business application. This might be a
purchase order from an ERP system, or something like a retail store’s
monthly sales figures from a point-of-sale system. Once this data is
pulled, the business integration solution will prepare it to be
transmitted to the external business partner.
2. Data Format: As mentioned above, not all data is standardized
when it resides in a business’s application. Formats vary, and so the
data must be converted into a standardized format for transfer into
the target application of the external business partner. As such, when
organizations asses business integration solutions, they must pay
attention to the types of integration that are supported, especially if
they source and/or sell materials with international supply chain
partners.
3. Transport Protocol: Naturally, the communication channel – or
protocol – must be agreed upon by both parties to exchange
information. There are a number of advanced protocols available –
such as SFTP, AS2, and HTTPs – to facilitate data exchange, though
trading partners and sometimes entire industries will often dictate the
transport mechanism to be used. As such, companies should ensure
 that they select a business integration solution that supports all the
protocols that their trading partners require, with the flexibility to
integrate new communication protocols as they appear.
4. Target Application: The final step involves the target application of
the trading partner. The target application must be able to receive and
process the data that was sent, make it readable, and integrate the
information into the recipient’s core business systems.

In short, these four components collect data from source applications,

transform it into the proper format, and then, using the appropriate transport
protocol, deliver it to the target application.

To give you an example of how business integration works in practice, let’s

look at a hypothetical retail order-to-cash scenario in which Supermarket A is
looking to buy cat food from Supplier B.

Supermarket A prepares an order for cat food in its purchasing system (source
application). The order is extracted and translated (data format) into a
Purchase Order. The Purchase Order is then securely transmitted (transport
protocol) to Supplier B via the internet, and processed by Supplier B (target
application). Supplier B then sends back a Functional Acknowledgement to
confirm the order was received.

After processing the order, Supplier B sends an Advanced Shipping Notice to

inform Supermarket A that the cat food is on its way. Supermarket A receives
the Shipping Notice, sends back a Functional Acknowledgement, and then
integrates the Shipping Notice into its back-end ERP system and prepares to
receive the shipment. Once Supplier B ships the cat food order, an Invoice is
sent to Supermarket A, and Supermarket A sends another Functional
Acknowledgment to Supplier B. Supermarket A then sends a Payment Order
to Supplier B to confirm payment details, and another Functional
Acknowledgement goes back to Supermarket A to acknowledge receipt of the
document.

All of this is handled automatically by the business integration solution, which

also leverages the same data that’s being exchanged between the two
companies to communicate with other distribution, warehousing and
fulfilment applications to prepare for and facilitate the completion of the
order.

Matrices

Definition
A matrix organizational structure is a company structure in which the reporting relationships are set up
as a grid, or matrix, rather than in the traditional hierarchy. In other words, employees have dual
reporting relationships – generally to both a functional manager and a product manager.

There are three types of matrix organizational structures:

1. Weak matrix organization

This type of matrix organizational structure is most similar to a traditional workplace hierarchy. A
functional manager oversees all aspects of a project and acts as the primary source of decision making.
While there is a project manager who also acts as a point of authority, they ultimately answer to the
functional manager.

2. Balanced matrix organization

In this type of matrix organizational structure, more authority is given to the project manager. While
there is still a functional manager who is the primary authority, employees also report to the project
manager.

3. Strong matrix organization

A strong matrix organization provides the project manager with equal or more power than the
functional manager. The project manager has primary control over resources and distribution of tasks.

Advantages of matrix organizational structures

There are several benefits of implementing a matrix organizational structure within the workplace.
These benefits include:

Increased communication efficiency

A matrix organizational structure allows multiple departments to easily communicate and collaborate on
a project. Because employees answer to multiple managers as opposed to just the functional manager,
issues are resolved more quickly, and company-wide interaction is increased

Improved employee motivation

In a matrix organizational structure, employees have much more autonomy and input in projects. This
type of structure encourages employee contribution and places a higher value on workers’ point of
view.

Increased teamwork

In a matrix organization, employees work across multiple projects and with various departments within
the company. This increases employee interaction and promotes a better sense of teamwork.

Maximizes resource usage

This type of structure allows resources to be maximized because of how equipment and employees are
shared across projects. A matrix structure also allows project managers to work in the areas of their
expertise rather than being pulled across multiple projects, boosting the overall contribution of their
talents.

Increased employee professional development

A matrix structure allows employees to work across a wide variety of projects and often requires them
to utilize and/or learn different skills. Being exposed to various job duties and responsibilities can
increase employee development and enhance their professional skills.

Disadvantages of matrix organizational structures

While there are many benefits to this type of workplace structure, there are also a few
disadvantages to consider. These include:

Potential conflict between managers and projects

Because this matrix requires employees to answer to two or more managers and work
on multiple projects, it could cause workers to become conflicted between managers
and projects. Also, because there are multiple managers in charge, there is the potential
for inconsistent managing directives among teams.

Authority confusion

Matrix organizational structures employ two or more managers that employees answer
to. This can cause several potential challenges, including confusion as to who the
supervisor is, undefined responsibilities among managers and the possibility of
managers opposing each other's decisions.

Reduced employee effectiveness

Oftentimes in a matrix organizational structure, employees are assigned to multiple

tasks across a number of projects. This can result in reduced employee effectiveness
and increased ambiguity as employees try to decide which tasks are most important.

Increased management overhead costs

This type of organizational structure can be costly in terms of management since

multiple managers are put in place for a project. As a result, management overhead
costs can increase, and the overall company budget can be impacted.
Tips for maximizing the success of a matrix organizational
structure
If you have determined that a matrix organizational structure is right for your company,
there are several ways in which you can increase the success of this structure. The
following are tips you can use to maximize the efficiency of a matrix structure within
your organization:

1. Clearly communicate who the primary reporting manager will be to employees.

2. Identify priorities and goals for each project and share them with the managers and team.
3. Keep an open line of communication with project managers to ensure they are in sync
with one another on project objectives and progress.
4. Take the time to train employees and managers on how the matrix organizational
structure works.
5. Manage conflicts as they happen rather than ignoring them or waiting for them to
escalate.
6. Ensure that management responsibilities are equally distributed to ensure effective
implementation of power and reduced confusion among authority figures.