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Open Systems Theory in business

Updated April 17, 2017

Open Systems Theory explains an open system as one where the units within an organisation are interconnected and mutually accessible and are also well connected to the outside world. Businesses operating closed systems have individual functions or departments that do not connect or share information and are not accessible to or from the outside world.

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Basic business functions

Businesses could not operate without some form of open system. For example, the sales department needs to know information on lead times, stocks and availability of goods in order to schedule sales. The stores, or shop floor, cannot supply ordered if they are not informed of sales order demand. Invoices cannot be raised without Goods Received Notes and payments cannot be matched to invoices without the availability of those invoices.


Different departments of a company making some part of the information they hold open to each other is a standard business practice. Often this is facilitated by duplication. Orders, Goods Received Notes and Purchase Orders are often printed onto multi-part stationary. Colour-coded copies are reserved by different departments and find their way to their new home through the business’s internal mail system.


The advent of computers, automated systems and networks makes the traditional muti-part stationary obsolete. Where there probably always will be at least one paper copy of orders, GRNs and invoices, they no longer need to be duplicate so that their information can be accessed by others. Enterprise Resource Planning systems adapt Open Systems Theory to create centralised stores of shared data. This information can even be accessible to external stakeholders. Customers and suppliers can log into open systems to check on the processing of their orders, invoices and payments.


Open systems have necessary limitations placed on them by business practices. For example, no business puts the price of goods on any documents accessible by warehouse personnel. Similarly, staff would be disturbed if their personnel files were accessible to all the world. Some types of data have to be restricted for both moral and legal reasons. Commercial secrets, like product design, Bills of Material and supplier contracts also cannot be accessible to more than a limited number of people within the organisation. These types of data are the source of the company’s profit and sharing them could destroy the company.

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About the Author

Stephen Byron Cooper began writing professionally in 2010. He holds a Bachelor of Science in computing from the University of Plymouth and a Master of Science in manufacturing systems from Kingston University. A career as a programmer gives him experience in technology. Cooper also has experience in hospitality management with knowledge in tourism.

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