Org Control in SCM

8/3/2019 Org Control in SCM

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SUPPLY CHAIN

MANAGEMENT

ORGANISATION AND CONTROL IN SUPPLY

CHAIN


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Learning Objectives

After reading this chapter, you should be able to:

Understand the need for logistics/supply chain organisational structureand its importance.

Describe the various types of organisational structures in integratedlogistics which have been evolved over time.

Discuss the meaning of organisational design.

Discuss the selection of appropriate organisational structure forlogistics/supply chain management function.

Discuss the kinds of alliances and partnerships in logistics/supply chainmanagement.


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Organisation is the structure which facilitates the creation, theimplementation and the evaluation of the plans. It is the formalmechanism for the purpose of allocating the human resources of the firm

to achieve the goals planned by the firm. The most difficult task involved

in the organising function in the establishment of human relationships

most optimally.The logistics and supply chain managers need to focus on the

organisational structure required for managing the business

logistics/supply chain management function.


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11.1 Need for logistics/supply chain organizational

structure

In a traditional form of organisation, activities are grouped around

the three primary functions of finance, operations and marketing. But

from the logistics/supply chain management point of view this

arrangement has fragmented the logistics/supply chain activities

among these three primary functions, whose primary purposes aredifferent from those of logistics/supply chain management.

Because of conflicts of purpose among the three major

functional areas, the logistics/supply chain management system

becomes sub-optimal affecting the efficiency of the firm as a whole.

Therefore, some form of organisational structure for coordinatingdecisions making of separate logistics/supply chain activities is

needed.


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Organisational Structure : Because of the geographically dispersed

nature of logistics work and the fact that operations typically span morethan one business, there is no absolutely right or wrong organisationalstructure for logistics. Therefore, one of the most difficult question to beanswered is where does integrated logistics belong in theorganisational structure?.

Organisation Structures in Integrated Logistics

Organisational structure depends on factors such as (i) size,(ii) product offerings, (iii) number of plants, (iv) sales volume,(v) customer locations and (vi) corporate philosophy.


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(i)Stage 1 Organisational Structure

In stage 1 organisational structure, logistics activities were assigned to

functional departments such as marketing, manufacturing,finance/accounting etc.

Exhibit 11.1 shows stage 1 logistical organisational structure.


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(ii) Stage 2 Organisational Structure

In stage 2 organisational structure, logistics was given an independent

status as a core competency, for example, physical distribution function

was separated from marketing function.

Exhibit 11.2 illustrates the stage 2 organisational structure.


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(iii) Stage 3 Organisational Structure

In stage 3 organisational structure logistics function was treated in par with

other major. Exhibit 11.3 illustrates the stage 3 integrated logistics

organisational structure.


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(iv) Stage 4 Organisational Structure

In stage 4 organisational structure integrated logistics function

became a separate functional area with its own senior executive

heading the department.


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Exhibit 11.4 illustrates stage 4 integrated organisational structure.


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(v) Stage 5 Organisational Structure

In stage 5 organisational structure, integrated logistics became a part

of management services and the organisational structure became an

integrated logistics matrix organisational structure.

Exhibit 11.5 illustrates the stage 5 integrated logistics matrix

organisational structure and Exhibit 11.6 shows the stage 5 integrated

logistics matrix organisational interfaces.


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11.4 Structure for supply chain performance

The logistics and supply chain organisation involves three majoraspects.

1. Organisational design including (a) organizational choice and

(b) organizational positioning

2. Organisation scope including (a) inter functional (b) intrafunctional

and (c) inter-organizational management and

3. Partnerships and collaboration including (a) information sharing

(b) alliances and (c) contracting

1. Organisational Design

Two aspects of organizational design are:

(a) Organisational choice and (b) organisational positioning


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(a) Organisational choice : When a firm has to establish some formof organizational structure, it may select from some basic choices.

These can be categorized as (i) informal (ii) semiformal and(iii) formal.

The informal organisation : The major objective for logistics/supplychain organisation is to achieve coordination among various logistics

activities for their planning and control. This coordination can beachieved in a number of informal ways. With-out having any changein the existing organizational structure, coordination is achieved bypersuasion among activities and cooperation among those who areresponsible for those activities. In firms having separate areas ofresponsibility such as transportation, inventory control and order

processing, an incentive system may be created to coordinate them. Insome firms, the budget may provide a mechanism for effectivecoordination.


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The Semi Formal Organisation : This type of organisation form

recognises that logistics planning and operation cut across the variousfunctions within a firms organizational structure. The logistics manageror the supply chain manager coordinates the projects which involve thesupply chain and cover many functional areas such as marketing,production, inventory, warehousing, purchasing etc.

This type of structure is also known as matrix organisation.

In a matrix organisation, the logistics/supply chain manager is responsiblefor the entire logistics system.

The Formal Organisation : This type of organisational form or structureestablishes clear lines of authority and responsibility for logistics/supply

chain manager. This involves (i) placing the logistics/supply chainmanager in a superior position relative to logistics/supply chain activitiesand (ii) placing the logistics/supply chain managers authority in a levelon par with other functional area managers such as operations, marketing,finance etc.


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11.5 Selection of appropriate organizational structure for

logistics/supply chain management function

The types of organisational structure to be selected is dependent on

the particular corporate strategy selected by the firm, viz., process

strategy, market strategy and information strategy.

A process strategy has the objective of achieving the maximum

efficiency in the movement of goods from the raw material state throughwork-in-process and on to the finished goods state.

Market strategy helps the firm to have a strong customer service

orientation. Co ordination of both sales and logistics is sought in this

strategy.Information strategy is used by the firms that have significant down-

stream network of dealers and distribution firms with substantial

inventories.


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Organisational positioning : After organizational choice and

organizational orientations are considered in the organisation design,

the next factor to be considered is organizational positioning orpositioning of logistics/supply chain activities for their most effective

management.

Organisational positioning is concerned with where to place these

activities in the organizational structure. Three issues which determine

this are (a) decentralization versus centralization (b) staff versus line

and (c) large versus small firm

2. Organisation Scope

(a) Inter-functional management

Since all activities of a firm are economically interrelated,

departmentalizing them along functional lines to create a reasonable

span of control promotes conflicts.


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Autonomy of responsibility, authority, accountability and rewarddiscourage trade-offs among inter-functional activities and can result in

sub-optimal performance by the firm as a whole. Therefore,logistics/supply chain managers face the problem of inter-functionalmanagement.

3. Alliances and Partnerships

Logistics alliances and partnerships provide some strategic and

operating advantages which are given below: Reduce cost and lower capital investment in logistical assets

Access to technology and management skills

Improved customer service

Competitive advantage (through increased market penetration) Increased access to information for planning

Reduced risk and uncertainty.


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Strategic alliance is a planned ongoing relationship where each party hasneeds that can be fulfilled by other and both firms share common values,goals and corporate strategies for mutual benefit.

Contract logistics is a specially defined relationship that is contractuallyoriented and dependent on the supplier meeting the shipping firmsdefined performance goals.

Of late, many logistics firms have emerged to provide a full-servicelogistics capability to their clients. These logistics providers (known as 3PL firms and 4 PL) can handle the entire logistics operations of a clientfirm for a contract price.


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Partnering through Collaboration

In formal and informal organisational design, relationships are defined

between people within an organisation. With the evolution of

information technology, a new dimension to organisation has emerged.

This is known as partnering through collaboration.

Collaborative Planning, Forecasting And Replenishment (CPFR)is aprogram of information sharing that involves forecast, production

schedules, order replenishment quantities and their timing and lead

times.


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Four most common areas for implementation of CPFRbetween a retailer and a manufacturer are: (i) retail event collaboration,(ii) DC replenishment collaboration, (iii) store replenishmentcollaboration and (iv) collaborative assortment planning.

DC replenishment collaboration occurs when two trading partnerscollaborate on forecasting distribution center withdrawals or anticipateddemand from the distribution center to the manufacturer.

In store replenishment collaboration, trading partners collaborate onstore-level point-of-sale forecasts, which are then converted to a series ofstore-level orders committed over a specified time horizon.

In collaborative assortment planning, the trading partners develop an

assortment plan jointly.Retail event collaboration is collaboration between retailers andsuppliers to plan forecast and replenish promotions.

Documents

Org Control in SCM