Organizational Design:

1. Evolution: Supply chain organizations have changed over time from separate functions to
combined ones like materials management and physical distribution.
2. Current Forms: Different perspectives exist, such as viewing supply chains as functions, programs,
or within a matrix.
3. Centralization vs. Decentralization: The key trade-off is whether to centralize decisions at
headquarters or decentralize to regions/business units, with general guidelines on which activities
are best suited for each.
4. Centralized Organization Model:
1. This model entails a hierarchical structure where purchasing decisions and control are centralized
at the corporate level. A central purchasing department oversees procurement activities across
all business units.
2. Advantages include the ability to leverage corporate spend, standardize sourcing processes, and
implement uniform technology solutions. These economies of scale enhance operational
efficiencies and facilitate knowledge sharing across the organization.
3. Centralization is most effective when business units have similar procurement needs and
requirements, allowing for streamlined processes and optimized purchasing power.
5. Decentralized Organization Model:
1. In contrast to centralization, decentralization allows for decision-making and procurement
activities to be distributed among individual business units or local offices.
2. This model empowers business units with autonomy and control over their procurement
processes, enabling quicker decision-making and issue resolution. It also reduces bureaucratic
red tape associated with centralized structures.
3. However, decentralized models may struggle to leverage corporate spend effectively and may
lack coordination and information sharing between divisions and sites. It is typically more
suitable for organizations with diverse business units operating semi-independently.
6. Center-led Organization Model:
1. The center-led model strikes a balance between centralization and decentralization. Corporate
supply chain strategies and strategic commodities are managed centrally, while tactical
execution is delegated to individual business units.
2. This approach allows for the advantages of centralized sourcing in strategic categories while
providing flexibility for local decision-making in non-strategic areas.
3. Key features include cross-functional teams, flexible process standards, coordinated metrics and
incentives, and integrated procurement information systems.
7. Factors Ensuring Supply Chain Success:
1. Alignment with Corporate Strategy and Culture: Successful supply chain organizations align
their structure with the company's strategic objectives and cultural norms. This ensures that
procurement decisions are in line with broader corporate goals.
2. Staff Skills and Expertise: The organization should ensure that staff possess the necessary skills
and expertise to perform their roles effectively. This may involve systematic assessment of skills
and backgrounds, as well as strategic staffing decisions.
3. Governance Structure: Effective governance elevates the supply chain function within the
organization, ensuring that procurement leaders have a seat at the executive table. This fosters
alignment between procurement initiatives and overall business strategy.
4. Collaboration and Communication: Formal and informal mechanisms should facilitate
collaboration and communication between supply chain stakeholders. This includes cross-
functional teams, regular communications channels, and physical proximity between supply
chain staff and other departments.
5. Impact on Information Systems: Changes to the organizational structure may necessitate
corresponding adjustments to information systems. This could involve upgrading software to
 support new processes, ensuring flexibility and integration with legacy systems, and leveraging
Software-as-a-Service (SaaS) solutions for scalability and cost-effectiveness.
8. Conclusion:
1. Choosing the right supply chain organization model requires careful consideration of various
factors. Overlooking these factors can impede procurement excellence and hinder long-term
organizational success.
2. Transitioning to a new organizational model requires thorough planning and management.
While challenging, it presents an opportunity for significant positive change if executed
effectively.

1. Functional Model: This is the traditional way of organizing where each function (like DC
Management) has its own leader or manager. It's straightforward, with clear hierarchical
reporting lines.
2. Matrix Model: While still organized by function, in this model, reporting roles cross over
functional boundaries. Managers might have multiple direct reports, which can create
complexity in terms of accountability.
3. Process Model: Here, processes like "Order to Delivery" or "Source to Sell" become more
important than individual functions. This model is innovative and has become popular with
big ERP implementations. It can be a bit complex to set up roles and responsibilities but can
offer significant benefits if done well.
4. Hybrid Model: This model combines elements from two or more of the above models. It's
often used by more mature organizations, especially when considering issues like
centralization versus decentralization. For example, planning functions might be separated
from execution.

In detail, each model offers a different approach to organizing and managing teams within an
organization:

1. Functional Model: This is the traditional approach where departments are structured based
on functions like sales, marketing, finance, etc. Each function operates independently with
its own manager or leader who oversees the activities within that function. The reporting
structure is typically hierarchical, with employees reporting to their respective function
heads. This model offers clarity and specialization but can sometimes lead to silos and lack
of cross-functional collaboration.
2. Matrix Model: In the matrix model, employees report to both a functional manager and a
project or product manager. This means that individuals may have dual reporting
relationships and work on multiple projects or tasks simultaneously. This model allows for
greater flexibility and resource utilization but can also create confusion and power struggles
due to multiple reporting lines.
3. Process Model: The process model focuses on organizing work around specific processes
or workflows rather than traditional functional departments. Processes like procurement,
production, and customer service become the primary units of organization, and employees
are assigned to roles within these processes based on their skills and expertise. This model
promotes efficiency and customer-centricity but requires careful coordination and
integration of processes across the organization.
4. Hybrid Model: The hybrid model combines elements from multiple organizational models
to suit the unique needs of the organization. For example, a company might adopt a
functional structure for certain departments while using a process-based approach for
others. This model allows organizations to leverage the strengths of different models while
 mitigating their weaknesses. However, it can also introduce complexity and challenges in
terms of alignment and coordination.
Each of the functions or processes to be considered should be evaluated for: responsibility, authority,
collaboration, and roles. For example, at the highest levels, alternatives will exist for roles and
responsibilities of:

 SC Planning and Optimization

 Distribution: Network and Facilities
 Transportation: International, Outbound to Stores or Customers, B2B, and B2C, with Final-Mile
Deliveries
 S&OP: Demand Planning and Supply Planning and Management
 Inventory Planning and Management
 Risk Management
 Information Technologies: Planning and Execution, Distributed Order Management (DOM) and,
also for the Sub-Functions

Here's a detailed summary of key points to consider when designing a supply chain organization:

1. Alignment with Strategy:

 Ensure that the structure of your supply chain organization aligns with your supply
chain strategy, which should in turn align with your overall business strategy.
 Tailor roles within the organization to support the strategic priorities of the business.
For example, if customer service is a priority, allocate resources to roles like
dedicated customer service representatives or planners handling a wide range of
products.
2.Staff Skills and Expertise: The organization should ensure that staff possess the necessary
skills and expertise to perform their roles effectively. This may involve systematic assessment of
skills and backgrounds, as well as strategic staffing decisions.


2. Process Integration:
 Break down large supply chain processes into smaller sub-processes and ensure
smooth integration between them.
 Consider placing related sub-processes under a single reporting structure to facilitate
coordination and accountability. For instance, integrating order taking, sequencing,
picking, and logistics under one management structure can streamline the entire
order fulfillment process.
3. Centralization vs. Decentralization:
 Decide whether to centralize or decentralize supply chain functions based on your
supply chain strategy and business needs.
 Centralization can promote consistency, knowledge sharing, and cost-effectiveness,
especially for common processes. However, decentralization may be necessary to
accommodate different business units with unique strategies.
4. Planning vs. Execution:
 Evaluate the benefits of separating longer-term planning roles from short-term
executional roles within the supply chain organization.
 For example, consider having a central distribution and logistics function responsible
for long-term network planning, while individual sites have short-term transportation
schedulers reporting to site management.
 5. Sizing:
 Assess the size and composition of your supply chain organization to ensure that
team members are not overwhelmed with tactical issues and firefighting.
 Address root causes of workload issues, such as process gaps, lack of segmentation,
and manufacturing execution challenges, rather than simply adding more personnel.
6. Methods for Improvement:
 Utilize various methods, including activity analysis, benchmarking, transaction
volume analysis, and IT improvements, to optimize the structure and performance of
the supply chain organization.
 Balance between art and science, allowing flexibility for adjustments based on
business changes and improvement initiatives.
7. Independence and Authority:
 Establish appropriate levels of independence and authority within the supply chain
organization, ensuring that leaders have the autonomy to challenge decisions from
other functions when necessary.
 Consider centralized leadership roles, such as VP of Supply Chain, to provide strong
leadership and representation within the organization.
8.Collaboration and Communication: Formal and informal mechanisms should facilitate
collaboration and communication between supply chain stakeholders. This includes cross-functional
teams, regular communications channels, and physical proximity between supply chain staff and other
departments
9.Impact on Information Systems: Changes to the organizational structure may necessitate
corresponding adjustments to information systems. This could involve upgrading software to support
new processes, ensuring flexibility and integration with legacy systems, and leveraging Software-as-a-
Service (SaaS) solutions for scalability and cost-effectiveness.

Process Design:

1. Transformation: Processes in supply chains transform inputs into outputs, like procurement
turning orders into products.
2. Complementarity: Processes should be designed to complement each other within the supply
chain system.

Performance Metric Design:

1. Metric Types: Metrics fall into categories like utilization, productivity, or effectiveness.
2. Evaluation Criteria: Metrics should be evaluated for robustness, integration, usefulness, and
validity.
3. Balanced Scorecard: No single best metric exists, so systems of metrics should be used in a
balanced scorecard framework to consider trade-offs between different criteria.
Supply chain metrics (also called supply chain key performance indicators, or KPIs) are the
numbers, ratios, and parameters used to measure supply chain performance.

Supply chain metrics quantify different aspects of your supply chain, such as delivery and
inventory movement, to provide insight into the efficiency and quality of those functions.

Func+tional drivers of supply chain performance: facilities, inventory,

transportation, information, sourcing, and pricing. These drivers interact with
each other to determine the supply chain's performance in terms of
responsiveness and efficiency.
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