Organizing for supply chain mangement
This paper reports some of the results of an empirical study on how companies structure their SCM-organisations. A paper written by Robert Boute, Steven Serneels, Roland Van Dierdonck and Ann Vereecke.
Few companies will deny the value of SCM. Many of them are therefore investing time and other resources in the development of SCM-systems in and between organisations. A key concern related to the design of such a system is how to improve the integration among the different actors – executives and organisational units – and among different companies in the supply chain. (Slone et al, 2007)
The literature has devoted a lot of attention to concepts, techniques and computer based systems that help organisations to integrate the SC–activities better (see e.g. Hendricks et al, 2007). However, much less attention has been given to the more “soft” side of the SC-system: the SCM-organisational structure. By this we mean the way the various SC tasks are being allocated to individuals and organisational units, called differentiation (Lawrence et al, 1969) and the way these individuals or units are being integrated afterwards, called integration .
Complex and challenging
In the late 70’s and early 80’s we have been involved in a study that addressed the issue of differentiation and integration focused on materials mgt activities (see Miller et al, 1981).
While many of the organisational structure questions are still the same today, others are different, making the overall problem more complex and challenging. (Parker et al, 2002) One of the major differences is that the scope of SC Management is broader than the scope of materials management. The scope is not limited to the traditional logistics activities (plan, source, distribute), but includes quite often actual manufacturing (make) and requires integration with other functions such as product development, finance, marketing and sales. Equally important is the fact that the scope extends beyond the corporate boundaries of an organisation to include different legally independent organisational units for which some of the classical integration mechanisms are less effective or even irrelevant.
The purpose of the study is two fold. The first part is more descriptive. It describes how the typical SCM tasks (defined according to the SCOR model) are being allocated and supervised. Particular attention is given to the profile and the role of the SC-executive. Further we describe which mechanisms are being used to integrate these tasks ranging from hierarchical structures to trust.
The second part of the study goes beyond the descriptive and tries to understand why SC organisational structures are different across different organisations. We identified a number of contingency variables that determine the “right” structure. One of the most important variables is the strategy or more generally the strategic context the company is operating in.
The empirical study consists of two parts. The first part is a large survey of in total 55 companies in three industrial sectors: chemicals, pharmaceuticals, and food and beverages. These sectors have been chosen because we expect some generic differences in the strategic context among these sectors which were hypothesized to have some effect on the SC organisational structure.
In a second part it is our intention to extend the sample to a larger number of companies in a variety of industrial sectors. This should help us to test more rigorously some hypotheses derived from the first study and to generalize the findings.
The empirical data for the first part of the study have been collected and are in the process of being analysed. The first results have been presented, discussed and validated by a panel of experienced SCM-executives
Interesting empirical data are available on how organisations structure their SCMgt function. We observed that various structures indeed exist. Also the more companies are mature in their approach to SCMgt and the more important SCMgt is in the overall strategy of the organisation, the more integrated the structure is.
The results of the first part of the study have already proved to be of value to practionners.
They help to benchmark a company’s SC organisational structure, including elements such as education, experience, reporting relationships of the SC executives. Also the study should provide insights in how to improve the SCM-system, more in particular the organisational structure.
The study is also of interest to the academic society. It builds on existing research in the SCM field but also in the broader field of organisational design. In doing so it bridges various disciplines.
Robert Boute, Vlerick Leuven Gent Management School, Belgium
Steven Serneels S&V Management Consultants and Vlerick Leuven Gent Management School, Belgium
Roland Van Dierdonck,Vlerick Leuven Gent Management School, Belgium
Ann Vereecke, Vlerick Leuven Gent Management School and Ghent University, Belgium
Galbraith J (1973), “Designing Complex Organisations”, Addison- Wesley.
Hendricks K, Singhal V, and Stratman J (2007), “The impact of Entreprise Systems on Corporate Performance: A Study of ERP, SCM, and CRM system implementations”, Journal of Operations Management, Vol 25, No 1, pp 65-82.
Lawrence P and Lorsch J (1969), “Organizations and Environments”, R. Irwin.
Martinez, J.I. and J.C. Jarillo (1989), “The evolution of research on coordination mechanisms in multinational corporations”, Journal of International Business Studies, 20, pp 489-514.
McEvily B, Peronne V and Zaheer A (2003), “Trust as Organizing Principle”, Organisation Science, Vol 14, No 1, January-February, pp 91-103.
Miller J and P Gilmour (1979), “Materials Managers; Who needs them?”, Harvard Business Review, Vol 57 , July- August, pp 143-153.
Miller J, P Gilmour and R Van Dierdonck (1981), “Organizing fore Materials Management”, International Journal of Production Management, Vol 2, No 1, pp 38-51.
Parker G, and Anderson E (2002), “From Buyer to Integrator: The transformation of the Supply Cain Manager in the vertically disintegrated Firm”, Production and Operations Management Journal, Vol 11, No 1, pp 75-91.
Slone R, Mentzer J and P Ditmann (2007), “Are you the Weakest Link in Your Company’s Supply Chain?”, Harvard Business Review, Vol 85, No 9, pp 116-127.
Tushman M and D Nadler (1978), “Information Processing as an Integrating Concept in Organisational Design”, Academy of Management Review, pp 613-624.