Supply Chain Organization Structure

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Regardless of product or business type, the goal of supply chain management is the most efficient delivery at the least expense to the next stop along the way. Efficient management of this flow of supplies and products includes fulfilling orders on time without maintaining excessive inventory. To achieve this end, managers often incorporate a supply chain organization structure.

A basic supply chain can begin with the mining of raw materials and end with sales in a retail store. Stops along the way include manufacturing plants that process the raw materials, factories that create products and wholesale warehouse and distribution centers that get the finished products to the retailers.

Functional Structure

Key components of a supply chain organization structure include the logistics of shipping and receiving, manufacturing and order fulfillment. In a functional supply chain organization, these departments fall under the umbrella of the operations division. Other business divisions in the supply chain organization include finance and administration, sales and marketing, research and development, order management and purchasing. Purchasing plans for and buys needed materials.

Transitional Structure

In a transitional supply chain organization, the marketing and sales department handles order management. Operations takes on the additional responsibilities of purchasing and order fulfillment in addition to logistics, supply management and manufacturing.

Integrated Structure

Companies with an integrated supply chain organization use the expertise of a supply chain manager or team to head the department that handles purchasing, supply management, manufacturing and order management and fulfillment.

Customized Organization

The functional, transitional and integrated organization structures are examples of how a supply chain can be set up. However, as Shoshanah Cohen points out in an article published by the Stanford Graduate School of Business, there is no one recipe for creating a supply chain organization, and no one design fits all businesses. Supply chains may be organized by product types, job functions or regional markets, to name three methods of approach.

Regardless of the approach, certain elements should be integrated into the supply chain organization for each participant. These elements include a structure that supports the business strategy and fulfills all required processes and transactions for the parties involved. Responsibilities of each employee along the way should be defined in detail. The organization must also be adaptable to changing conditions. This requires periodic objective analysis of what works efficiently and what needs modification.

Tip

  • Implementing a new supply organization structure may not be feasible all at once. The design may need to be put into action incrementally over several months.

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