Reasons Why Centralized Supply Management is the Best Option over Decentralized Supply Management for Any Organization
The centralized management system in supply chain manages organization-wide change sustains the corporate goals. Corporations restructure to consistently adapt to the changes in the competitive environment. The executive management viewpoint will direct the principal organization form, with the chief procurement officer indemnifying that the centralized structure best achieves the goals of the company. While the decentralized system has problems in instigating change due to lack of sufficient support with organization-wide global purchasing processes, the centralized system is less complicated with centrally-led ingenuities such as global sourcing processes that’s elect company-wide suppliers (Monczka et al., 2016).
Since the purchasing function is more sophisticated and multifaceted, it facilitates the enhancement of specialized expertise in purchasing, and supports distinct buying units. Additionally, it synchronizes and manages the company-wide management systems such as the data warehouses, e-purchasing systems, and the enterprise resource planning systems. To avoid an assortment of incompatible systems, the design and coordination of these systems should not be decentralized into units (Monczka et al., 2016).
The centralized system facilitates smoother coordination of purchasing and supplies management strategies and plans (Wheelen et al., 2018). Nowadays, organizations are integrating purchasing plans, operations, and corporate plans to the overall strategic plans, meaning purchasing is more of a strategic tool than a tactical function. In this regard, a centralized supply management appeals more in fostering purchasing strategy at the top management. Furthermore, centralized system lessens duplication of purchasing exertion. On the other hand, the decentralized system lacks consistency among operating units, is inefficient and costly (Lee, 2018).
Finally, the centralized supply management influences purchase volumes through attaining lower prices by executing spend analysis. The organization meets the plant buyer’s operating requirements by amalgamating purchase volumes to achieve and sustain material cost reductions. Moreover, service requirements can be bolstered through centrally-led buying (Monczka et al., 2016).
Reasons Why Functional Organizational Structure is Prevalent
It is common since it segregates the organization into sections or departments depending on their respective functions. The employees are classified according to their skills and knowledge, enabling then achieve high productivity and performance. Their job responsibilities and roles are set hence accelerating effortless accountability for the chore. There is operational speed associated with this form of corporate specialization, ensuring a reliable level of sectorial or divisional competencies (Gleesom, 2019). The fully qualified personnel safeguard support issues are enhanced to follow-up faction; thus, boosts customer retention and satisfaction.
Furthermore, cooperation among employees is outstanding within the organizational department, staff have clarified career growth path, there is more employee loyalty due to its job security, the departments have distinct responsibilities hence duties/ assignments are not duplicated, there is seamless flow of communication, and a well-defined hierarchy that lessens the number of communication channels.
Drawbacks of Functional Organizational Structure and how they are Overcome
One of the disadvantages is departmental segregation in the organization, meaning respective departments have staff specialized in certain chores which cannot be done in other departments in the same organization. Therefore, there is need for management to ensure that the employees’ diverse teams get the opportunity to meet and share ideas for the long-term betterment of the organization.
Another drawback to this structure is the deterioration of common bonds. This happens when there is isolation of each group of specialists in a functional firm, hence the bond that accentuates a sole predominant corporate objective is inevitably feebler. Therefore, adopting a common organizational strategic objective is a fundamental predictor of organizational accomplishment, and boosts employee performance and morale, more so when diverse kinds of employees frequently communicate and interact. The territorial disputes and lack of coordination can be mitigated through integrated communication and cooperation, and team building activities (Gleesom, 2019).
References:
Gleeson, P. (2019, January 25). Benefits & Disadvantages of a Functional Organizational Structure. Small Business Chronicles, Hearst Newspapers, LLC. https://smallbusiness.chron.com/benefits-disadvantages-functional-organizational-structure-11944.html
Lee, C. (2018, November 15). Centralized vs. Decentralized Logistics: Which is better? Warehouse Anywhere. https://www.warehouseanywhere.com/resources/centralized-vs-decentralized-logistics/
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management (6th ed.). Boston, MA: Cengage Learning.
Wheelen, T., David H., Allan H., & Charles, B. (2018). Strategic Management and Business Policy: Globalization, Innovation, and Sustainability. Fifteenth Edition. Pearson Education, Inc.