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Organizational Structures of Supply Chains Matter Featured

The alignment of an organization is a crucial factor that organizations need to consider for success in their supply chain operations. When the right organizational model is matched to the business model, culture, operations, strategy and management, great benefits will be attained by the organization. The supply chain structure should highlight the groups, processes and functions needed to move products from production facilities to end users. Effective supply chain management is crucial in allowing an organization a competitive advantage, especially with high competition.

Companies that buy and sell items from one another form a basic supply chain. This results in a series of relationships, and the lead company manages the process of issuing and processing purchase orders on demand. The definition of a supply chain structure includes the suppliers of raw materials, services, and components that an organization needs to manufacture and distribute products to the customers.

Procurement

This function purchases products, including raw materials, machinery, components and software, from vendors to satisfy customers or internal demand within an organization. After the need has been satisfied, the procurement group is needed to identify and screen the potential supplies, select the supplier, negotiate payment terms and arrange any logistics concerns that may arise during the process. Procurement staff are responsible for monitoring the performance of company supplies in relation to the terms of the contract.

Materials management

 Materials management groups handle every aspect of materials from supplier to production. A key purpose of the group is to arrange the needed materials to be at the right place when needed. A major part is to work towards the lowest possible transportation cost while transporting materials from point to point.

Master management of data

This function is responsible for managing the structure, quality and use of data by internal and external users through database tools, GUI-based user interfaces and other methods of storing data and managing systems. The master data management function depends on the IT team and the company’s existing infrastructure necessary for storing, exporting, analyzing and collecting data from different sources, both internally and externally.

Supply chain integration

The goal of any supply chain service provider is to be more efficient and maximize revenue. This can be achieved through integration via an integrated supply chain. When supply chain integration is instituted, the lead company formally takes control of its most crucial suppliers via mergers and acquisitions. Integration can create a barrier to competitor entry and reduce costs if suppliers operate efficiently. Integration can reduce the flexibility of the lead company and allow them to switch suppliers if problems occur.

Manufacturing and production

This is a critical component in the whole supply chain organizational structure. It refers to the processes and methods used to turn inputs into finished products. The inputs can be raw materials, partially finished goods, or information.

Order management

This function is responsible for gathering, validating and submitting all information needed to fulfill customer orders accurately. The function bridges an organization’s sales, production and distribution functions. Order management mediates between supply and demand. A successful customer order needs coordination between aspects like marketing, sales, pricing and production quotation. Others are inventory tracking, production, packaging and shipping.

Distribution

The products distribution group handles almost every aspect of items or products delivered to the customers. The group arranges and compiles necessary goods and materials before they can transport them to the customers on a timely basis. The distribution group monitors the safety of delivery and takes precautions as necessary, considering the challenges such as transportation costs and time. They may also store products safely during transportation and audit packaging to ensure it is in a good state. 

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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