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Thoughts About Supply Chain Design Org Structure

By Mark Armstrong  January 2, 2019

Two common questions among supply chain professionals are, “How should we set up our Supply Chain Design organization?”, or “What is the best structure for a Supply Chain Design organization?”  To start, there is no single best structure for a design organization.  There are various factors that will help shape the decision, so it really requires some thought on the given organization’s set-up and overall objectives with design.  In most cases there are going to be some risks/drawbacks with any set-up; the key is to account for the risks as you define your overall processes and governance.  Below I’ve provided a few points for consideration when thinking about your Supply Chain Design organizational structure.

Scope of Design – When defining your design org structure, the types of questions and decisions you are looking to support through design is one of the key criteriaDesign can influence and drive decisions spanning end-to-end supply chain functions covering long-term strategic, mid/short term tactical, to operational. In addition to the business questions, other aspects that may define scope are the geographical support and breadth of business coverage (i.e. does design support a single business unit, or multiple).  Typically, as you move closer to tactical and operational, or as I say “running the business” type decisions – it lends itself to a more local or dedicated presence of design given the need for tighter integration with the business and increased frequency of activity. This is evolving as though new tools are being introduced to support more self-serving modeling activities.  I won’t go in depth, but the tool mix in play can have an impact on how you define your structure as well.

Integration of Supply Chain – In organizations where design scope covers multiple geographies or business units, the level of integration across those groupings comes into play.  If you have an integrated supply chain where synergies can be leveraged across geographies or business units, a centralized model works well to help bring things together, whereas a decentralized approach makes it much more difficult to drive these connections.

Business Structure – The underlying business structure can impact your approach to setting up a design organization.  The reality is many peoples’ decisions will be based on how they are incentivized, and this becomes a key aspect of how design priorities are driven.  A benefit to one group may be a hindrance to another.  I always say this should not be a barrier in defining your design set-up if there is a true opportunity for supply chain integration, but it does require strong governance definition and alignment at senior levels to drive towards what is best for the holistic organization.

Budget and Funding – Where the budget sits is definitely a factor when thinking about your design set-up.  I view the budget structure as more of an output or recommendation coming from the overall organization structure decision.  In other words, look to define the appropriate budget structure to allow you to achieve your design vision.  A centralized budget may help to drive towards accomplishing broader, global-oriented objectives, while a decentralized budget can lead to more local prioritization and achievement of local goals.  So you may ask what you do if you have both global and local objectives; that’s when a hybrid approach works well. Even a hybrid set-up requires strong governance definition to drive alignment when needed.  Setting up design as a shared service is another approach that exists.  Inherently the budget has to be in place to support the development of an overall competency. Therefore, if you don’t receive approval on the vision –  it becomes a driver of organizational set-up based on where it exists.

Skill-Set Development and Retention – Having the right people and skills in place is a critical success factor for any design organization.  Those who are successful in design have a unique skill-set blending strong analytics with business savvy.  This requirement creates challenges for many organizations with developing and maintaining a strong capability in design.  Because of this, your design set-up may be driven by where you can find and maintain the talent.  In theory, you should be able to develop the talent anywhere within the organization, but it may take time to build-up to a proficient level.  When you mix in the reality of turnover and succession within an organization, it becomes increasingly more difficult to retain the right skill-set.  With all of this said, your organizational set-up can have a direct impact on your ability to develop and maintain the right blend of talent.  In some cases, it may require an evolution of the structure as you build out the team’s skills and capabilities.

The idea of an evolving Supply Chain Design organizational structure is a reality, and it may be required with the growth and expansion of your design objectives.  Given the multiple factors that impact successful design execution, I always recommend evaluating your organizational set-up as part of your normal design planning cycle to ensure ongoing alignment.  With my points above I’m speaking to the idea of defining the higher level organizational set-up.  There’s also the decision for defining the make-up of the team and specific functions supporting the overall process.  This is an area we can explore in a future posting.

If you would like to discuss this topic further, please contact your LLamasoft Customer Success Strategist.