Organization Structure

Page1



Synopsis
Introduction (Basic Concept, Definition)
Re-Engineering
Development Of An Optimal Logistics Organization
Responsive Organization
Integrated Logistics
Barriers of Organization Structure
Objectives of Organization structure
Importance Of Effective Logistics Organization
Aid to Improve Effectivness of Organization Structure
Stages Is Evolution Of Logistics Organization With Emphasis on Modern Flat
Organization
Relation Of Logistics With Other Departments/Functions Of Organization
Matrix Organization










Organization Structure
Page2





3 MARKS QUESTIONS:

Q1. Definition & Basic concept of Organization Structure?
Definition- relatively enduring allocation of work roles and administrative mechanisms
that creates a pattern of interrelated work activities and allows the organization to
conduct,co-ordinate and control its work activities.
The typically hierrarchial arrangement of lines of authority,communications,rights and
duties of an organization.
Organization structure determines how the roles,power and responsibilities are
assigned,controlled,and coordinated,and how information flowsbetween the different
levels of management.
A structure depends on the organizations objective and strategy.
In a centralized structure, the top layer of management has most of the decision making
power and has tight control over departments and
divisions.
In a decentralized structure, the decision making power
is distributed and the departments and divisions may
have different degrees of independence.
Q2. What do you mean by Re-engineering?
Re-engineering is radical redesign of an organization's
Processes, especially its business processes.
Rather than organizing a firm into functional specialties
(Like production, accounting, marketing, etc.) And
EXAMPLE:
Some lines of business, such as
banking and manufacturing, require
tasks to be done regularly and
precisely.
Typically, these businesses require
and do not allow much if any
variation in how their employees
perform their jobs because the
requirements of the tasks are set.
Therefore, their organizational
structures tend to be very vertical --
emphasizing limited scopes for
employees at the bottom and many
layers of managerial oversight
above them.
Everyone has a very specific role.

Organization Structure
Page3


looking at the tasks that each function performs, We should, according to the
reengineering theory, Be looking at complete processes from materials Acquisition, to
production, to marketing and distribution.
The organization gets far more opportunities to reduce Cost out of supply chain than out
of manufacturing.
The firm should be re-engineered into a series Of processes.

Q3. Explain the concept of development of an optimal Logistics organization?
There are a variety of good organizational designs for a firm and over time, a firm may have to
modify its designs to reflect environmental and corporate changes. The development of a new
logistics organizational unit or restructuring an existing one requires the following tools or
stages:
1. Determine corporate strategy and objectives
2. Organize functions in a manner compatible with the corporate structure
3. Define the functions for which the logistics executive is accountable
4. Know his or her ( i.e. logistics managers) management style
5. Organize for flexibility
6. Know the available support systems
7. Understand the plan for allocation of human resource so that it complements the
objectives of both the individual and the organization.

Q4. What is a responsive organization?
The competitive situations have compelled the organization to possess, the need to be
responsive.
The responsive organization puts the customer at the center of the business and designs
all its system and procedures to improve the speed of response and reliability of the
response.
o From functions to processes- Emphasis on management of processes by creating
outputs

Organization Structure
Page4


o From profits to performance- The logic is performance drives profitability, get
right performance the profit will follow.
o From products to customers- Emphasis on customer value and not on just band
value.
o From inventories to information- Information on actual customer usage of the
product could be linked directly in to logistics system then the need for product
could be much reduced.
o From transaction to relationship- Long term relationship with customer and
supplier.

Q5. Explain the concept of Organizing Integrated Logistics?
It is stated that Logistics is a central activity. The functions are well spread in all the
departments of the company.
Logistics does not exist in isolation. The interfaces of logistics with other functions in the
company establishes relationship between logistics and the other functions. Logistics is
one among other systems in the firm along with marketing, productions, accounts,
material, etc.
Integrated logistics support (ILS) is an integrated and iterative process for developing
materiel and a support strategy that optimizes functional support, leverages existing
resources, and guides the system engineering process to lower life cycle cost and
decrease the logistics footprint (demand for logistics), making the system easier to
support.
Although originally developed for military purposes, it is also widely used in commercial
product support or customer service
organizations.




Organization Structure
Page5



Q6. Explain the tools/ stages required for development of an optimal Logistics
organization?
There are a variety of good organizational designs for a firm and over time, a firm may have to
modify its designs to reflect environmental and corporate changes. The development of a new
logistics organizational unit or restructuring an existing one requires the following tools or
stages:
Determine corporate strategies and objectives.
Organize functions in a manner compatible with the corporate structure.
Define the functions for which the logistics executive is accountable.
Know the logistics mangers management style.
Organize for flexibility.
Know the available support systems.
Understand the plan fir allocation of human resource so that it complements the
objectives of both the individual and the organization.

5 MARKS QUESTIONS:

Q1. Explain the barriers in forming effective Logistics organization?
A study in USA highlighted the importance of quality programs in the area of logistics. It
identified several barriers to instituting high quality program in logistics management. The top
six barriers identified were related to employees or organizational issues.
These barriers are as follows:
1. Changing the corporate culture- The changing environment forces the corporate to
keep updating themselves and get adapt to changes smoothly which becomes a reason to
face difficulties in managing qualitative logistics.
2. Establishing a common vision throughout the organization- It is always mandatory
and first priority work for the top management to convey the whole organisation about

Organization Structure
Page6


the common vision which will avoid the clashing of different individual vision/targets.
3. Establishing employee ownership in the quality process- Participation from employees
in the quality process is extremely important in todays world to build up the quality right
at the first time. Eg- Toyota production system.
4. Gaining top management commitment- The commitment from the top management to
work on the same principal and fixed common vision is equally important for
achievement of goals.
5. Changing the management process- Frequent changes in the management process will
lead to disorganisation in the company.
6. Training and educating employees- With company facing constant changes it demands
constant training also without which the quality process may get affected.

Q2. What are the objectives of Organization structure?
1. Chain of command: Organizational structures, among many things, help establish who
is in charge or what. They dictate how many vice presidents, department heads, managers
and project coordinators there are and what they oversee. Good organizational charts
illustrate who reports to whom so that everyone has a clear idea of how they are held
accountable. This helps employees know from whom to take direction, where they fit in
to the overall scope of an operation, and the scope and limitations of their roles.
2. Efficiency: Everyone needs to understand their role in a company's operation to do their
part well. If two people perform unnecessarily overlapping tasks, the company is wasting
labor resources. If no one is handling a particular task because they don't think it's within
their role, the company faces another form of inefficiency. Structures help to define
departments, jobs and roles around the tasks and functions the company needs executed.
As companies grow, downsize or business changes, they should periodically review their
structures to make sure the structures match their efficiency needs.
3. Uniformity and Controls: It defines the uniformity the organization should follow and
the controls allocation.


Organization Structure
Page7



Q 3. What are the importance of an Effective Logistics Organiztion?
A firms strategic management process includes an effective and efficient logistics
organization.
The problems and challenges the organization face primarily lie in systems, structure,
mission, people, corporate culture and reward structure rather than in strategic decision
making.
The manner in which these strategic resources interact to create a synergetic system is
critical to the success of the organization.
In tradition organizations, logistics functions was scattered throughout the firm with no
single executive, department or division responsible for managing the entire distribution
process.
Integrated logistics management concept requires an organizational structure that
combines the activities of logistics under a single, high level executive.
The present trend is to integrate many logistics functions under one top ranking
executive.
The logistics executive exercise control over logistic activities such as: transporation,
warehousing, inventory control, order processing,purchasing,procurement.
In general, logistic executives span of control has been expanded to include
transportation, warehousing, inventories order processing , packaging , materials
handling , forecasting and planning and purchasing.
Coordination of the various logistics activities is crucial to the efficient functioning and
effectiveness of the organization.

Q3. Explain the factors, which can aid to improve the effectiveness of the Organization?
A firms strategic management process includes an effective and efficient logistics
organisation.The problem and challenges that organisations face primarily lie in systems,
structure, mission, people, corporate-culture and reward structure rather than in strategic decision

Organization Structure
Page8


making.
The various methods for improving logistics organizations effectiveness are as follows:
1. Strategic goal setting: Establishing clearly defined overall organizational and individual
goals and trying to concile both the goals for the benefit of the organization.
2. Resources: Using technical, financial, technological resources to maximize corporate
objectives.
3. Performance environments: It motivates logistics function effectiveness. It includes
proper selection, training development, etc.
4. Communication process: Without good communication system, policies cannot be
transmitted in the organization. Hence the organization should have a transparent and
easy communication process.
5. Qualities of leadership and decision making: If the top executive is highly capable who
makes logical decisions, and then the logistics organization that reports to him shall also
are effective.
6. Organizational adaption and innovation: As conditions change, logistics must adapt
and innovate to provide an optimal cost.

10 MARKS QUESTIONS

Q1. Explain the stages in development of Organization structure in integrated Logistics or-
Explain the different stages in evolution of Logistics Organization with emphasis on
modern flat organization?
Logistical executives span of control has been expanded to include transportation, warehousing,
order processing, packaging, material handling, forecasting and planning and purchasing.
Coordination of the various logistical activities is crucial to the efficient functioning and
effectiveness of the organization.


Organization Structure
Page9




The stages are discussed below-
1. Stage I organization:
Post 1950, as reorganization started, some of the logistical functions were brought together
and grouped but these groups still reported to different heads.
Activities were fragmented into functional areas: marketing, finance, accounting,
manufacturing, management services.
When this regrouping was done there was lot of bitterness in the organizations as some
functions were deleted from some functional heads.
These functional heads felt that their importance is being depleted and resisted these moves.
But as functional closeness started yielding performance improvement this resistance
decreased and organizations accepted the change.
This grouping resulted into stage 1 organization.
Materials department dealt with inbound logistics and reported to manufacturing department.

Organization Structure
Page10


Marketing dealt with customer service. Traditional departments remained as they were.



2. Stage II organization, 1960 to early 1970
A new function at higher level called physical distributionwas created which directly
reported to the CEO of the company.
This department assumed direct responsibility for outbound logistics. Inbound logistics
still remained with materials management.
Focus was on reducing the number of transport carriers, eliminating obsolete inventory,
improving utilization of transport vehicles and levelling out workload.
Logistics started contributing to the strategy of the company as the head of physical
distribution function.

Organization Structure
Page11




3. Stage III organization, 1980
It includes functions of order processing, customer service, inventory control and in
bound traffic in addition to function is stage2 organization.
Single authority for logistics was created at the top most level in the management
hierarchy.
All logistical functions and operations were under the logistics manager.
Logistics manager is responsible for developing the change process, rewarding good
performance, consolidating and integrating logistics measures.

4. Stage IV organization:
Flatter or horizontal organization , where the span of control is very large

Organization Structure
Page12


The rapid sharing of the accurate information allowed the integration of the organization.
Logistics manager looks into demand forecasting, scrap disposal, purchasing, materials
handling, service support, and logistics planning.
Teams have clear goals and try to achieve them without leaning on top.















5. Stage V organization-
Logistics organization structure becomes a logistics matrix environment.
It helps to coordinate the flows of products into, through and out of the firm.
The integrated logistics manager links integrated logistics to marketing, finance/
accounting and manufacturing.

Q2. Explain relation of Logistics with other departments or Functions in the Organization?
(Can come for 5 marks also)
Logistics plays a vital role in implementing the strategies, plans and programs to deliver
adequate levels of quality and service. In traditional organizations logistics functions were

Organization Structure
Page13


scattered with no single department or division responsible for managing the entire distribution
process. Whereas integrated logistics management requires an organizational structure that
combines logistic activities under single, high level executive.
1. Integrated logistics matrix organization

Integrated Logistics
Activities
Marketing Financial
Accounting
Manufacturing
Transportation International and
domestic outbound,
carrier selection,
private carrier
Budgets International and
domestic outbound,
inplant, carrier selection,
private carrier
Facility structure Felid warehouse
operations and
locations
Budgets Raw materials, work in
progress and finished
goods, warehouse
operations, plant and
warehouse location
Inventory Finished goods,
parts and service
support
Budgets Raw materials, work in
progress and finished
goods parts and service
support, purchasing
Material Handling Field warehouse
system,, packaging
Budgets In plant and warehouse
system and packaging
Communication Order processing,
demand forecasting
Budgets Production Scheduling

Around 1950s, some large organizations realized that the divisionalized organization
structure was not working well.
It did not link people in various divisional and corporate positions and hence the
synergy of being part of a large corporation was lost.
To combat this problem, many organizations began to implement Matrix

Organization Structure
Page14


Organization.

2. Matrix organization:An organizational structure that facilitates the horizontal flow
of skills and information. It is used mainly in the management of large projects or
product development processes, drawing employees from different functional
disciplines for assignment to a team without removing them from their respective
positions.
Typical matrix organization:

(Black boxes represent staff engaged in project activities)

The basis for the Matrix Organization is an endeavor to create synergism through shared
responsibility between project and functional management. Here in the above diagram, chief
executive represents the Top-level management. Functional managers take decision for their
respective dept. while workers are accountable to functional managers. There is manager of all
the project managers who acts as a leader.
3. Advantages:
Individuals can be chosen according to the need of the project.
Chief Executive
Functional
Manager
Staff
Staff
Staff
Functional
Manager
Staff
Staff
Staff
Functional
Manager
Staff
Staff
Staff
Managers of
Project
Managers
Project Manager
Project Manager
Projec tManger
Project Co coordinator

Organization Structure
Page15


The use of a project team, which is dynamic and able to view problems in a different way as
specialists have been brought together in a new environment.
Project managers are directly responsible for completing the project within a
specific deadline and budget
4. Disadvantages:
A conflict of loyalty between line managers and project managers over the
allocation of resources.
If teams have a lot of independence can be difficult to monitor.
Costs can be increased if mire managers are created through the use of project
teams.
5. Conclusion:Thus, we can conclude that logistics is inter-linked with different
departments in the organizations. Logistics also helps in achieving the desired level of
quality.

FILL IN THE BLANKS:

1. A matrix organization is one where functional leaders are responsible for more than one
area.
2. Changing corporate culture, having a common vision, establishing employee ownership,
training and educating employees, changing management processes are the barriers in
forming effective logistics organization.
3. Stage 2 recognizes the physical distribution function in the firm.
4. The basis for the Matrix organization is an endeavour to create synergism through shared
responsibility between project and functional management.
5. Goal setting is one way of improving effectiveness through logistics organization.

I n a business there are different departments, and each department has a
general boss. However, each member of a department may have a different
project and report directly to a different manager under the overall boss.

Organization Structure
Page16