Chap 3 Organisation Structure- FINAL

8/11/2019 Chap 3 Organisation Structure- FINAL

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Organization StructurePage1

Chap : Organization

Structure

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


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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 therequirements 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.


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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 theobjectives 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


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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.


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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


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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 todaysworld 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.


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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


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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.


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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.


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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.


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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


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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


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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 servicesupport, 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


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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 ofProject

Managers

Project Manager

Project Manager

ProjectManger

Project Co coordinator


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The use of a project team, which is dynamic and able to view problems in a different way asspecialists 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 thephysical distribution function in the firm.

4.

The basis for theMatrix organization is an endeavour to create synergism through sharedresponsibility between project and functional management.

5. Goal settingis one way of improving effectiveness through logistics organization.

I n a business there are dif ferent departments, and each department has a

general boss. However, each member of a department may have a dif ferent

project and report di rectly to a dif ferent manager under the overal l boss.


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Chap 3 Organisation Structure- FINAL

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