Drivers of Logistics Organizational Structure

The organizational structure depends on the business strategy the firm pursues to achieve the desired organizational goals.

1. Process

This type of organization tries to achieve the maximum efficiency in the movement of goods from a raw materials state through work in process to a finished-goods state. Here, the organization is likely to focus on the activities that give rise to cost. These may be procurement, manufacturing inventory, transportation and order processing. In these organizations, the functional and hierar­chical structure is prevalent.

2. Market

For the market-oriented organization with a strong requirement for customer service fulfilment, the organizational structures are rather lean and flat. The reason is the speed in decision making.

3. Information

For seeking information from markets, the organizational structure is apt to span functions, divi­sions and business units. Business organizations that pursue an information strategy are those that have a significant downstream network of dealers and distribution agencies with substantial inven­tories spread across the network. Coordination of logistics activities throughout this dispersed net­work is a primary objective, and information is the key ingredient for good management. Hence, the organizational structure must span the traditional legal boundaries of the firm itself.

No single firm is likely to display a single organization design. Because mixed strategies often exist within the same firm, a variety of designs will appear for essentially similar firms. In addition, the similar firms may be in different stages of organizational development.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.