Factors Influencing Logistics Organizational Structure

The following factors influence the formation of an organization structure. These factors can be classified into two categories: internal and external. Internal factors cover size of the organization, strategy evolved, management philosophy and the degree of control. Organization structure is impacted by various factors as shown in Figure 22.6 to enhance the organizational performance.

1. Size

Logistics and supply chain activities and their complexities have a direct relationship with the size of the organization. The larger firms prefer to have a decentralized structure for ensuring a higher degree of responsiveness and customer service. Having a number of decision levels may be suitable for cost controls, but decreasing the number of layers will speed up the decision process and ensure flexibility. However, in the smaller organizations wherein the logistics network is small, the activity base is limited due to the lower transaction base; hence, the preference is for a centralized logistics control.

2. Corporate Structure

In large organizations, authority and responsibility generally are clearly defined for each and every position. Hence, the logistics organization and functions reflect the same characteristics of autonomy and flexibility. A well-defined structure will promote coordination among the various functions of the organization, thus enabling it to operate as an integrated system.

3. Strategy

The structure of logistics organization depends on how the enterprise wants to use the logistics function. Is the structure being used for cost-effectiveness, system efficiency or extending superior customer service? For cost-effectiveness a well-defined hierarchical structure is a must. In case the objective is superior customer service, a well-defined flexible structure is essential.

4. IT Enabling

The success of the organization depends on the degree of accuracy of timely decisions at various levels. Timely information is the vital element in organization success. The speed of information processing and formatting depends on the availability of IT infrastructural facilities in the organization and its interface with other supply chain members like vendors, resellers, customers, transporters, and so on. This enables a firm to improve its customer responsiveness capability with minimum cost. IT has not only empowered firms to enhance their service capabilities, but also ensures a high degree of coordina­tion between the various functions by speedier cross-functional communication of information. The structure of the IT-enabled logistics organization vastly differs from its traditional format.

5. Environmental Factors

Many organizations adopt the structure of their competitors or the structure generally prevailing in the same industry. However, the success of any organizational function depends not only on how well an enterprise has coordinated its various functions, but also on how well it has integrated its logistical functions with the logistics partners.

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

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