To align the objectives of logistics with those of the organization, or to direct the logistical activities for competitiveness, a powerful control mechanism needs to be evolved and implemented. Invariably, organizations are going in for the following control systems:
Budgetary Control. Irrespective of the organizational reporting structure, the firm fixes up the budget for each of the logistical activities, which are treated as cost centres. Traditionally, these are financial budgets indicating the limits on application of funds on the cost centres. The deviation of cost is judiciously monitored, as the emphasis being on cost saving rather than service to the customer.
Structural Control. The controls are exercised through the proper organizational structure. Typically, an organization having cost as their differentiation strategy will have several layers of reporting structure to cut cost at the subsequently higher level on the investment proposals. In these organizations, customer service-related investment proposals take the back seat.
On the other hand, a customer-focused organization will have a flat reporting structure. The span of control is wider. The degree of authority and responsibility entrusted to the individual is higher. The managers enjoy work freedom, but are accountable for the results. The decisionmaking process is faster. The activities are treated as profit centres. These are result-oriented organizations and performance measures are used for continuously tracking and improving the health of the supply chain to remain competitive.
Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.
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