A great deal of time and effort is put into organising supply chains effectively. In recent years a focus on integrating processes has led many businesses to organise management structures around end to end processes rather than around functions. These process-based organisations are often supported by the overhead functions such as procurement and supply planning, and the resulting structure is operated as a matrix. Matrix management in this scenario requires prioritised objectives that emphasise process efficiency above functional excellence. So when does this add value compared to a traditionally organised supply chain, is it the right choice for you, and what is the mechanism for getting there?
The over-riding objective of the process-based structure is to integrate and optimise the processes that add customer value. In this way, significant efficiencies are claimed, costs can be reduced and service and quality become the key objectives of the process organisation. Lean owes many of it’s key waste-reduction benefits to process optimisation, with it’s attention to wasted resources, unnecessary use of labour and equipment time, and idle inventory. In a well balanced process which fully utilises equipment, labour and materials at all points in the production cycle, intuitively this makes a lot of sense.
Where it all becomes more difficult is in the world where many processes operate with sub-processes that are vastly different in terms of labour and skills required and levels of capital equipment invested. One machine may be required to operate 24/7 to effectively recover capital costs, and may support several small batch processes that operate for minutes or hours rather than days. Other sub-processes can be highly people intensive, and require a heavy focus on labour productivity to maintain costs. Yet others may require high levels of training and skills, the operators command expensive salaries and this resource also needs to be fully utilised. If the items being produced have high value, having agile production processes that can start and end quickly may be a key driver of organisational success. The process support organisations again, in theory, should have objectives that align with process success, however for many industries, inventory control and customer service are still the over-riding objective of supply planners, and purchased material price is still the prime objective for procurement groups. These may be to the detriment of process efficiency, but are often critical to being competitive.
Process-based organisations can in these cases significantly impact capabilities at a sub-process level and may be better managed functionally. If the ability to rapidly re-deploy resources between different processes is also crucial for you, then process-based organisations tend to restrict this as the work in the individual process organisations expands to fill the time available.
So is a process-based organisation right for you? There is no proscribed answer. The key to understanding this is whether you can you improve productivity, at a machine, labour and capital level by organising this way, and if so, do these benefits outweigh any additional costs? If you can answer yes, then this becomes key to implementation. Understand the benefits you can create first, then organise around them. Structure will then evolve from the strategy, and will do so regardless of the lines you draw on an organisation chart. If close process integration is going to yield benefits for you, the culture you develop from the way you implement it is far stronger than the formal hierarchy. A change programme developed from the involvement of the process operators will achieve the behaviour changes you need, and it will improve process efficiency far more than changes to management and supervisory structures.
If you want to learn more about the Cosmapec approach to supply chain process optimisation visit us at http://www.cosmapecsupplychainmanagement.com or contact us
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