Organizational structures and the performance of supply chain management

Abstract

The objective of this paper is to suggest a set of best organization structures for efficient supply chain management. For this, this paper derives organization types for supply chain management according to the formalization and centralization level of an independent department responsible for supply chain management (SCM) activities, and hierarchical relationship in organizational position and operational responsibility between the SCM department and existing other functional departments. And then, this paper identifies organizational characteristics, which have significant influences on SCM performance by investigating the difference in performance across the proposed organization types. From the results of empirical test, this paper finds that even though too excessive formalization and centralization of the SCM department within a firm may interrupt complete SC integration and performance improvement, a certain range of control by the SCM department is inevitable to build the fundamentals of integrated supply chain management, and thus the temporary pursuit of intensive control focused organization type such as integrated line organization may be considered depending on firm characteristics and environmental change. However, the empirical results further indicate that in the long run, intermediate organization types such as Functional and Process Staff organization that the SCM department maintains an adequate level of balance and harmony with other functional departments while it controls, adjusts, and integrates various SCM activities effectively might be advisable. Yet, the study findings reveal that a more dynamic and extensive approach in reaching the best organization type for SCM performance is necessary.