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The Supply Chain Networks are changing. What should the design guidelines for supply chain organizations be?

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The consequences of disruptions on physical networks are well known to supply chain leaders. These include frequent and rapid changes in manufacturing locations, supplier bases, warehousing, and transport networks. These physical changes in the supply chain are determined by cold calculations of cost margin and risk. However, Gartner clients are grappling with the implications for organization design.

  • Do you think the organization’s structure needs to be changed to keep up with the network?
  • Are there roles that need to be moved?
  • Should roles and teams be closer to the physical work to be more customer-centric?
  • Is it better to have multiple roles and give them global reach to maximize efficiency and scalability?

Operational Layers

Let’s begin with the operational layers — Execute & Orchestrate — which are the roles and teams that coordinate and complete operational transactions to make and deliver products.

All roles involved in physical products, such as production, packaging, and transport, must be present on-site regardless of network changes. Your organization, or an outsourced provider, must staff the factories, warehouses and transport depots accordingly.

What about those not directly involved with the product, such as planners, buyers or customer-service representatives? They should be able to be located at regional or global centers, but they must be present on-site. The following questions can be used to determine the role of each one:

  • Local execution is necessary to achieve the speed required for decision-making and action.
  • Is there strong compliance or regulatory reasons to locate positions in a particular geography?
  • Are the local execution’s benefits greater than the scale benefits derived from co-location at a regional or global level?

If you answered yes to any of these questions, new nodes in your physical network would need operational staffing at those locations or near them. These roles and teams can be located in regional or global centers that offer scale benefits, such as greater utilization of highly skilled resources and lower headcount costs.

Layers to Govern and Adapt

The Govern and the Adapt layers of capability have roles and teams that make decisions about the future supply chain and how to get there. The Govern layer comprises the heads of supply chain roles and heads of function, as well as members of governing committees or councils. The Adapt layer includes roles such as process owners and innovation leads. They are grouped into teams like Centers of Excellence or Business Process Improvement.

These roles are often found in centralized organizations located in regional or global offices and remote and virtual settings. It is tempting to think that these roles are immune to network changes. This kind of work, however, can be done anywhere on the planet, taking advantage of all the benefits of collaboration technology.

Not necessarily. I’ve worked with companies that carefully considered where these roles and teams should be. These are some reasons why changes in supply chains can affect the distribution and location of Govern and Adjust roles.

  • The regionalization of an organization and its ecosystems alters the balance between global and regional Govern and adapt roles to favor regional structures.
  • New strategic partners and stakeholders emerge, and their proximity can catalyze innovation and development (e.g., university partnerships for technology and non-governmental organizations for sustainability).
  • The increased presence of an organization in a particular location can open up new opportunities for the availability, quality, and retain talent.
  • Developing resilience and adaptability to disruption requires a greater spread of decision-making power within the supply chain organization. This results in Govern-focused positions in new locations.

Changes in supply chain networks can dramatically impact the design of supply chain organizations. Supply chain leaders must identify the roles and teams affected, decide if an organization redesign is needed, and optimize their organizational structures.

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