Supply chains have been around for thousands of years, but over the past 20 years they have dramatically increased in complexity. Even with all of the change in information technology, products and globalization we are still working with organization design technology that is 4,000 years old — the hierarchy.
Often, when we design organizations, our minds start with the hierarchy, wanting to draw reporting relationships, job titles and who will be in specific positions. When we do this, we leave out important discussions about what the current issues are, what we are trying to solve, the main principles we would like to see in the new organization, and the relationship between critical supply chain functions and capabilities at a global, regional or local level. These are strategic discussions that impact the future of the organization and must be dealt with before organization charts are created.
Organizations are like large brains
During his session at Gartner Supply Chain Executive Conference this week in Phoenix, Arizona, Ken Chadwick, research director at Gartner, said organizations are like large brains — taking in information, processing it, making sense of it, making decisions and then activating parts of the body in order to accomplish an end.
“Organizations are complex social neural networks whose primary responsibilities are to take in information, make decisions and execute on them,” said Mr. Chadwick. “In designing organizations today we are more like social engineers, designing the way in which people will interact and make decisions on behalf of the customer and the company. The agility required for today’s business environment requires an organization with more dynamic interaction between people, smart machines and business partners.”
One way to begin to shift perspective is to think differently about the purposes of the organization. Successful supply chains have four distinct layers of organization, each focused on a set of critical activities and decision making. Mr. Chadwick recommended that organizations be aligned and balanced across these four layers:
- Govern: This layer is dedicated to frame decision making across the supply chain, effectively staving off bureaucracy by allocating decision making to positions, teams, departments and councils throughout the business.
- Adapt: This layer is focused on innovating and developing capabilities and infrastructure to support the evolution of business models and products.
- Orchestrate: This layer drives outcomes across the end-to-end supply chain, using specific positions and teams to link process, product, customer/channel and geographical business units.
- Execute: This layer is focused on delivering core supply chain functional outcomes, mobilizing functional experts at a global or local level to respond to the daily needs of the business.
The organization of these layers is in the distinct positions, teams, councils and functions attributed to each layer that serve as ingredients for each organization’s recipe. By mobilizing these ingredients in different ways, each organization will be able to address its specific challenges using a unique recipe.
“For example, use the Govern and Adapt layers to design the strategy, policy, organization, processes and systems necessary for the complexity of its organization. The bottom layers, Orchestrate and Execute, can be used to operate the business across multiple functions, products, customers/channels and geographies,” said Mr. Chadwick.
“However, each organization should seek its own balance of central and local control, order and change, and delivery of outcomes across product, geography, customers/markets and functions,” Mr. Chadwick said. “Each recipe should be distinct, but the basic organizational ingredients used are much the same.”