Industrial Engineering Letters www.iiste.

org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.5, No.4, 2015

Role of Organizational Structures in Supply Chain and

Abstract
To determine the value of having effective organization structures in operation activities in an organization. It is
important to understand the context of the application organization structures in operation management.
Basically, the role of organizational structures is to enable strategic change and improve business performance in
several dimensions. Efficient and effective organization structures helps in rapid delivery of top-quality
communication, meeting the mission and vision of organizations, product development, supplier development,
supports organizations in meeting high standards in customer care, and it provides the means to compress design
and development times in order have the competitive advantage in the market. Good organization structures
helps to launch new products more frequently, to explore and enter new markets faster, and to seek new
distribution channels. All of these dimensions can give companies a powerful competitive edge. Failure to have
effective, well organized structures in operation management the company cannot realize business objectives in
today’s competitive, often global environment. To determine the role played by organizational structures like
coordination, specialization, control and so on .It is important to first understand the context of the organization
structures applications, history and roles. The first part of this chapter provides a review of the evolution of the
role and application of organization structures, leading to its role in today’s competitive markets. The second
chapter will tackle the roles of organization structures and advantages of effective management in organization’s
operations.
Keywords: Operation Management, Organizational structures, Formalization, Lean production

INTRODUCTION
Operations management is an area of management concerned with overseeing, designing, and controlling the
process of production and redesigning business operations in the production of goods or services. It involves the
responsibility of ensuring that business operations are efficient in terms of using as few resources as needed, and
effective in terms of meeting customer requirements. It is concerned with managing the process that converts
inputs (in the forms of materials, labor, and energy) into outputs (in the form of goods and/or services). The
relationship of operations management to senior management in commercial contexts can be compared to the
relationship of line officers to highest-level senior officers in military science. The highest-level officers shape
the strategy and revise it over time, while the line officers make tactical decisions in support of carrying out the
strategy. In business as in military affairs, the boundaries between levels are not always distinct; tactical
information dynamically informs strategy, and individual people often move between roles over time (Hill,
2005).
According to the U.S. Department of Education, operations management is the field concerned with
managing and directing the physical and/or technical functions of a firm or organization, particularly those
relating to development, production, and manufacturing. Operations management programs typically include
instruction in principles of general management, manufacturing and production systems, plant management,
equipment maintenance management, production control, industrial labor relations and skilled trades
supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and
materials planning. Management, including operations management, is like engineering in that it blends art with
applied science. People skills, creativity, rational analysis, and knowledge of technology are all required for
success of an organization.
Contingent approach emphasizes that there is no ideal structure .Structures are determined by many
factors which include age and size, technical systems, power and environment. Age and size is emphasized on
the fact that the older or larger an organization is the more standardized will be its behavior, policies and
procedures. This makes changes difficult in older, larger organizations. Moreover, technical systems suggests
that the more a technical system controls the workforce the more standardized will be the operating system and
bureaucratic the organizational structure.Conversely,information and computer technologies may transform a
bureaucratic to a flexible structure and lead to changes in the nature of managerial work, job design and working
practices(Lysons,2006)
Power also contributes in determining a structure of an organization. This may be defined as the
capacity of an individual or group to influence decisions or effect organizational outcomes. Power identified may
include reward power which is based on individual or group perceptions that another individual or group has the
ability to provide varying amounts and types of rewards. Legitimate power is based on the values held by an

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Industrial Engineering Letters www.iiste.org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.5, No.4, 2015

individual or the formation of particular values as a result of socialization. Coercive power is based on individual
or group perceptions that another individual or group has the ability to administer penalties, for example, human
resource department. Expert power is based on individual or group perceptions that another person or group has
greater knowledge or expertise than them and is thus worth following. Reference power is based on the desire of
an individual or group to identify with or be like another person or group (Lysons, 2006). Purchasing plays a
leading role in supporting operations in its job of making the organization’s products. The links between
purchasing and operations have to be very close thus the former normally communicates to operations
management in the organizational structure. A major link between operations and purchasing is through their
strategies which must be closely aligned and may be developed jointly. These links must be maintained at a
tactical level. For instance, an operations production plan might show production levels over the next year, and
this specifies the materials needed and their arrival schedule to be organized by procurement. Purchasing and
operations must clearly work together at all levels and this encourages many firms to relocate their purchasing
staff to physically work in operations facilities to respond quickly to needs(Momczka,2010).
Organization structures have to be organized in such a way that they check quality in operation
management. This should be emphasized using techniques like TQM.Firms are also outsourcing more of their
components and service’s needs, so purchasing must work closely with operations in the fields of quality
control.Moreover,designing of new products or changes to existing ones is central function in most
organizations. This is known as engineering in manufacturing industry. This calls for operations and the
organization to work hand in hand to enhance product development and supplier development and management.
In addition the role of finance and accounting in supporting the operation management cannot be under rated.
Purchasing and accounting function need to communicate effectively and share essential information. This could
be facilitated by use of EDI and EFT.This will allow prompt payment to suppliers hence effective running of an
organization. This will only be facilitated by the role played by the organization structure especially the
management function (Slack 2011).
On the other hand, marketing and sales are vital in supporting the operation management in an
organization. Marketing and sales are more concerned with moving products out to customers.Morever,they are
still connected ,as many ideas for new products and materials come from marketing when they return comments
from customers.Furthermore,marketing develops sales forecasts that convert into production plans and material
requirements.
Legal function in the organization structure plays a vital role to enable proper legislation especially
when signing contracts or purchase order with the suppliers. The details of such agreements have to be written
by lawyers and this needs close coordination between the purchasing and legal functions. Legal function also
plays vital role in patent ownership, intellectual property, terms in new product development, risk assessment,
product liability claims, and anti-competitive practices escape clauses in long term contracts and so on.
Organization structures have to support fully environment management, health and safety. Purchasing
has a responsibility to ensure that the materials they buy meet all health and safety regulations and increasingly
that they do not cause environmental damage. This also ensures that suppliers in their own operations are using
safe methods and are complying with relevant laws (Crosby, 1996)
Critical analysis of organization structure on Supply Chain
A research on organizational structures best practices by the Mintzberg (1979) has estimated that most
companies and organizations can realize the best performance in their operations if well managed and aligned to
the objectives of that organization.Mintzberg analysis had emphasized that different environment lead to
different strategies. Different strategies require different structures. After a study of almost one hundred large
American companies he concluded that changes in corporate strategy precede and lead to changes in
organizational structure. This is to mean that structure follows strategy. This is under critique because structure
could constrain strategy and once an organization has been locked into a particular environment-strategy –
structure relationship; it might have difficulty pursuing activities outside its normal scope of operations (Lysons,
2006).An organization cannot change strategy until it implements changes in structure.Acording to the above
study, one it is clear that structures play a vital role in operation management. Considering the importance of
effective organizational structures, firms that do not embrace the great role played by structures exhibit lack of
control, coordination, poor decision making and effective communication. This might cost the performance and
competitiveness of the organization. It is therefore very crucial for any organization to understand the roles
played by effective organization structures for the prosperity of any organization.
Role of organizations structures
Mintzberg has defined organizational structures as the sum total of the ways in which the enterprise divides its
labour into distinct tasks and achieves coordination among them (Lysons, 2006).
Specialization
Traditionally, specialization was the division of organizational activities into functions, occupations, jobs and
tasks. By means of vertical integration, enterprises also aimed at self-sufficiency both in the supply of materials

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Industrial Engineering Letters www.iiste.org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.5, No.4, 2015

and the in house manufacture of products. There was an emphasis specialization which related to core
competences or competitive advantage that satisfy three criteria: potential access to a wide variety of
markets,significants contribution to the perceived benefit of the end product as well as core competence should
be difficult for a competitor to imitate. Concentration on core competences has led to the outsourcing of both
core and non-core activities. These will include transfer of non-core manufacturing activities to specialist
contract manufactures that, by leveraging their fixed costs over multiple customers, can produce more for less,
transfer of noncore service activities such as catering or training to specialist providers, removal from corporate
balance sheets of manufacturing assets such as tools and equipment, reduced payroll by eliminating non-core
employees, ability to combine the power of several highly specialized contributions into single ,flexible, value
adding entity ( Krajewski,2010)
Coordination
Coordination is an aspect of ensuring that people and resources grouped into discrete functions worked together
to accomplish organizational goals. Today, coordination is synonymous with integration.Esentially, integration is
conflict resolution. On the assumption that separate organizational elements and interests will inevitably conflict
over scarce resources, objectives, status and similar factors, there must be integrating mechanisms to ensure
unity of effort. Here such integration is not achieved, the result will be waste, conflict and low productivity, or
sub optimization. Integration can be both intra and interorganizational (Slack, 2010)
Integration also involves formalization or the extent to which work behavior is constrained by
ruls,regulations,policies and procedures.Formalisation is greatest when the individual discretion is given to
employees is low .The extent to which an organization is formalized indicates how top decision makers view
their subordinates (Juran,2001)
Control
Control involves powerbase and control mechanism which involves centralization and
formalization.Cenralization involves decision making either carried out by a centralized authority or requires the
approval of the centralized authority before it is implemented. Power on the other hand is the capacity of an
individual or group to influence decisions or effect organizational outcomes (Lysons, 2006)
Russell (2009) observed that organizational structure is the framework that helps employees achieve
their goals and does their jobs. An efficient company structure benefits the organization in several ways
including making it easier to delegate responsibility and effect change throughout the organization. To benefit
from a strong framework it is important to understand the advantages of an organizational structure. Clark (2008)
identified that good organizational structure in operational management will make a company present a unified
front to customers, vendors and investors. When a common marketing message is used throughout the
organization it helps the organization to better understand its marketing goals and then work together to achieve
them .When multiple departments are involved in a single endeavor a unified marketing message can be essential
to project success.Singo (1989) working at Toyota company in Japan observed that efficient structures also help
in succession process. A strong organizational structure is better able to prepare qualified employees for
management. When the company operates under a strong structure, a comprehensive management training plan
is easier to create and execute to help maintain a strong managerial core. Departments can work together on a
developmental plan to help encourage the training of management candidates within any department. Structures
in operational management also help in focus on strategy. Using a strong organizational structure allows a
company to better its focus on a single set of goals instead of each group working towards its own agenda. This
is the result of the flow of communication an organization structure offers as well as the establishment of
responsibility and respect for the company’s hierarchy that comes from a strong structure. It helps the company
to use resources widely in the pursuit of company goals as opposed to doubling efforts or experimenting with
options perhaps not in the company’s best interests. Training is also vital in operational management. A good
organizational structure makes employees training easier to administer and also allows it to remain flexible based
on the changes within the organization. When an organization structure regulates the flow of information, then
changes within that information are easier to monitor and better adaptable for a company wide training program
(Barnes, 2008).
Summary
The activities in an operations system can be classified as input, transformation process and output. The input
activity involves two categories of resources. Transforming resources are the elements that act on, or carry out,
the transformation process on other elements. These include such elements as labour, equipment/plant and
energy. The nature and mix of these resources will differ between operations. The transformed resources are the
elements which give the operations system its purpose or goal. The operations system is concerned with
converting the transformed resources from inputs into outputs in the form of goods and services. There are three
main types of transformed resource of materials which can be transformed either physically (e.g. manufacturing),
by location (e.g. transportation), by ownership (e.g. retail) or by storage (e.g. warehousing), information which
can be transformed by property (e.g. accountants), by possession (e.g. market research), by storage (e.g.

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Industrial Engineering Letters www.iiste.org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online)
Vol.5, No.4, 2015

libraries), or by location (e.g. telecommunications) and customers they can be transformed either physically
(hairdresser), by storage (e.g. hotels), by location (e.g. airlines), by physiological state (e.g. hospitals), or by
psychological state (e.g. entertainment). Two types of transforming resources are facilities (e.g. building and
equipment) and staff (all the people involved in the operations process).The sub-systems of a firm related to
specific business disciplines are termed the functional areas of a business. The three main functional areas in a
business are the operations, marketing and finance functions. The marketing function works to find and create
demand for the company’s goods and services by understanding customer needs and developing new markets.
The need for marketing and operations to work closely together is particularly important as the marketing
function will provide the forecast of demand from which operations can plan sufficient capacity in order to
deliver goods and services on time. The finance function is responsible for the obtaining and controlling of funds
and covering decisions such as investment in equipment and price-volume decisions. Other functions which play
a supporting role in the organization include the personnel function which will play a role on the recruitment and
labour relations, the research and development function which generates and investigates the potential of new
ideas and the information technology department which supplies and co-ordinates the computer-based
information needs of the organization. The relationship between functions can be seen as a number of sub-
systems within the system called the ‘organization’. Thus each function (e.g. marketing) can be treated using the
same input/process/output transformation model as the operations function. In other words each function within
the organization can be treated as performing an operations activity, as they are transforming inputs into outputs.
This implies every part of the organization is involved in the operations activity (to an external or internal
customer). When an operation is cited as a function in itself however it is referring to the part of the organization
which provides goods and services for external customers. The operations function itself is involved in all parts
of the firm and thus has a major impact on the competitive position of the organization. The traditional view of
the operations sub-system is that it is one function within a linear sequence of processes and is thus ‘buffered’
from the actions of the marketplace. Thus both physical stocks and allocation of responsibility within functions
outside of operations are used to protect the operations system from the external environment. For example, the
R&D function will carry responsibility for the development of new product ideas which are then ‘passed on’ to
the operations function and the purchasing function will take responsibility for the sourcing of materials and
bought-in services. Physical buffers include stocks of materials before and after the operations function to ensure
stability of supply and ability to meet fluctuating demand respectively. The idea behind this model is that the
operations function can concentrate solely on transforming inputs of raw materials into goods and services
without the need to consider the external environment outside of the organizational system. The disadvantage of
this model includes the slowness of response to changes in the environment as they are transmitted through
various connected functions and the inability of operations to develop in response to the needs of customers. In
fact, the operations function is critical in meeting customer needs and is deeply involved in the performance of
the organization. For example, the parameters under which a product/service can be marketed are directly
consequent on inputs from the operations functions such as flexibility affecting the product range available.
Thus, the role of effective organizational structures is crucial in the prosperity of an organization, competitive
advantage and meeting both the mission and vision of that organization.

REFERENCES
1. Barnes, D 2008, Operations Management: An International Perspective, Thomson Learning, London.
2. Crosby, P.B. 1996, Quality is Free: Making Quality Certain in Uncertain Times, McGraw-Hill.
3. Hill, T 2005, Operations Management, 2nd edn, Palgrave Macmillan, Basingstoke.
4. Johnston, R & Clark, G 2008, Service Operations Management: Improving Service Delivery, 3rd edn,
Pearson Education, Harlow.
5. Juran, J.M. 2001, Juran’s Quality Handbook, 5th Edition, McGraw-Hill.
6. Krajewski, L.J; Ritzman, L.P; Malhotra, M.K 2010, Operations Management: Processes and Supply Chains,
9th edn, Pearson Education, New Jersey.
7. Ohno, T. 1988 Toyota Production System: Beyond Large-Scale Production, Productivity Press.
8. Lysons (2006),Purchasing and Supply Chain management,7th edn,Pearson Education Limited, Great Britain
9. Mintzberg,H.(1979),The Structure Of Organizations,Prentice Hall,1979
10. Russell, R.S & Taylor, B.W 2009, Operations Management: Along the Supply Chain, 6th edn, John Wiley &
Sons Ltd, New York.
11. Shingo, S 1989, A Study of Toyota Production System, Productivity Press.
12. Slack, N; Chambers, S; Johnston, R 2010, Operations Management, 6th edn, Pearson Education Limited,
Harlow.
13. Slack, N; Lewis, M 2011, Operations Strategy, 3rd edn, Pearson Education Limited, Harlow.

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