1. Organizational structures
Purchasing and Supply Chain Management
Organizational structures
(Structure and Supply Chain + Purchasing structure and design)

2. Structure and Supply Chains
Mintzberg Definition
An organisation structure is the sum total of the ways
in which the enterprise divides its labour into distinct
tasks and achieves co-ordination among them.
Control Requires:
A power base – organisational, personal
A control mechanism that may take the
form of one of the following:
Centralisation
Formalisation
Output control
Cultural control

3. Structure and Supply Chains
McKinsey’s 7S Model
Seven interrelated factors that organisations wishing to become
more customer orientated need to address
Shared
Values
Skills
Style
Systems
Structure
Strategy
Staff
Breaking down of functional barriers
Information flow
Style or cooperation, relationships, trust, information sharing etc.
Purchasing contribution to marketing, alliance, growth, diversification etc.
Ways in which things are done around here

4. “Hasting” Seven Characteristics of New Type Organisations
Structure and Supply Chains
“Hasting” Seven Characteristics
of New Type Organisations
Radical
Decentralisation
Demanding
Expectations
Distributed
Leadership
Networking &
Reciprocity
Intense
Interdependence
Transparent
Performance
Standards
Boundary
Busting
„Small is beautiful“
Leadership distributed among people
Direct relationships and communication between individuals
+ multidisciplinary approaches

5. Structure and Supply Chains
“A network structure is a series of strategic alliances that an
organisation forms with suppliers, manufacturers and distributors
to produce and market a product.”
A network is not a world of individual and isolated transactions.
Network structures allow organisations to bring resources together
on a long-term basis to reduce costs.
Networks relate to all aspects of the supply chain, including
marketing and distribution.

6. Second-tier Suppliers
Structure and Supply Chains
Factors in Configuration
Those that integrate for direct supply to the assembler or who have a significant technical
influence on the assembly while supplying indirectly
First-tier Suppliers
Second-tier Suppliers
Those that supply components to
first-tier suppliers for integration into systems or provide some support service

7. Structure and Supply Chains

8. Lean Production – Key Aspects
Structure and Supply Chains
Lean Production – Key Aspects
Target costing – work backwards to meet target 1
Use of value engineering/value analysis 2
Use of cross functional teams 3
Just-in-time pull system 4
Zero defects 5
Assembler and first-tier supplier co-operation 6

9. Structure and Supply Chains
Enablers of Agile Manufacturing
Directly collects customer requirements through on-line communications systems
Electronic commerce
Provides a quick response to the need for shorter product development cycles
Concurrent engineering
This includes CAD, CAE and CE to reduce product development times (computer-aided design, computer-aided estimates, computer engineering)
Rapid prototyping tools
The integration of diverse systems of participating organisations
Integrated product/production systems
Achievable through tools such as IT and QFD techniques (quality function development)
Rapid partnership formation tools
A temporary alliance of partner enterprises located all over the world
Physically distributed teams & manufacturing
Each Functional aspect may be performed by many different organisations using Internet
Virtual enterprise

10. The virtual organisation structure

11. Structure and Supply Chains
Value Stream Mapping Tools
Provides overviews of a particular supply chain from an industry perspective
Physical structure
Identification for the purpose of improvement
Quality filter mapping
Identifies when products stop being made in accordance with actual demand
Decision point analysis
Identification of demand changes along the supply chain
Demand amplification
Targeting of inventory reductions
Production variety funnel
Reduction of lead times and inventory
Supply chain response matrix
Reduction of waste
Process activity mapping

12. Structure and Supply Chains
Flow of ownership
Supply chains and the principal ‘flows’

13. Structure and Supply Chains
A simplified supply chain or value stream

14. Structure and Supply Chains
The value stream of a soft drink can

15. Structure and Supply Chains
Convergent and divergent elements in a supply chain

16. Structure and Supply Chains
Types of supply chain

17. Structure and Supply Chains
Types of supply chain (Continued)

18. Structure and Supply Chains
Types of supply chain (Continued)

19. Four Factors Impacting on Structure
Purchasing Structure and Design
Environmental Factors and Purchasing Structure
Four Factors Impacting on Structure
Downsizing 1
E-commerce 2
Global
Sourcing 3
Partnering &
Outsourcing 4
The two strategies in (4) above may in some
circumstances be unrelated.
Create leaner and more responsive organisation
Streamlining, EDI

20. Characteristics Advantages Disadvantages
Purchasing Structure and Design
Purchasing as a Functional Department
Characteristics
Advantages
Disadvantages
Work is tasks
Prime focus of the
individual and his/her job
Chain of command goes
up the functional ladder
Manager’s job to match
people to tasks
Physical location together
in the department
Specialists available
High morale
Ease of supervision and
control
Simplification of training
Operational efficiency
More concerned with
reporting and authority
Guards the big picture
Prefers one-on-one
problem solving
Actual to budget
matrices a focus
Perceives goal setting
to be top down

21. Purchasing Structure and Design
Horizontal organisations and Processes - Principles and Characteristics
Organise around process not task. 1
Minimise sub-division of work flows. 2
Assign ownership – of processes and process performance 3
Link performance objectives to customer satisfaction. 4
Make teams the building blocks, not individuals. 5
Combine managerial and non-managerial activities if possible. 6
Multiple competences should be the rule. 7
Train on just-in-time to perform basis. 8
Maximise customer/supplier contact. 9
Reward skill development and team performance. 10

22. Purchasing Structure and Design
Buying unit
Cross Functional Purchasing
Involvement of purchasing in strategic decisions
Concept of supply chain
Vastly increased information available
Development of, for example, ERP, MRP and JIT
Purchasing needs expert advice and support with some
decision making
Teams outperform individuals acting alone

23. Purchasing Structure and Design

24. Purchasing Structure and Design
Centralised Purchasing
“Economies of Scale”
Centralised Purchasing Enables Leverage of Purchasing Power
because:
Forecasts can be made for the whole organisation
Quantity facilitates negotiation, including price/cost
Suppliers compete for preferred status
Suppliers can adopt a marginal costing strategy
Supplier rationalisation is easy to implement
Facilitates appointment of purchasing professionals

25. Advantages and disadvantages of decentralised purchasing
Purchasing Structure and Design
Advantages and disadvantages of decentralised purchasing
Advantages
Disadvantages
Closer to users
Rapid response
Closer supplier relationships
Support of local suppliers
Profit centres have own
purchasing
Geographical, cultural
appropriateness
Reduced leverage
Lack of strategic direction
Reports to lower level
Limited expertise
Lack of standardisation
Restricted careers
Cost of purchasing is relatively
high

26. Could Centralise Could Decentralise
Purchasing Structure and Design
Multi-plant Organisations
Centralised and Decentralised Options
Could Centralise
Could Decentralise
Determination of strategy and policy
Purchase of strategic products
Purchase of capital equipment
Negotiation of bulk contracts
Purchase research
Control of group inventory
Staff development
Purchase of IT systems
Small value orders
Items that are plant specific
Emergency purchases
Local buying
Staff purchases
Those purchases offering a local
community prosperity

27. A centralised/decentralised structure