Organizational Structure: Influence on Logistics Integration, Costs, and Information System Performance

Abstract

Organizational structure significantly influences firm performance. A recent survey of logistics professionals revealed that centralized structures accommodated logistics system integration better than decentralized structures. Also, centralized firms spent a lower percentage of net sales on logistics costs and information system support costs than decentralized firms. On the other hand, no signficiant differences were identified between centralized and decentralized firms in terms of information system performance. Information system support needs were addressed comparably regardless of organizational structuring. However, while centralized and decentralized firms exhibited similar capabilities in terms of effectiveness (reaching goals), centralized firms appeared to be more efficient (resource utilization).

Understanding the factors that enable and inhibit the integration of operations, purchasing and logistics

“…Factors such as size and structure (number of plants, location, reporting hierarchy and the like) also have linkages to integration in the literature. For instance structure is one of the few drivers of integration, albeit within a function, to be identified and tested in the literature (Stank et al, 1994). Although some of the factors were not directly related to the central focus of our study, we felt that the information obtained might provide insight into the factors that enable or mitigate efforts at integrating the supply chain.…”

“…There is also a growing body of research that begins to identify the antecedents of integration in areas outside of product development. For example, Stank et al (1994) examine the relationship between structure, information systems and logistics integration and find that more centralized structures were more accommodating to integrated logistics. A number of authors have focused on information systems as being a key element of integration (e.g.…”

“…Structure: "the formal reporting relationships, grouping and systems of an organization" (Daft, 1995, p. 582) has been shown to have an active role in integration. Stank et al (1994) noted that centralized structures tended to enable the integration of logistics. The data from this sample suggests that centralization is only one of the structural elements that influence integration.…”

“…From an integration standpoint centralization is a double edged sword. Based on the evidence presented by Stank et al (1994) and intuition, centralization should create synergies across a company, but may lead to problems at individual plants, especially during the switch to centralization.…”

“…The literature suggested that centralized structures (Stank et al, 1994) could create integration, at the organizational level. At the plant level focused on by this study, the results are more nuanced.…”