Centralized business model
A company cannot achieve efficiency and effectiveness using one single model. Based on the complexity, some functions need more delegation and some areas needs tight integration. Organizational structure significantly influences firm performance.
I am working for a multi-nation company, involved in various global initiatives to reduce manufacturing cost by consolidating global demand, establishing global product sourcing and global IT systems. I have seen “Pressure for integration” from Top management to reduce total cost using global sourcing and continuous production methods to increase profit margin, at the same time there is a “pressure of localization” from regional teams for more delegation to increase operational effectiveness.
Company felt that it was necessary to centralize the management of geographically dispersed manufacturing activity in order to reduce cost and optimize investment. We decided to consolidate our manufacturing operations at a single factory specific to a product to consolidate global demand and capitalize low cost manufacturing and sourcing. There are many surveys from the market have proved that centralized structures accommodated logistics system integration better than decentralized structures.
In some situations there is no advantage to global integration or the global integration is detrimental, e.g. there is too much logistics expense and overhead cost, and it is more viable to manufacture locally to meet demand fluctuation. Decentralization is seen as requiring high maintenance because it requires supportive infrastructure of information flow.
Initially my organization started with too much decentralized, and local team was fully empowered to run independently with more freedom with high expense. The decentralized structure created market erosion due to high production and administrative cost, and we are forced to integrate manufacturing operations globally and leave sales & distributions at the regional level, and scarify
I am working for a multi-nation company, involved in various global initiatives to reduce manufacturing cost by consolidating global demand, establishing global product sourcing and global IT systems. I have seen “Pressure for integration” from Top management to reduce total cost using global sourcing and continuous production methods to increase profit margin, at the same time there is a “pressure of localization” from regional teams for more delegation to increase operational effectiveness.
Company felt that it was necessary to centralize the management of geographically dispersed manufacturing activity in order to reduce cost and optimize investment. We decided to consolidate our manufacturing operations at a single factory specific to a product to consolidate global demand and capitalize low cost manufacturing and sourcing. There are many surveys from the market have proved that centralized structures accommodated logistics system integration better than decentralized structures.
In some situations there is no advantage to global integration or the global integration is detrimental, e.g. there is too much logistics expense and overhead cost, and it is more viable to manufacture locally to meet demand fluctuation. Decentralization is seen as requiring high maintenance because it requires supportive infrastructure of information flow.
Initially my organization started with too much decentralized, and local team was fully empowered to run independently with more freedom with high expense. The decentralized structure created market erosion due to high production and administrative cost, and we are forced to integrate manufacturing operations globally and leave sales & distributions at the regional level, and scarify