The Concept of Process Orientation in Supply Chain Management

The Supply Chain Management, with its overall perspective on the supply chain, has been difficult for many companies to operationalize. Looking from operational level, the complexity of Supply Chain Management is so vast that it is necessary to break down the supply chain into smaller segments in order to understand it. This does not mean that the overall perspective is thrown aside, but rather that is must be looked at as a way to create a foundation for realizing the vision and perspectives of the supply chain management concept.

Function of Process Orientation

Today, much focus and attention is given to a function-oriented company which is on managing, controlling and measuring the activities bound to a specific function. Budgets, accounts, critical success factors, and award systems are set for each functional area. Each department is driven by a budget, which it must fulfill for a given period. When a department has reached its budget target, whether it is based on costs, resources, earnings, it has performed well and will be rewarded.

A line manager usually manages each of his/her function without any interference. Attempts to work across a function-oriented company will lead to resistance from managers guarding their territory, who do not want to empower or leave decisions to others within the organization. The worse case scenario, in the eyes of these managers, would be having control or decision making powers lying in the hands of the companies external to the organization.

The division of a company according to functions does have its advantages when the aim is to exploit specialized knowledge and experience within different areas. There may be disadvantages, however, if the aim is to gain an overall understanding of the company and develop a process orientation. There is a strong risk that each department will sub-optimize from the perspective of the company as a whole.

The built-in conflicts and opposing targets are well known in most companies. They are very hard to avoid in the daily life of the company. The risk of sub-optimization similarly increases its own internal business processes only, rather than looking at the supply chain as a whole.

A number of companies have realized the need to change their vertical organization structure to a more historical structure. This change draws attention to process, as opposed to looking at the functional barriers and the different steps of the supply chain. Setting up working process management is a major challenge for management, as it requires the ability to predict organizational changes and to establish new management forms, decision-making methods, tasks and award systems.

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