Centralized Supply chain Harvard Case Solution & Analysis

Centralized Supply chain Case Study Solution

Centralized Supply chain

The centralized supply chain refers to the management of supply chain from one location or by one authority that takes decisions for all purchasing and distribution of raw material and products produced by the company.The centralized supply chain is a process by which a central authority controls, and takes decision regarding supply, procurement, purchasing, and distribution. It can be determined that in given scenario a company with centralized supply chain system tend to be beneficial in some situations. Since, the centralized warehousing system, and distribution systems tend to have numerous pros and cons.[1]

Advantages of centralized supply chain

  • One central authority has control over all operations.
  • Duplication of efforts are eliminated which would result in cost effective and efficient management.
  • Managers are relieved from purchasing, and they can focus on their work.
  • Specializedskillful buying and distribution staff in the supply chain management system.
  • Company could maintain strong and long relations with the staff.
  • Lower costs of operations to integration of operations and logistic advantages such as distribution.
  • Better and value added services to the customers with shorter lead times with better flow of information from company to customers.
  • Better communication of vision, and fast execution of policies.
  • Reduced conflict over decisions and full control over operations with accountability.

Disadvantages of centralized supply chain

  • High initial costs of setting centralized system
  • People involved in the system might not be efficient.
  • Increased lead times due to the delay in delivery of material from one department to production house.
  • Delay in sending materials to different departments.
  • High costs of material management with increased time delivery and approval process.
  • Higher risk of loss of all material and products, because if fire incident occurrs so there would be higher chances that all material would be lost in fire.

The company would acquire material in large quantity that would enable itto negotiate over the price with the suppliers and distributors.Certainly, the managers of all departments would feel relaxed, because they would not be required to make purchasing decisions, so they could focus on their work rather focusing on purchases, and headache of supplying the product.

Centralized Supply chain Harvard Case Solution & Analysis

On the other hand, it can be determined that there is also concern for the company that it might not be able to meet effectively with the requirements of each three non-competing business units in the organization. Similarly, it is a big problem and a disadvantage for the company that it might purchase such material that is low in quality or that does not meet with the requirement of the production unit. Therefore, the quality and reliability of the products might be undermined[2].

Decentralized supply chain

The decentralization refers to supply chain management by different business units separately. They take decisions as per their requirements, since they purchase and distribute with their own resources and efforts. They take decisions about how much to produce and how much to supply. The decentralized supply chain management also includes warehousing distribution system. There are numerous pros and cons of the decentralized supply chain management[2]

Advantages of decentralized supply chain

  • Business units could hire efficient peoples from industry their own. Those have good experience and expertise in supply chain management.
  • Local management knows what is the demand of market and how much should be produced and sold. This gives competitive edge and would enable the company to grab good market share because their local management have better understanding of the market demand and customer choices.
  • Decentralized supply chain management gives control to different business units separately so error of one person have less effect on the whole organization.
  • Innovation is emphasized to put together best talent and expertise.
  • Delays in material management is eliminated and cost of material management is reduced because each department would have control over material management to ensure better quality.
  • Increased efficiency into the operations and reduced costs of material management would enable company to transfer this value to the customers.
  • Customers and company would have better understanding.

Disadvantages of decentralized supply chain

  • Higher costs of supervision because, more cost would be incurred to manage the business units separately. So, a professional and experienced personnel would be required to manage the operations.
  • Higher investment would be required in order to setup different warehouses, transportation facilities. Also, inventory management would be required to send goods to different distribution centers.
  • Duplication of efforts would increase cost of supply chain, longer planning cycles would increase inefficiencies.
  • The local management might have slow mentality in which peoples in the organization from different departments do not share information and knowledge to benefiteach other from it.

One of the important advantages of decentralized supply chain management is that risk of loss, fire, damage is reduced because each unit has separate warehouses, so it could manage its inventor on its own. Certainly, the quality, and reliability of the product would increase. But, on the other hand the cost of distribution would increase because each warehouse would transport goods separately....................

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