Supply Chain Planning Leaders Are Urged to Design A “Fit for Purpose” Organization

As noted in our news section today, Gartner Supply Chain Symposium/XPO taking place through Thursday, features CSCOs and supply chain executives taking a strategic view of the trends disrupting our industry.

One of biggest takeaway for our readers is how supply chain planning leaders are defining their function’s “fit for purpose” and choose a corresponding organization design will improve their results and be better aligned to the overall business, according to Gartner, Inc.

The term “fit for purpose” describes an approach where planning leaders focus on what they should be doing, instead of benchmarking what others are doing, but may not necessarily work for them.

“Many supply chain planning leaders ask themselves if they should organize their function in a more centralized or decentralized way,” said Ken Chadwick, vice president analyst with the Gartner Supply Chain practice. “To answer that question, they must first understand what their individual fit for purpose organization looks like.”

To design a fit for purpose planning organization, leaders must consider their companies’ business and operating model as well as the operational mindset.

Business and Operating Model

The first element of designing a fit for purpose planning organization is to understand the business and operating model of the overall company – customer base, products, serviced markets – and determine to what extent those factors are changing.

“Some companies are now moving from global to more regionalized supply networks because global networks are less resilient when it comes to disruptions, such as trade wars or the COVID-19 pandemic,” Chadwick said. “On the other hand, there are companies that want to try a more centralized approach to better serve their key customers.”

Operating Mindset

The next step is to focus on what is important to the company in operations and decision making. Some companies’ mindsets focus on business unit accountability, so they align planning to a commercial leader who owns those outcomes. Other companies are driving an end-to end mindset, leading to one integrated planning organization serving enterprise outcomes. Mindsets related to cost-focus, customer experience, innovation, agility, resilience, and risk also have a significant impact on how planning leaders organize.

“When planning, leaders know about their organization’s present and future operating model and mindset, they can in turn think about what their own function should look like to best fit in and serve its purpose,” Chadwick added.

Decentralized, Center-Led or Centralized

Based on the organization’s overall operating model and mindset, supply chain planning leaders can evaluate if a decentralized, center-led or centralized model is the best design for their function.

In a decentralized model, all planning roles report into the separate business unit leaders. This approach makes sense for large portfolio companies with mostly independent business units.

The center-led model leaves planning operations within the business units but creates roles at a global level that focus on planning processes and long-term planning. Finally, in the centralized model, all elements of supply chain planning report into an integrated planning leader who is running all aspects of planning across the different regions.

“There really is no one-size-fits-all solution for a planning organization, nor is a decentralized model necessarily a sign of lesser maturity. Planning leaders must evaluate their individual situation and future plans and design their function accordingly,” Chadwick concluded.

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