Logistics as a central unit or division

Logistics as a central division and unit

When a company is organized by business divisions such as regions or products, there are several ways to integrate logistics. A critical consideration is to classify logistics in terms of its importance to commercial success. This extends from a central organization outside all divisions to a logistics unit in every division. If the approach is carried out well, competitive edges can be achieved.

Centralized, decentralized and hybrid organization

Large companies frequently are matrix organizations. Such companies employ organizational units based on operational function such as production, human resources and finance as well as organizational units based on divisions such as business segments A, B and C. A matrix organization has three ways of grouping logistics - centralized, decentralized or hybrid.

Logistics as a central unit

In a divisional organizational structure, operational activities on the top level of a company’s management are structured by object - e.g., by product groups or regions. This base model also has various ways of integrating logistics.
To achieve synergies among the divisions, logistics tasks are taken from the divisions and placed in a central unit [1].

Logistics as a central unit and function in each division

In a decentralized approach, tasks can also be carried out in the division. This frequently leads to a division of labor with the central level’s carrying out tasks that have a superordinate character in terms of phase. An example is the setting of guidelines that govern logistics services.
In this case, the central unit of logistics has absolute policy-making authority. Operational tasks, in particular, are carried out on the basis of these guidelines. This is an efficient solution when the divisions offer a broad line of different products and the potential for consolidating logistics tasks is small. If such potential exists, operational tasks can be performed centrally. This also applies to outsourced logistics services [1].

Logistics in a divisional organization

Logistics as a separate division

Another option is to create a separate division of logistics. This division can be operated as a profit center and can offer services in the marketplace to other companies. It can even be spun off as a separate company, creating a formal type of outsourcing Outsourcing for logistics.
Particularly in a divisional organization, the difference between a company organization and a group organization is fluid.
In the real business world, a two-tier centralization problem frequently exists because a distinction must be drawn between central organization units on the company and group level. This aspect is significant for one reason: If central group logistics units are employed, a shift of central tasks from the company to the group level can occur [1].

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