How Organizational Silos Can Ruin Your Supply Chain

supply chain management

Organizational silos are based on the division of labor, on organizing the labor in such a way that each individual specialized in what he/she knows best, so that it can all be integrated in such a manner that a cohesive whole which is created in the result is much better in quality and much cheaper in price. This gift of the industrial age to humanity allows to make a production must better in quality and must cheaper in price. Indeed, because of the period of time, the person will become very good at his production and work at a much faster rate, even if the technology is the same. Each employee will make his work much faster, and he would make it much better quality than if he was making the whole product.

By the 70’s, the division had been carried too far, in fact, so far that each person would pretend that as if he has nothing to do with the other employees. To give you an example, I was working in a business transformation project in a mid-sized airlines and I was sitting in the office of the person in charge of maintenance planning of the aircrafts. At one point in the conversation he dug out and e-mail exchanged with his colleagues from across the room and this e-mail exchange had been carried on over a period of 18 months. This trivial matter could have been solved by just walking across the room in an authentic spirit of give-and-take and collaborating across the silos. People in both silos have entrenched themselves into such a position where no action could be taken, the decision-making was extremely slow and people were pointing fingers at each other.

In fact, every organization we have seen, to some extent or other, suffers from this silos mentality. The bureaucratic organization of supply chain 0.0 leads each department to become a pyramid. Any information which needs to be passed from one department to another would have communicated with the head office of one department to another. Imagine the time wasted and the problem of information distortion in the process. By killing the spirit of collaboration, it hampers efficiency and effectiveness.

No wonder this kind of organizations find it very hard to compete against even rudimentary supply chains, such as supply chain 1.0. Many companies struggle with one business transformation after another without addressing the root cause of information holding and silos in supply chain 0.0. If the company stays stuck in organizational silos, no appreciable improvement will be seen: Information holding will become rife and selective information sharing, the norm. Blame will be the name of the game in such a situation.

Below are 20 questions that every executive should ask about the supply chain in their business:

 

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Vivek Sood

I write about "The Supply Chain CEOs", "The 5-STAR Business Networks", and, how to "Unchain Your Corporation". In my work, I help create extraordinary corporate results using several 'unique' supply chain methodologies. Contact me for interesting, high impact projects, or, to get access to my IP for creating transformations using these methodologies.

  • Kennedy says:

    Counterfeit parts can ruin the integrity of your supply chain

    Counterfeit parts have been entering supply chains at an alarming rate over the past 10 years. Fasteners and electronic components are amongst the most counterfeited products in the U.S. With tight deadlines and stock shortages, it can be easy to push product straight through to production lines. Extremely low prices and quick availability on scarce products are indicators that there can be unauthorized activity taking place. Counterfeit products could not only be detrimental to the integrity of a supply chain but could also become a safety concern.
    In the military and aerospace industries, is it especially crucial to look for counterfeit identifiers in order to ensure the safety and efficiency of production?
    The DOD (Department of Defense) and FAA (Federal Aviation Agency) have put guidelines in place, and have selected authorized distributors to uphold and be compliant with AS 9120 and ISO 9001 standards.

  • Nevaeh says:

    It is not only about the organization will ruin your supply chain other than that anyone can up with the intention to ruin your supply chain
    The best supply chain managers know that to thrive, each link must be scrutinized. From raw materials suppliers to finished goods your bottom line depends on top-notch sourcing of vendors and providers. With so many variables in even the simplest of supply chains, it is easy to overlook crucial details. Many times the question of “how are we going to get this to our customers,” is one of the last questions on the minds of entrepreneurs and business owners. When you cut corners or proper vetting isn’t performed, the supply chain of any company can quickly break. Here are some ways to completely ruin your supply chain – and how to avoid them by choosing the best providers for your business…..(https://bit.ly/2OngnYV)

    • Andrew SC Expert says:

      Hey Nevaeh! Thanks for your valuable information it helped me a lot in my practical project performance during my final assessments thanks a tone.

  • Simon says:

    Eliminate silos. That has been a top priority and discussion point of organizations for years, yet we continue to struggle to really get rid of silos once and for all. What can organizations do to eradicate silos? The answer lies in your customers. The business has come a long way since the age of the consumer revolutionized sales and marketing to revolve around customer engagement, retention and the never-ending battle for loyalty. But as organizations rushed through transformations and new tools in order to put customer experience at the forefront of their strategies, they were forced to essentially patch silos together with duct tape.

  • Matty says:

    Sure, companies and software vendors have invested a lot of time and money integrating these applications, but just like there’s a difference between cooperation and collaboration, there’s also a difference between data sharing, which has been the focus of application integration to date, and intelligence sharing, which involves the sharing and alignment of objectives and constraints too. So, if companies have not listened to the break down your functional silos advice for the past 20 years, why should they now? What has changed? What would make the company owners change their mindset? Why would they adopt the silos break down strategies?

  • Mari Dell says:

    One of the business challenges I have addressed since I have set up a small business is the disruption in the flow of critical information, both internally and with other business stakeholders, caused by the existence of silos. The supply chain is just as apt to contain silos as any other portion of a business. Silos develop along the lines of job functions or geography. Good companies break down silos by implementing cross-functional teams and getting purchasing managers involved in product development. I believe that silos will always exist and only a constant and persistent effort to open doors for information sharing between siloed sectors can mitigate the negative effects that can emerge wherever silos appear.

  • Brian says:

    Happy to read your article Vivek. Few people have discussed this topic before with such detail and depth. I think the ramifications of functional silos in today’s global supply chain market are numerous and wide-ranging. In a time when supply needs need to be visible and agile to even keep pace with competition; functional silos can hamper baseline efforts to remain profitable and competitive. The functional silo problem whereby supply chains are structured vertically as opposed to horizontally. This paradigm inhibits supply chain transparency, agility, and resiliency, each of which on its own can be the death knell for making quick, cost-effective supply decisions.

  • Duvall says:

    Good article Vivek. Broken customer service. Bad employee morale. Inefficiency preventing innovation. I have experienced all the destructive effects of silos within corporations, both as an employee and as a customer. Silos happen when departments either can’t or won’t easily share information with other departments. As a result, departmental priorities supplant your company’s long-term goals. Information is the lifeblood of the modern enterprise; silos cut off the circulation. And they don’t just happen within the confines of the enterprise. Globalization, new business models, outsourced manufacturing, acquisitions and partnerships, just-in-time manufacturing, and even joint product development with suppliers have blurred the boundaries between national and international business owners. For most companies, mission-critical dependencies on suppliers are essential to competing successfully. Supply chains are so vital to business success that even large scale businesses treat information about its supply chain operations as one of its most valuable trade secrets.

  • Farrington says:

    Organizational silos are the bane of so many brands’ and retailers’ supply chains, from disconnected departments to information disparages across channels. But there is relief in sight in the form of today’s next-generation supply chain management systems that are connecting channels and alleviating the pain silos put on production and profits. Boosting sales and profitability can be summed up with a simple formula: If something is selling, accelerate production and make more of it; if it’s not selling, cut the losses and stop making it, because it’s cheaper to cancel production. Even a handful of poor-selling products can ruin overall profitability.

  • Rex says:

    In my view, the only way to truly break down functional silos is to combine supply chain software solutions with the viewpoint of a supply chain as one entity – from manufacturing to sales or order to delivery and to align objectives and analysis accordingly to monitor and review supply stream effectiveness as a whole. Simply put, breaking down silos requires the incorporation of technology and a new mindset about workflows across a supply chain. It may be easier said than done, but breaking down these functional silos is more vital than ever in today’s global, digitized supply landscape. As supply chains diversify and hubs and distribution centers go live in new markets across the world, silos will become increasingly dangerous as the sharing of objectives, data, and returns on investment expand beyond localized centers, and supply chain logistics become increasingly complex.

  • Patricia says:

    This advice is not new. Analysts, consultants, and others have been telling companies to break down their supply chain functional silos for as long as I’ve been in the business, yet those silos still remain tall and strong at many companies. Logistics, Manufacturing, Procurement, Sales and Marketing, these functional groups, for the most part, continue to operate independently from each other, each driven by their own objectives and metrics. Historically, supply chain software has mirrored this siloed an organizational structure. Transportation Management Systems, Warehouse Management Systems, Demand Planning, Labor Management, all of these software applications, for the most part, have focused on maximizing the performance of a single business process.

  • Jarrett says:

    It is safe to assume most organizations today struggle to break down the barriers of business silos. The silo mindset is an age-old problem that does not appear accidentally or by coincidence in supply chain management. Silos are more often than not the result of leadership or management teams that are driving against competing agendas. The first step to overcoming this hurdle is to get everyone across the entire company on the same page and aligned around the same Key Performance Indicators, which is easier said than done! Breakdowns can take on a variety of different looks and feels from departmental mandates, historical worst practices within teams or even technology is driven divisions within an organization. When it comes to inventory management, there are three ways to align your company to break down silos.

  • Joe Siano says:

    How many parts of your company act as independent silos? How many functions in your company conduct themselves like they are islands? One of the main problems in a functionally organized company is that those functions over time can become isolated from each other. The responsibilities, metrics, skills, strategies, and mandates for each function can cause people to put their functional focus ahead of the greater company objectives. But the Supply Chain team is uniquely positioned to bridge all of these silos and islands. Supply Chain is truly the link that can hold your company together! Whenever I have joined a new company a common refrain that I have both heard and observed is that people are not working as well as necessary across functions. Organization lines and boxes on a piece of paper become actual boundaries and barriers to teamwork and productivity in real life. The Finance team has their priorities, the Marketing team has its focus, the Operations team is doing their own thing, and Sales is off doing something else entirely. When the organization is truly dysfunctional each of these functions works at cross purposes, finger pointing as to the deficiencies of other groups, and basically undermining the ability of the overall company to succeed.

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