Worldwide companies are trying their best to reduce their product cost as one of the survival strategies in this fiercely competitive global environment. In this endeavor the first action companies typically take is to try to address the cost of input material and/or services, which put lots of emphasis into the activities of sourcing function of that organization. This effort has already resulted in the creation of a separate strategic sourcing function in most of the medium and large sized companies.
While creating a strategic sourcing structure, companies should design for maximum benefit. During this design phase, one should consider the company size, resources and organizational needs in mind. The various types of strategic sourcing structure that have been discussed here are:
Product based structure: Product based structures place specialized talents within their corresponding departments allowing these resources to work together toward their objective. Product based structures are appropriate models for larger organizations that produce products requiring a complex arrangement of tasks to achieve stated objectives.
Network Type Structure: Network structures are characterized by outsourcing specialized tasks to independent organizational entities to aid in product production. In this type of structure, organizations manage a part of the sourcing activities with themselves whereas taking external help to manage the remaining. The output of these external service providers is fed directly to the procurement team as well as the sourcing team; hence the entire structure looks like a network.
Matrix Structure: Matrix structures are complex structures that combine both line and functional structures to efficiently achieve a main objective. Matrix structures form teams with members of both functional departments and line departments to achieve a particular task by harnessing a variety of talents and/or compensating for a lack of talent. Matrix structure is probably the best way to maximize the utilization of all potential in-house resources.
Virtual Structure: Virtual organizational structures are "borderless" by design and usually maintain a small staff (skeleton crew) while outsourcing the majority of tasks to independent specialists, volunteers or both. Here there is no permanent strategic sourcing structure and depending upon the assignment/category, a strategic sourcing team is constituted with members within the organization and once the assignment is over, the team is wound up.
Hybrid Structure: A hybrid structure adopts parts of both functional and divisional structures. The basis of divisional sourcing structure could be product, market or geography - depending upon the priority of the organization and the same can be linked with the function. This structure suits the needs of large sized organization having presence in multiple geographies.
Function based Structure: This sourcing structure is based on the Function type. Depending upon the different offerings, multiple sections (cutting across the geographies) are created which are responsible for their own strategic sourcing activities. Each category team works as an autonomous body having their own head, responsible for taking any decision pertaining to that category.
In the referenced whitepaper, the above hypothesis have been examined by showcasing a set of commonly implemented strategic sourcing organization structures and also some of the factors that most commonly influence redesigning strategic organization structure. Examples from best in class companies along with the main advantage / disadvantage have also been mentioned here to enable you think which one suits you the most?