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The effect of silo mentality on supply base information sharing

Burger, Jelle and Pot, Thomas (2011) The effect of silo mentality on supply base information sharing.

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Abstract:Introduction Over the last few years, Capgemini Consulting identified capabilities of software solutions that support procurement business processes by conducting several studies. These software solutions focused much on ‘traditional’ purchasing processes, e.g. sourcing and contract management. These type of solutions are called Supplier Relationship Management (SRM) solutions. However, the market for these type of solutions has matured; many companies have adopted and are currently using these kind of software solutions. Nowadays, multinationals have suppliers all around the world. Along with this global network of suppliers come new business developments, stated as ‘mega trends’ in this report (Caps research, 2007). The word ‘trends’ is used, as all organizations in the business will eventually encounter or will be influenced by the trends. Product life cycles become shorter and shorter, innovation occurs more rapidly and production is done globally, are some examples of these trends. They do not only exercise pressure on the relation between suppliers and buyers; it involves all functions within a company. Often, many different departments and functions of a company interact with suppliers. It is not only the purchasing function which regulates the relationships with these suppliers. All these departments and functions require (a certain need) information about the suppliers. This information consist of data concerning the supply base, managed in supply base management (SBM). The sharing of information to and over the supply base, is the focus of this research. Research Model This research tries to indentify and determine the influence of other organizational functions on the purchasing function in the context of supply base information management. The main and underlying assumption of this research, is that a silo mentality or silo organization may be the cause that organizations cannot cope well with the mega trends. With silo mentality is meant that every function or department of an organization has its own way of collecting, developing, sharing and exchanging information with the supply base in this case. Using academic literature, an ideal situation for all different functions in an organization is sketched; this forms a reference model in this research. Using an empirical study, information on how organizations are performing and organizing their supply base management is gathered. For this empirical study, managers of eight different large manufacturing organizations are interviewed. By comparing the reference model and the findings from the empirical study, an analysis is made and conclusions are drawn. Findings Most information about suppliers is documented within the information systems of the companies which participated in this research. In most cases, the organizations knew what (kind of) information is documented and for what purpose (giving feedback to supplier and regulating orders for example). However, this information is not easily accessible for higher level management, including the purchasing function, because this information is being documented at operational level. Therefore, strategic decision making concerning supply base management is difficult. It seems that the effects of silo mentality are prevalent in the organizations, but it is not that the different departments and/or functions work solely or on their own. Many interviewed managers acknowledge that because of choices in the past, different departments and functions have developed their own best of breed systems or solutions. So there is no silo mentality but silo organization. Which reveals itself in the form of a restriction in work activities due to the use of (different) information systems. Generally, systems are not integrated, linked or working together, whereby the exchange of information often needs to be done manually. Discussion and further research The goal of this research is to contribute to the development of collecting, developing, sharing and exchanging information between the different business functions that interact with the supply base, so that it is useful for all these different parties. Due to the complexity of organizations and their supply base management function, this research is only a small part of a possible solution; to be able to advice companies how to organize information exchange in relation to supply base management. What could be the best solution for managing a company’s supply base, depends on many factors. The level of integration between different IT systems, the business itself, and e.g. organization culture all influence the companies way of sharing information with its supply base. When these aspects are studied more specifically and in a larger study group, their impact on firms performance could be more significantly tested. The other point from the discussion is that no matter what happens with the megatrends, it is to the customer to decide whether companies will be punished for not keeping up with them. The company that is able to make from the challenges, the megatrends are causing, his new strengths will be the next riser in the fortune 500. And to tackle those challenges, the purchasing function will play a very significant role in the future.
Item Type:Essay (Bachelor)
Capgemini Corporation
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration BSc (50645)
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