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From functional organizations to product-oriented organizations; a design methodology

Functional organization structures have been very common in the manufacturing industries. Manufacturing planning and control for a functional organization however, is a very complex matter and was merely done by rule of thumb (typically one week per process step per department). Monitoring the progress during this year was virtually impossible. Modern planning and control software is often thought of as a solution. Planning software usually fails to work properly if work in progress monitoring cannot be implemented to the level of an individual work order. Although functional organizations claim that they are very flexible because they are not obstructed by fixed routings, in practice they lack the means for managing product variety effectively. The demand for shorter lead-times and better quality control has driven many manufacturing organizations towards a product-oriented organization model. Developments in flexible production automation and in production planning and control demanded more integration and this too pointed in the direction of a product-oriented organization model. In this paper, a business process redesign scheme is introduced that tends to favor the design of product oriented organization structures. The key to this scheme is that it designs organization structures that have an intrinsic match between the control instruments present in the organization hierarchy and the natural control needs of the core process. The core process is the process that contains the bare minimal functions absolutely necessary to fulfil the customers needs. The design approach is illustrated with a case.