Centralization vs. Decentralization in Warehouse and Returns Management

Term Paper : Centralization Vs. Decentralization in warehouse and returns management By Kyongnim Chea August 02, 2011 1. Introduction In this paper, centralization and decentralization in warehouse and returns management is investigated. An important characteristic of the centralized return centers is adapted to methodology via web-based access and electronic data interchange (EDI) for returns management to solve the problems. The interdependences between warehousing and returns department is considered for core components in a flexible and systematic manner.

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This paper is going to question on a key issue relative to managing warehouses and inventories at the companies. Do the company let warehousing and returns department manage their own warehouses or inventories or transfer credits to customers’ accounts, or do it create restocking the returned parts or products centrally for warehouse with only a minimum of input from the separate distribution centers? Prior to answer those question, several other issues will be discussed such as what is the optimal degree of centralization within a firm or what is the optimal degree of decentralization within a firm?

To what extent should lower-level managers be given the authority to make a decision independently of higher-level management? In the case of returns and credits department, those questions take the form of how much discretion corporate headquarters should give to the managers. Should a tightly controlled set of operating procedures be mandated, or should warehouse and returns department managers be given considerable discretion with respect to operating their warehouses and returns department?

How do they influence the relative performance of different organizational structures? The objective of this paper is to provide some insight into those questions. This paper exams which organizational structure and management system can be formed in running warehouses and returns department even though little is known and found about how exactly organizational structure influences the performance of warehouses and returns department in the companies and which one fits most. The rate of improvement might be achieved through innovation and new organizational strategies.

However, innovation and new organization strategies have a potential risk against the existed managers who refuse to accept changes. For example, in the case of Crown Point Cabinetry, some managers left the company when new management system, team-based management, was adopted (Anthony & Govindarajan, 2006, p. 556). To reduce such negative effect when generating innovation and new organizational structure, each of departments related to this business process management should be communicated and share information.

Warehouse control system and centralized returns system provide significant benefits to companies from various sources such as simplified procedures, reduced costs, and improved management information, etc. 2. Decentralization Versus Centralization in Warehouse & Returns Department Advantages & Disadvantages of decentralized management of Warehouse & Returns Department : Under decentralized management, advantages and disadvantages are as follows ; Advantages : ¦ Numerous individuals throughout the organization have an input on personal decisions. Accurate information to analyze appropriately ¦ Team-based performance and cross-functional teams ¦ No exact instructions needed ¦ Dispersing decision-making governance to the people ¦ It relies on lateral relationship and less on command and force. ¦ Interfaces between parts of a system ¦ Employees feel more comfortable that they are in control of their own decision making. Disadvantages : ¦ Confusion, especially if one of team member is absent. ¦ “Fragmented” : It is not easy to consolidate each of division. ¦ Lack of uniformity or consistency Unclear evaluation system when taking responsibility. Advantages & Disadvantages of centralized management of Warehouse & Returns Department : Beneficially, centralized management of warehouse consolidates and provides a single interface point between each department. Centralized management is applicable to a long-term plan and it is easy to control when people in organizations have the same objectives. Other advantages are as follows ; ¦ The ideas that come from the people who are professionals and have unique strategies. ¦ Responsibility is easily placed. ¦ All related data kept together Uniform service provided to all users. Disadvantages ; ¦ It may require investment in efficient equipments or automation and high technologies. ¦ Information given is unrealistic for adequate services. ¦ It takes times to be responsive against incidents. 5. Recommendations Any size of any company cannot be fully centralized or decentralized. I personally favor decentralization. However, the recognition of local control and personal engagement of decentralization must be blended with centralized services that are often more efficient, cost effective, and liberating.

As seen the case above, high technology system allows companies to centralize information and data to perform an adequate activities regarding a quality of services while decentralization strengthens the ideas of performances and operations maximizing individuals’ ability. Warehouse where both centralization and decentralization is adapted has been successful resulting in accuracy, a high quality of performance, and real-time base information available. Applying communication management to returns department and building trust in a relationship is essentially needed in order to change the unreasonable and ineffective policies.

Under decentralized system that is becoming more popular, based on “Great power comes great responsibility”, organizations are allowed to take advantage of division of labor by sharing decision-making across the organization while the managers and employees improve their performance by being able to act immediately having discretion on problems. However, the limited authority given to the manager levels loosens the responsibility of their performance that takes place, which reduces the pressures on the results of performance.

Conclusively, both centralization and decentralization are necessary for organization, but more favorable in decentralization. I personally feel that efficiency, effectiveness, and profitability should come with caring for the individuals who will accomplish goals and objectives on behalf of organization and communities. Sources Brennen, A. M. (2002). Centralization versus decentralization. From http://www. soencouragement. org/centralizationvsdecentralization. htm (Anthony & Govindarajan, 2006, p. 556 ———————–

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