Barriers to Internal Integration

BARRIERS TO INTERNAL INTEGRATION Organizations do not implement internal logistics integration in a v acuum. It is important to recognize obstacles, or barriers, that often serve to inhibit internal process integration. Integration barriers originate in traditional practices related to organization strttcture, measurement systems, Inventory ownership, information technology, and knowledge transfer capability. Each potential barrier is discussed below. Organization Structure The traditional organization structure for conducting business prevents any cross- functional process from being implemented. Most traditional organizations are stricture to divide authority and responsibility according to functional work. In essence, both structure and budget closely follow the work to be performed. The traditional practice is to assemble all persons related to performing specific work into a functional department such as inventory' control, warehousing operations. or transportation. Each of these organizations becomes concerned with achieving its own functional excellence. Since the goal of integration is cooperation among functional areas, the formal organizational structure can hinder s uccess. Popular terms to describe traditional functions arc the sandbox or silo nieiztalitv. In part, this managerial preoccupation with function is caused by the fact that most man- agers are rewarded for achieving functional excellence. The general belief that prevailed was that functions, excellently executed, would combine to create overall superior pei'fornanc. Successful integration of a process such as logistics requires managers to look beyond their organizational structure and facilitate cross-functional coordination. This may or may not be best accomplished by creating a new organization structure. However, regardless of whether the organization structure is realigned, significant modification of how an organization deals with cross- functional matters is essential for successful process integration. Measurement Systems Traditional measurement systems have also made cross-functional coordination difficult. Most measurement systems mirror organization structure. To successfully facilitate integration of logistics functions, a new scorecard must be developed. Managers must he encouraged to view their specific functions as pail of a process rather than as stand-alone activities. Managers may. at times, have to assume increased costs within their functional area for the sake of lower costs throughout the piocess. Unless a measurement system is cr eated that does not penalize managers, logistical integration will be more theory than practice. Inventory Ownership It is a fact that inventory can help a specific function achieve its mission. The traditional approach to inventory ownership is to maintain adequate supply to gain Comfort and protect agtdnst demand and operational uncertainty. The availability of inventory, for example. can support long manufacturer runs resulting in maximum economy of scale. Forward co mmitment of inventory to local markets can also serv e to facilitate sales. While such practices create benefits. they have a related cols The critical issue is the cost - benefit relationship and the risks related to incorrectly located or obsolete inventory. Information Technology Information tech..neology is the key resource to achieve integration. However, similar to performance measurement, information system applications tend to be designed along organization l ines. Many databases are limited to specific functions and are not easily accessed on a cross-functional basis. The need to shoe information has resulted in the development of data warehouses that exist for the sole purpose of sharing information between systems. Until schemes are developed to transfer

information, the existing applications can serve as a barrier to process integration because critical data cannot he readily shared. Knowledge Transfer Capability Knowledge is power in most business situations. An additional barrier to integration is limitation in the ability to share experience. Failure to transfer intonation or knowledge containment tends to foster the functional orientation by developing a workfare composed of specialists. The failure to transfer knowledge can also create a barrier to continued integration when an experienced employee retires or for some other reason leaves the firm. In many cases, replacement personnel are not available to . learn'' from the experienced worker. The more serious situation is a failure of many firms to develop procedures and systems for transferring cross functional knowledge. Process work often involves many employees and is not limited to any specific functional area. Transfer of this type o f knowledge and experience is difficult to standardize.