As companies scale, they usually subdivide into multiple operating units. Whether growth has been organic or through mergers and acquisitions, prioritizing smaller-unit operations offers many advantages — from driving innovation and flexibility to enabling specialization and cultivating team culture.
One of the most significant barriers to achieving economies of scale is fragmentation. Systems, processes, resources and people are often divided by organizational boundaries. Many companies struggle to work across business units for one simple reason: a lack of visibility into what’s driving overall operational performance.
With many units using discrete systems and files, gaining insight into other business units’ ways of working can be challenging. For supply chain leaders looking to get a bird’s-eye view of company operations, the problem compounds even further. In response, some companies limit core activities like planning to annual cycles despite their business potentially benefiting from doing it more often.
Many companies have long-term plans to consolidate systems and processes across units. Yet more often than not, these plans come up short or fail. There must be a better solution to the challenge of collecting and aggregating information cross-functionally, at scale. So what’s the missing link?
The answer is simple: bring operating units together. But how does it work?
Economies Of Scale: A How-To Guide
In an ideal world, company management could quickly and proactively identify bottlenecks and business opportunities across organizations as if they were a single unit.
• Resource allocation: With balanced inventories and manufacturing resources, business units can collaborate effectively and seamlessly support one another as suppliers and customers.
• Supplier negotiation: By consolidating their logistics facilities and capabilities (from shipments to warehouses, distribution and even workforce utilization), companies improve their negotiation power with suppliers.
Against the backdrop of an ever-changing business landscape, requirements shift faster than projects are complete. In reality, large-scale operational systems are almost impossible to rip and replace. How might businesses catch up?
What’s The Alternative?
Companies can bridge the gap between business units with a system-of-systems approach. By collecting data from different systems and organizing it in a way that’s easy to understand, business users from across the organization can access and consume the data they need for optimal collaboration — whoever’s involved and regardless of its source.
What’s The Value?
Establishing a common language and framework for accessing information promotes a culture of data-driven communication and informed decision-making.
• Efficiency: Stop wasting time debating whose reports to use. Instead, focus on using data to support the goal — or solve the problem — that drives tangible business outcomes.
• Collaboration: Leverage knowledge and resources cross-functionally to reduce silos and improve collaboration across business units.
• Optimize resource allocation: With better visibility comes the ability to control and optimize resource allocation across the organization, improving economies of scale.
By eliminating sources of fragmentation and becoming data-driven, all the systems, processes, resources and people that were once disconnected can now collaborate with less effort and better insights across organizational boundaries. Best of all, this isn’t a utopian ideal. With the right planning, people and technology in place, it’s something that scaling companies can implement now.