As organizations seek to optimize their supply chain operations across the continent, whether or not to favour aย centralized or decentralized approach has become a common question.
Many organizations and supply chain managers want to know which is the best fit for them and how they can go about it.
Before we go into that, we will take a brief overview of the two concepts, define them and explore their pros and cons.
What is a Centralized Supply Chain?
A centralized supply chain operation consolidates the key aspects of the supply chain, such as procurement, planning, and production, into one unit. You may call it the control unit.
The idea is to have a top-down approach to the operation. And the approach is usually taken when supply chains are looking to save money or consolidate resources.
Pros of a Centralized Supply Chain
These are the advantages of using a centralized supply chain in your business or organization.
๐ฅ๐ฒ๐ฑ๐๐ฐ๐ฒ๐ฑ ๐ข๐ฝ๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป๐ฎ๐น ๐๐ผ๐๐: Centralization can help supply chains reduce operational costs by consolidating everything into one system. This allows them to tweak and nitpick as necessary to cut down unnecessary costs.
๐ฆ๐๐ฎ๐ป๐ฑ๐ฎ๐ฟ๐ฑ๐ถ๐๐ฎ๐๐ถ๐ผ๐ป: With centralization, there aren’t a lot of ideas swinging around, no offence to the system. This leads to standardization of the processes and products, which in turn simplifies and improves quality.ย
๐ฆ๐๐ฟ๐ฒ๐ฎ๐บ๐น๐ถ๐ป๐ฒ๐ฑ ๐ฃ๐ฟ๐ผ๐ฐ๐ฒ๐๐๐ฒ๐: In a Centralized supply chain, it is easy to monitor and tailor the supply chain process to the ideal fit. This makes it easier to integrate new people, processes or tech solutions.
Cons of a Centralized Supply Chain
Here, we explore some things that go wrong when using a centralized supply chain.
๐ฅ๐ฒ๐ฑ๐๐ฐ๐ฒ๐ฑ ๐ฅ๐ฒ๐๐ฝ๐ผ๐ป๐๐ถ๐๐ฒ๐ป๐ฒ๐๐: Because everything has to go through one central system, in many cases, centralized supply chains can be less responsive to local or regional market demands, potentially leading to customer dissatisfaction.
๐ฅ๐ถ๐๐ธ ๐๐ผ๐ป๐ฐ๐ฒ๐ป๐๐ฟ๐ฎ๐๐ถ๐ผ๐ป: In a centralized supply chain, the key operations are concentrated in one point. This also makes the supply chain more prone to risk.ย When there is a disruption in one part of the supply chain, it brings all the others to stand still because they are all interconnected.
๐๐ผ๐บ๐บ๐๐ป๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป ๐๐ต๐ฎ๐น๐น๐ฒ๐ป๐ด๐ฒ๐: With the centralized supply chain, managing and decimating information gets tricky, especially when operations span a wide geographical area.ย When information is not properly managed, it leads to inefficiencies and problems for the supply chain.
What is a Decentralized Supply Chain?
Decentralized supply chain operations spread the core functions and decision-making across multiple points. There is no one single unit that controls the entire supply chain.
With this approach, the supply chains prioritize local responsiveness and market adaptation instead of cost and resource consolidation.
Pros of a Decentralized Supply Chain?
Here, we explore some benefits of favouring a decentralized supply chain.
๐ค๐๐ถ๐ฐ๐ธ ๐ฅ๐ฒ๐๐ฝ๐ผ๐ป๐๐ถ๐๐ฒ๐ป๐ฒ๐๐: With decentralization, supply chains are empowered for faster response to market demands. This also helps lead to more customer satisfaction.
๐ฅ๐ฒ๐ฑ๐๐ฐ๐ฒ๐ฑ ๐ฅ๐ถ๐๐ธ: Distributing the functions and decision-making across the supply allows the risks to spread across multiple locations.ย It can help isolate the impact of supply chain disruptions in one area, enhancing resilience.
๐๐น๐ฒ๐ ๐ถ๐ฏ๐ถ๐น๐ถ๐๐: Decentralization enables businesses to adapt to regional or seasonal variations in demand and supply, offering more flexibility in operations.
Cons of a Decentralized Supply Chain
These are adverse effects of using a decentralized supply chain.
๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ ๐ข๐ฝ๐ฒ๐ฟ๐ฎ๐๐ถ๐ป๐ด ๐๐ ๐ฝ๐ฒ๐ป๐๐ฒ๐: Higher operating costs are associated with the decentralized model because of resource duplication, various facilities, and dispersed operations.
๐๐ผ๐บ๐ฝ๐น๐ฒ๐ ๐๐ป๐๐ฒ๐ป๐๐ผ๐ฟ๐ ๐๐ผ๐ป๐๐ฟ๐ผ๐น: It can be more difficult to manage inventory across several sites, which could result in problems like stockouts or overstocking.
๐ค๐๐ฎ๐น๐ถ๐๐ ๐๐ผ๐ป๐๐ฟ๐ผ๐นย ๐๐ต๐ฎ๐น๐น๐ฒ๐ป๐ด๐ฒ๐: It can be difficult to maintain constant product quality across several locations because standards may differ.
Which of them Should Your Supply Chain Operations in Africa Adopt?
Finding the right fit for your supply chain, whether it is a centralized or decentralized approach, depends on many factors, including the nature of the supply chain, the industry, the location, and the type of product, among others.
There is no better option between the two, it all depends on what you want to achieve. In many cases,it can boil down to preference.
How you adopt them is what defines the success of your supply chain. There are instances of similar supply chains across Africa adopting each of them, and yet they enjoy the same level of success.
The two types of supply chain operations are dependent on the resources and limitations available to your organization. Whether or not you will get success from them depends on how well you channel these resources.
In Africa, there are limitations, such as poor infrastructure and political instability, that may also impact your choice.
Obinabo Tochukwu Tabansi is a supply chain digital writer (Content writer & Ghostwriter) helping professionals and business owners across Africa learn from real-world supply chain wins and setbacks and apply proven strategies to their own operations. He also crafts social content for logistics and supply chain companies, turning their solutions and insights into engaging posts that drive visibility and trust.
