"I didn't even KNOW about it!"

How common is this? The bad news, readers tell Purchasing, is this is more common than it should be (in fact, one time is too many). The good news is that it's a problem many companies are addressing by changing their corporate structure or organizational charts to foster collaboration where necessary and put more controls and responsibilities in place where needed.

The most prominent org chart trend has been the emergence of a C-level supply chain officer. At the same time, logistics titles are moving up the chain, following their procurement and supply chain brethren. While it's not exactly a new trend, it is one that is winning supporters and opponents.

Raj Penkar, vice president of UPS Supply Chain Solutions, says "supply chain now is treated as a functional expertise. Many companies we work with have a chief logistics officer at the corporate level and a counterpart at the business unit level. And the business unit logistics people often report to the operations people at the business unit with a 'dotted line' reporting function to the corporate logistics group."

Randy Strang, vice president of UPS SCS, agrees more companies are centralizing their supply chain function and organization with logistics and procurement both key members of the cross-functional team.

"For example, in the consumer goods industry, you do see more movement to a centralized supply chain where they combine critical mass to gain leverage," Strang says. "Even retailers are starting to look more at total landed cost and the fastest pathway to market, rather than lowest cost."

Penkar points out that in the era of global sourcing, "the landed cost view is what's really becoming most important to many companies. You could have a logistics organization that is purely focused on driving down transportation costs without visibility into the overall vision and cost factors." Driving down those transportation costs may mean increasing inventory costs and creating more overall cost, he says. "So," he adds, "the transportation metrics need to match the overall goals of the business and someone has to be the referee."

Another trend that is driving many companies to draw some dotted lines on the org chart is the cost of logistics in the current market. As more companies begin taking control of their logistics processes and contracts with the goal of consolidating, optimizing and cost-reduction, there's a natural collaboration between logistics and procurement that needs to be helped along with a dotted line or two.

Eastman Kodak is certainly no stranger to change. The Rochester, N.Y. giant has been a household name for decades. In the era of global sourcing, the company is trying to manage freight costs by placing logistics specialists within the procurement organization. It's not a purchasing specialist collaborating with the logistics organization, but a team of logistics specialists spearheading the sourcing of logistics services.

Leo Nussenbaum is the global logistics sourcing manager in Kodak's worldwide purchasing organization and is the senior member of the six-person logistics sourcing team.

In a sense, Nussenbaum says, logistics is his internal customer—especially on bidding projects—where his team needs to establish the customers' needs and goals and work to achieve them.

" The longer transit times and leadtimes of global sourcing means more inventory costs as well as fuel costs. So we're constantly reviewing different options in different regions."

“Purchasing is not located in the ‘golden tower’ with logistics back in the warehouse. We’re both together.”  —Leo Nussenbaum, logistics sourcing manager, Kodak

Clearly, companies are reshuffling their org charts and shifting logistics' place on those org carts to better meet the business needs. One recent example is American Pad and Paper (AMPAD), a Richardson, Texas-based office products supplier.

Last fall, AMPAD's incoming CEO implemented a two-pronged organization: a group of customer-focused "value teams" that work on establishing customer needs; and a group of more internally focused functional centers of excellence in supply chain, as well as finance, marketing, IT and human resources. The commercial value teams are cross-functional teams comprised of sales and marketing, supply chain and manufacturing, and functional centers.

"If you want to drive the supply chain forward, you need the right structure," says Brad Roach, vice president of supply chain at AMPAD. "This new structure is meant to start with what the customer needs and move backwards.."

One of the major changes that came as a result of the restructuring was an overhaul of the metrics tracked by the logistics organization. Echoing Penkar's earlier point, Roach says AMPAD's metrics were internally focused and in some cases were a direct mismatch with customer needs. "We had metrics that drove processes away from customer needs," he says. "If you only focus internally, you may miss the customer issues. We aligned our people differently so we can better measure ourselves in the eyes of the customer."

For his part, Roach feels having procurement and logistics report to the same person is a winning structure. In the past, the company's sourcing and logistics were separate but both report up to Roach under the new structure.

A clear example of this came when AMPAD decided to consolidate its third-party logistics service providers. When Roach took his current post the company was using one 3PL for its warehousing and another for its transportation management function. The complexity of using two providers slowed order cycle times and caused a lot of finger pointing. Roach headed up a cross-functional team with representatives from procurement, logistics and finance that laid out and evaluated multiple scenarios emphasizing the total cost, rather than rates on individual contracts.

After a full RFP process, AMPAD consolidated both functions with a single 3PL, Ozburn-Hessey Logistics of Brentwood, Tenn.

"We wanted to maintain control of the carrier contracts and we've done that using Ozburn-Hessey as a true third party to manage the processes and drive value and productivity while we maintain leverage with direct carrier relationships."