What is a significant drawback of a decentralized supply chain?

What is a significant drawback of a decentralized supply chain?

• A. Streamlined operations
• B. Potential inefficiencies and increased costs due to duplicated efforts
• C. Greater adaptability to market demands
• D. Improved supplier relations

Answer: (B)

A decentralized supply chain structure often leads to potential inefficiencies and increased costs primarily because different departments or locations may end up duplicating efforts. Each division or unit may handle its own procurement, inventory management, and logistics independently, which can result in overlapping functions and inconsistent processes. This lack of uniformity can drive up operational costs as well, since each unit may negotiate its own contracts with suppliers or maintain separate systems for tracking inventory. Moreover, when various units operate without a central coordination, there can be inefficiencies related to communication and resource allocation, making it harder to achieve economies of scale. For example, bulk purchasing opportunities may be missed, leading to higher per-unit costs for materials and products. Ultimately, while decentralization can offer flexibility and responsiveness to local market conditions, it can also hinder overall operational efficiency and elevate costs across the supply chain.

A decentralized supply chain structure often leads to potential inefficiencies and increased costs primarily because different departments or locations may end up duplicating efforts. Each division or unit may handle its own procurement, inventory management, and logistics independently, which can result in overlapping functions and inconsistent processes. This lack of uniformity can drive up operational costs as well, since each unit may negotiate its own contracts with suppliers or maintain separate systems for tracking inventory.

Moreover, when various units operate without a central coordination, there can be inefficiencies related to communication and resource allocation, making it harder to achieve economies of scale. For example, bulk purchasing opportunities may be missed, leading to higher per-unit costs for materials and products. Ultimately, while decentralization can offer flexibility and responsiveness to local market conditions, it can also hinder overall operational efficiency and elevate costs across the supply chain.