Centralization

Centralization is a form of organizational structure where the decision making capability rests with
the top management. A couple of hand-picked members are entitled to create strategies, determine
the goals and objectives based on which an organisation will function.
In a centralized organisation, the top management sets rules and procedures which are then
communicated to the lower-level employees, who are expected to carry out the same without
questioning the authority.
The advantage of such a structure is, it allows employees to have a well-defined framework within
which all work needs to carried out.
The disadvantage of such a structure is that it increases the time taken to arrive at a decision. As
decision-making authority lies with selected people from top management, it may result in biased
decision making.

Decentralization
Decentralization is another form of organizational structure that functions by delegating decision-
making capabilities to multiple teams across geographies.
In such an organization, most of the planning, strategy and decision to implement them are taken by
the people in the middle and lower level of management.
The of deceadvantage ntralization is that the employees are empowered to make their own decisions
that will benefit the organization, which results in a high level of employee satisfaction and boosts
the productivity of an organization.
Decentralization enables low-level employees to gain leadership skills, which can contribute to the
growth of the organization in the long run.
Let us look at the most crucial points of difference between centralization and decentralization in the
following

Decentralization Centralization
Definition
Decision-making capabilities delegated across Decision-making capabilities delegated across multiple levels
multiple levels
Flow of Information
Open and free Vertical
Ideal for
Decentralization is ideal for large-sized Centralization is ideal for small-sized organizations
organizations

Decision-making speed
Significantly faster Comparatively slow

People Involved
In decentralization, a higher number of people In centralization, only a few handpicked people are
from each level are involved in the decision- involved in the decision-making process
making process
 Employee Motivation
Highly motivated employee Demotivated employee

Conflict in Decision
Most likely to occur Least likely to occur

The burden gets shared among many
levels
Prone to instability due to multiple
conflicting decisions
Burden
Only one group is carrying the burden
Stability
Relatively stable as decisions are made by a central
authority sharing a common ideology

Nestle
Introduction – Challenges & Goals
Historically, Nestlé’s transport operations and carrier management have been decentralized, with
various countries and business units being responsible for tendering, contracting, and daily operations.
This has resulted in several challenges such as duplication of efforts, varying prices and service levels,
and lack of visibility. Nestlé therefore made a concerted effort to optimize transportation with real-time
visibility being a key ingredient to realizing major improvements such as decreasing cost, reducing CO2
emissions, improving service-levels, and optimizing internal operations.

Specifically, Nestlé has been aiming to:

• Reduce transportation costs across Europe

• Enhance environmental sustainability through CO2 emissions reduction

• Improve management of carrier landscape & quality of service

• Increase customer satisfaction through proactive information

Results

Sixfold enabled Nestlé to keep uncertainties under control and react quickly to volatile conditions 一
even black swan events such as the disruption caused by the COVID-19 pandemic. It is providing the
necessary foundation for Nestlé to better drive operational decisions and to achieve long-term, strategic
goals such as the more flexible and efficient use of transport capacities. Specifically, the following results
have been measured so far:
• Improved service levels and customer satisfaction

• Decrease in manual operational resources needed to identify and handle exceptional transports

• Increased stability of the supply chain (enabling Nestlé to react more flexible and resilient in times of
disruption)

• Improved supply-chain efficiency, including environmental sustainability, based on visibilit