THE ORGANISATIONAL DESIGN OF PLANNING AND CONTROL:

THEORY AND PRACTICE

Keywords:
case studies, production system, organisational design

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Dr. Jan de Vries
Department of Operations Management

Faculty of Management and Organisation

University of Groningen
P.O. Box 800, 9700 AV Groningen
The Netherlands
Tel: +31 50 363 7020
E-mail: J.de.Vries@bdk.rug.nl

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The organisational design of planning and control: theory and practice

Abstract:
Within companies it is widely recognised nowadays that the performance of
production systems is not only determined by the way the production system is
controlled but also by its organisational design. Many organisations therefore try to
improve their performance by simultaneously implementing advanced planning and
control systems and utilising organisational measures. Notwithstanding its
importance, the field of production and operations management still lacks however, a
comprehensive body of knowledge integrating both control and organisational aspects
of production systems. One of the reasons for this shortcoming seems to be a lack of
understanding how planning and control systems interact with their organisational
embedding. In this article, this interdependence is further explored. Firstly, a
conceptual framework is presented. According to the framework, four important
groups of characteristics are of importance when trying to understand the
interrelationship between planning systems and their organisational design. These
groups of characteristics relate to the transformation system involved, the planning
and control system, the superstructure of the planning system and the structure of
positions. The framework has also been the foundation for five case studies
performed during the last years. One of the main conclusions derived from the case
studies is that organisations often try to neutralise shortcomings in the planning and

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control system by applying organisational measures. In addition to this positive
congruence, negative forms of congruence were also found. Shortcomings in the
planning and control system are then negatively re-enforced by the organisational
setting of the planning and control system. The findings of the case studies also
suggest that companies often do not apply a clear and well-defined policy regarding
the organisational setting of advanced planning and control systems. We end this
paper by arguing that objectified notions on (re)designing planning and control
systems and its organisational design often under-emphasise irrational behaviour of
the parties involved. A further elaboration of the framework presented in this article
integrating operations management concepts and organisational theory therefore
seems to be worthwhile.

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The organisational design of planning and control: theory and practice

1. Introduction

Due to increasing competition, expanding foreign markets, high-speed

technology innovations and the availability of dedicated information systems many
organisations have introduced 'new' production concepts during the last decades. One
can think for instance of manufacturing resource planning, business process
reengineering, lean production, just in time production, enterprise resource planning
and more recently supply chain management. It is not surprising, therefore, that in the
late 20th century, the body of knowledge of production and operations management
has rapidly expanded. It can be concluded that the field of Operations Management
has evolved from a rather narrow defined production and industrial engineering
discipline to a discipline including a broad array of management issues like
manufacturing strategy, innovation management and service management.
Notwithstanding our increasing understanding of the design and performance of
production systems some gaps and holes in the theoretical foundations of the
production and operations management field, still exist yet. As an example, we can
take a closer look at the organisational setting of production systems. Nowadays, we
often come across theories on self-regulation, decentralisation, autonomous groups
and unit management. Many of the theories regarding the organisational design of
production systems are still based however on either a behavioural way of thinking or
on a more traditional operations management school of thought. It is only recently

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that authors have stressed the necessity for a greater coherence and integration
between the different management disciplines dealing with organisational issues of
the production system (e.g. Lovejoy, 1998; Miller and Arnold, 1998).
In practice there appears to be an ongoing struggle how to organise production
systems properly as well. When trying to solve interface problems between
Production and Sales for example, the introduction of a materials manager is for
many years considered as an sufficient organisational measure. Although the
introduction of a materials manager seems to be useful in many situations, it is
indicated by research that the establishment of this function often results in new
domain-conflicts and co-ordination problems (Bowersox and Daugherty, 1987;
Sutton, 1990; Murphy and Poist, 1998). Another example of an important
organisational issue in the field of operations management illustrating the importance
of the organisational design question of the production system, is the ongoing debate
about the benefits of semi-autonomous work groups. Many critics have focused on
the negative aspects of semi-autonomous groups and have questioned the usefulness
of implementing autonomous groups in some production environments. At the same
time many organisations all over the world have adopted semi-autonomous groups
and have reported major contributions to improved efficiency and competitiveness
(Cole, 1989; Rubenowitz, 1992; Van der Meer and Gudim, 1996; Thompson and
Wallace, 1996)
The above-mentioned notions have been the starting point for an empirical
research aimed to explore the interdependence between the planning and control
structure and its organisational design. Within companies it is widely recognised
nowadays that the performance of the production system is not only determined by
the way, the production system is controlled but also by the organisational design of
the planning system. Many organisations therefore try to improve their performance
by simultaneously implementing advanced planning and control systems and taking
organisational measures with respect to the planning system. Despite its importance,
the field of production and operations management still lacks however a
comprehensive body of knowledge in which both control and organisational aspects
of the production system are integrated. One of the reasons for this shortcoming
seems to be a lack of empirical data on how the planning and control system and its
organisational design interact with each other. Planning and control systems as well
as their organisational embedding apparently seem to be closely related to each other

6
in practice. The question nevertheless is how this interdependence looks like. One can
ask for instance whether the characteristics of the planning and control system need to
be reflected in its organisational design. In addition to this, the question arises if some
specific design rationale is applied in practice. In this context one can speculate on
the sequence of the succeeding steps when the planning and control system and its
organisational context are to be (re)designed. It is furthermore surprisingly that also
little is known about the underlying principles used in practice regarding the
organisational embedding of planning and control systems. There are some
indications for instance that organisational design strategies regarding planning and
control systems can only to a certain extent be explained by current theoretical
frameworks and that only some best practice exists (Draaijer and Boer, 1995).
Clearly, it is not possible to deal with all these questions in this article
extensively. Our focus therefore will be on two issues. Firstly, a conceptual
framework is developed. The framework provides a structure to describe and
systematise the interdependence between the planning and control of production
systems and the organisational setting of planning systems. Secondly, the overall
results of five (longitudinal) case studies are presented and analysed by means of the
framework. By doing this, we hope to establish a more profound understanding of the
organisational context of planning and control systems; both from a theoretical as
well as from an empirical point of view.
The article is structured as follows. In the next section, first some theoretical
backgrounds of our research are presented. Subsequently, an analytical framework is
developed leading to a set of key-dimensions related to the interdependence between
planning and control, and its organisational design. Section four goes into some
methodological details of the performed case studies. The last section of this article
elaborates some of the major findings of the case studies. One conclusion derived
from the case studies is that the interaction and interrelationship between production
control and the organisational design of production planning can vary from positive
re-enforcement to negative re-enforcement. This conclusion and its implication is
more underpinned and discussed in the last section.

2. Theoretical backgrounds

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 Although the field of production and operations management and behavioural
oriented disciplines show some overlap with respect to the issue of planning and
control, a number of important dissimilarities between these two disciplines can be
distinguished. In literature it is extensively argued that social science oriented
disciplines seem to be less technique and method-oriented, more concentrated on
some key features of the production system (e.g. standardisation, uncertainty, co-
ordination) and more heavily focused on behavioural aspects of the production
system. At the same time the production and operations management discipline is
often characterised as a design and technological oriented discipline concentrating on
the unique characteristics of single production systems and dominated by planning
and control issues (e.g. Meredith et al., 1989; Schmenner and Swink, 1998; Van der
Zwaan and de Vries, 2000; Meredith, 2001). The differences between both fields are
also reflected in the competing paradigms for scientific research. The field of
operations management seems to be more a mix of quantitative and qualitative
research consisting of both positivists and interpretivists and of both theory builders
and problem solvers than behavioural disciplines (Meredith, 2001). The current status
of the operations management discipline therefore appears to be more ambiguous and
to a certain extent even more confusing than social science based disciplines.
Starting from the multiple competing paradigms it is not surprising that many
of the concepts and frameworks concerning the control of production systems do
represent to some extent a partial approach. In the field of production and operations
management the main focus is for instance often on trying to achieve a fit between
the characteristics of the production and distribution system, and the control system to
be used (Ruffini et al., 2000). Or stated in another way: in the production and
operations management paradigm production and technological characteristics are
often considered as the two dominant factors that influence the design of the control
system. In more social science based disciplines at the other hand, specific and unique
characteristics of the production and distribution system are often simplified to
aggregated and isolated variables. Issues like the influence of customer orders, the
existence of multiple product/market combinations and the complexity of trade-off
decisions in many cases are even neglected. From a scientific point of view one of the
main challenges therefore seems to be to develop a framework from which questions
regarding both the planning and control of the production and distribution system as
well as the organisational embedding of this control can be described and analysed in

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coherence. Ideally, this framework is also the basis for an integrated design
methodology with respect to controlling and organising production and distribution
systems.
In trying to achieve a better understanding of production and distribution
systems as a whole, we performed several (longitudinal) case studies during the last
decade. In these case studies, we focused on the interdependence between the control
of the production and distribution system and the organisational setting of this
control. Before studying the companies, an explorative framework was developed
based on the assumption that a close and complex interaction exists between the
planning and control of production and distribution systems and the organisational
setting of the planning system. The theoretical background for this assumption can be
found in many different managerial disciplines. From the open system approach we
know for instance that the control structure of the organisation will usually be
designed in such a way that departmental boundaries follow the lines of technological
near-decomposability (Bertrand et al., 1990). At the same time, many studies have
uncovered a set of so called contingency factors that influence the organisation design
of the technical system (e.g. Woodward, 1965; Khandwalla, 1977; Child 1972;
Rogers, 1983; Clark and Stauton, 1989). As we will see, elements of our framework
are based on this contingency way of thinking.
In the next section, an explorative framework is presented which was used to
identify the mechanisms behind the interaction and interrelationship behind the
transformation system, the planning and control system being applied, and its
organisational design. From this, the results of the case studies are discussed in the
remainder of this article.

3. Structuring production control and its organisational design

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 To examine the relationship between the planning and control of production
systems and the organisational setting of this control more closely, an explorative
conceptual model was developed. Figure 1 shows the conceptualised interdependence
among the transformation system, the planning and control structure, the
superstructure, and the structure of positions. The main idea behind this model is that

Situational characteristics

Transformation
Situational characteristics
system
-technological characteristics
-variety of products
-resource interdependence
-flexibility Organisational setting
Performance of
the production
Superstructure Structure of positions and distribution
-relative position
-lines of authority system
-allocation of responsibilities
-concentration degree -communications mechanisms
-grouping criteria -foralisation of behaviour
-specialisation
-requirements and skills

Planning and control

system
-planning levels
-degree of formalisation
-control rationale
-degree of uncertainty
-possibilities of decomposition

Situational characteristics

Figure 1 Schematic representation of the conceptual model

by means of describing these dimensions as well as their interaction, one can gain a
better understanding of the complex and messy phenomenon of production planning
and its organisational setting. One important research proposition in our study was
that in practice different patterns exist with respect to the interdependence between
the planning and control structure, the superstructure of the transformation system
and the structure of positions. We will now first explore these dimensions in more
detail. In the succeeding sections, the model will be illustrated by means of five case
studies.

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The transformation system
In our conceptual model, the transformation system is related to the entire
material flow from supplier to customer including both the supply of raw material, the
manufacturing of parts and products, warehouse activities and the distribution of
products to customers. The transformation system in other words refers to the way
organisations produce goods and to the way goods and materials are distributed from
supplier to the manufacturer and from manufacturer to the customers. So, in our
terminology the term transformation system refers to both inbound as well as
outbound activities. Sometimes this broad definition of transformation system is
referred to as the logistical system. The term ‘logistics’ however, is often very
confusing. In many cases the American definition of logistics is limited to
warehousing, inventory management, and transportation activities while in Europe,
logistics also covers the area of operations.
Within the field of production and operations management, a huge amount of
characterisations and typologies exist with respect to the production and distribution
system of the organisation (e.g. Woodward, 1965; Hayes and Wheelwright, 1979;
Hill, 1991; Slack et al., 1998). Although many of these typologies differ in terms of
the goal of the typology and in the way variables are operationalised, the underlying
dimensions are often similar. In general terms, the production and distribution system
can be described by characterising the products and services, the characteristics of the
operations network, the layout and flow of materials, and the process technology
used. Each of these four dimensions in itself can be operationalised by additional
characteristics. Figure 1 gives an overview of the main characteristics used in our
empirical study to describe the transformation system of the companies examined. A
wide range of both production and operations management studies and contingency
theories of organisations were applied to operationalise these characteristics. As a
result, many of the characteristics as depicted in figure 1 can be found in literature
and are generally considered as important determinants for the performance of
production and distribution system.

The planning and control system

Within the area of production and operations management, the issue of
designing a proper planning and control framework for the production and
distribution system is strongly emphasised (Bertrand et al., 1990). A control

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framework can be considered as an overall and to some extent generic model, which
includes the trade-offs between the leading decisions regarding the production- and
distribution system of the organisation. In general, the production and logistical
control system of the organisation reflects the way customer orders are accepted, how
production and procurement orders are placed, and the way production and
distribution capacity available is used (e.g. Bowersox et al., 1986). From a
production and operations management standpoint, the control framework is a leading
factor for the methods and techniques, the planning procedures and the information
system to be used in a specific situation. It is therefore not surprising that within
production and operations management literature the necessity for an adequate
control framework is strongly emphasised and that many attempts have been made to
develop generic frameworks for production control. An example of a generic
framework for the control of production systems is presented in Bertrand et al. (1990)
which is founded on the general system-approach as well as on the MRP-II concept.
On a more abstract level, the control system also reflects how co-ordination between
all these decisions is achieved and identifies the main trade-offs with respect to the
production and distribution system.
Clearly, in many organisations the overall control of the production and
distribution system can be quite complex. A large number of variables, complex
interrelationships and the uncertain outcome of decisions make it in many cases
impossible to deal with the control problem as a whole. To avoid this complexity,
often a hierarchical control structure is used in which the overall control problem is
decomposed into several sub problems (e.g. Burbidge, 1971; Bertrand et al., 1990).
From a systems theory point of view, three control levels can be distinguished with
respect to the production and distribution system (e.g. Mesarovic et al., 1970).
Strategic control focuses on the formulation of a framework of objectives. In this
framework, trade-offs between different objectives are made explicit. Besides this, on
the strategic decision-making level the context is set in which the production and
distribution of products and material take place. The ‘output’ of the strategic control
level focuses on constraining the lower control levels, which consists of the adaptive
and operational control. At the adaptive control level, the transformation of general
objectives with respect to the production and distribution system into operational
performance criteria takes place. Finally, the operational control level contains the

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concrete (operational) control of the production and distribution system. Figure 2
summarises these control levels in general terms.
In exploring the planning and control system of the organisations, our focus
was not only on the decisions being made with respect to the production and

Planning and control system

Strategic control

objectives

Adaptive control

performance
criteria

Operational control

Production and
Distribution system

Goods and materials flow

Figure 2 Planning and Control system

distribution system but even more on the fundamental concept and rationale
underlying the planning and control system. Examples of questions we have been
asking ourselves are: how is the company involved trying to reduce control
complexity, what are the key-drivers for implementing advanced information-
oriented planning systems, and what is the underlying rationale behind trade-off
decisions to be made with respect to the allocation of resources.

The superstructure of the transformation system

The issue of the organisational setting of the planning and control of the
production and distribution system can be separated into two analytical closely
related dimensions. First, there is the question of the superstructure. The
superstructure focuses on the functions and activities to be distinguished in relation to
the production and distribution system and on the way control activities are arranged

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in organisational units and departments. In organisational literature this issue is
described as the design of the superstructure, also called the organic structure of the
organisation (Mintzberg, 1979). In general, the superstructure can be operationalised
by means of three parameters. The concentration degree defines to what extent the
various planning and control activities are grouped into a single organisational unit or
department or to what extent they are arranged within different organisational units.
The relative position of the planning and control activities is the 'position' of these
groups of activities in the organisation structure. On the one hand, planning and
control activities can be allocated ‘high’ in the superstructure of the organisation. On
the other hand, control activities often are allocated as much as possible to the
‘bottom’ of the organisation near the work processes themselves. As will be
illustrated in the case studies, the relative position is often some mixed and hybrid
form. Finally, the grouping criterion defines the basis on which the planning and
control activities regarding the production and distribution are grouped into units or
departments. From organisational literature, we know that different grouping criteria
can exist. Planning activities for instance can be grouped based on product
characteristics, market segments, or the underlying production system. Combined, the
above-mentioned parameters characterise the superstructure.
Apparently, superstructures can differ immensely and various factors will play
a role in the choice of the superstructure. From literature we know that different
contingency variables can or will influence in some way or the other the eventual
superstructure. Some of these contingency factors distinguished in literature are the
planning and control complexity, the overall organisational structure, the degree of
production and logistic professionality, the (perceived) importance of the control, and
the size of the organisation (e.g. Pfohl and Zöllner, 1987).
From a design standpoint, the result of the superstructure is a rather extensive
list defining which organisational entities have to carry out which planning and
control tasks. We notice here that structuring the production and distribution function
as a separate organisational unit is often not necessary and even not possible. In many
cases planning and control tasks will be performed by traditional organisational func-
tions like production, marketing, sales and purchasing. As an example we can think of
the position, small companies find themselves in. Often they do not have the means to
create a materials management department. In several situations, the creation of such
a department is not necessary either. Short communication lines, a rather informal

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way of organising the production and distribution system and a strong co-ordination
from the top of the organisation make a separate planning department in these
companies often superfluous.

Structure of positions
Organising the production and distribution planning consists of grouping
planning and control activities into organisational units on the one hand
(superstructure) and the establishment of positions on the other hand (structure of
positions). The structure of positions is therefore defined as the formal and actual
relations between persons and groups of persons as far as they occupy themselves
with the planning and control of the production and distribution system. In general,
three aspects are involved with the structure of positions (Mintzberg, 1979). First of
all, position design entails the requirements for holding a position. This includes
aspects like knowledge and skills needed to perform, in our case, planning tasks.
Secondly, the structure of positions includes the formalisation of behaviour. In the
past, several studies have addressed the circumstances that determine the degree the
organisation is excluding personal discretion when performing planning tasks (e.g.
Lawrence and Lorsch, 1967; Van de Ven, 1976). Organisations formalise behaviour
for several reasons. Ensuring prediction and controllability, reducing variability of
(planning) behaviour, and fulfilling a subjective desire for order are mentioned in
several studies as ultimate reasons for a high degree of behaviour formalisation.
Finally, the structure of positions also involves the degree of specialisation of the
(planning) job. Specialisation of the planning job can differ immensely varying from
highly specialised to being engaged in a wide variety of different planning tasks.
From a design point, the structure of positions is the final step of defining the
organisational setting of planning and control. Because of the comprehensiveness and
complexity of the aspects that cohere with the structure of positions, it is probably
also the least transparent dimension.
Structuring the positions with respect to the planning and control of the
transformation system involved often focuses on the question whether there should be
one logistic or materials manager in control of all planning activities or not (e.g.
Miller and Gilmour, 1979). Traditionally, responsibilities for the entire materials flow
are rather fragmented. It will however also be clear that a unification of respon-
sibilities with respect to the production and distribution system in many cases is

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neither possible nor desirable too. In practice there often seems to be a certain
ambiguity about the position and role of logistic managers and materials managers on
the one hand and production managers on the other hand. As we will conclude from
our case studies, in many cases the relation between the logistic and materials
manager and line management is somewhat problematic. In comparison with
production managers, the task domain of the logistic and materials manager for
instance is more difficult to define. Furthermore the ambiguous role and position of
logistic managers can often be explained by the fact that their contribution to the
accomplishment of organisation objectives is rather difficult to trace. When they are
trying to realise performance improvements, logistic managers for instance largely
depend on the management of functional areas (Production, Sales, Procurement, etc.).
Our empirical study suggests that in practice logistic and materials managers often
feel trapped between various conflicting role perceptions, expectations, and
organisational measures.

As mentioned above, figure 1 shows the conceptualised relationships between

the transformation system, the planning and control system, the superstructure of the
planning and control system, and the structure of positions regarding the planning and
control of the transformation system. This brings us now to the question of the
interaction and interrelationship between the characteristics of the planning and
control system being applied and the organisational structuring of the planing and
control system. Starting from the framework depicted in figure one, several research
propositions can be derived. By considering the dimensions mentioned above it can
be argued for instance that an assessment of the transformation system, as well as the
control structure, the superstructure and the structure of positions, is a necessity for
explaining the overall performance of production and distribution systems. At the
same time it seems to be of importance to take the interaction and interdependence
between these characteristics into account as well. Therefore, we also assume the
overall performance of the production and distribution system to be influenced by the
extent to which the characteristics of the above mentioned dimensions fit together.
In the remainder of this article, we will focus on the application of the
framework in terms of describing the interaction and interrelationship between the
control of the production and distribution system and its organisational design as it
has shown up in five case studies. Section five presents some of the outcomes of the

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case studies with respect to this interdependence. In the next section however, we will
first focus on the research method applied.

4. Research method

The empirical part of the research is founded on five in-depth case studies. In
one case, the organisation was examined during a period of more than fifteen years.
The remaining four organisations were examined during a continuous period of six
months. After this intensive research period, the organisations were followed during a
period of two years. During this period developments regarding the planning and
control system and the organisational design of the production and distribution
system were observed. Three companies are situated in the semi-process industry,
two companies are assembly-oriented. The size of the firms varied from small (± 50
employees) to medium sized companies (± 250 employees). Although all companies
examined were independent, two organisations formed a part of a larger
(multinational) corporation. In all companies distinctive functional areas like
production, sales, procurement and marketing exist.
Data was gathered by studying internal reports, visiting and observing
meetings, distributing questionnaires, and by means of (semi-)structured interviews.
In all cases planning, manufacturing, sales, en logistics employees were interviewed
for several times. Within each organisation the employees being interviewed
consisted of employees working at both the lower, middle and higher management
levels. Both the (semi-) structured interviews and the questionnaires were based on
the model as presented in the previous section. The questionnaires focused on an
assessment by the employees of the four aspects mentioned e.g. the transformation
system, the planning and control system, the superstructure and the structure of
positions. During the interviews, the results of the questionnaires were discussed and
further information was provided by the employees regarding the interaction between
the planning and control system and its organisational design.
In all case studies some participative research elements were included. In one
way or the other, all the companies were interested in an critical evaluation of the
organisational design of their production and distribution system. This included

17
questions like: do we need a logistical or materials management department, how can
conflicts between Production, Sales and Logistics be reduced, are there any co-
ordination problems between Purchasing, Production and Sales and if, how can they
be solved, and last but not least: are interfaces within the company between functional
areas managed properly. From this evaluation in all companies an improvement and
reorganisation process was conducted. The nature and characteristics of these
reorganisation processes differed, however, from making some minor improvements
to changing the entire planning and control system. In three companies organisational
changes encompassed a redesign of the superstructure and a re-allocation of
authorities en responsibilities. During this process of change the role of the
researcher(s) was solely restricted to making observations, the structuring of on-going
discussions and providing management with analytical –theory-based- material
regarding the issues being discussed. All of this was framed by the research model as
described in the previous section. Many of the techniques and methods used in this
structuring process were based on a soft systems approach (e.g. Checkland and
Scholes, 1999; Flood and Jackson, 1993). Cognitive mapping and the drawing of so-
called rich pictures were for example used to reveal problems with respect to the
production and distribution system. By using the method of cognitive mapping tacit
knowledge with respect to the production and distribution system was made explicit
(Nonaka & Tackeuchi, 1995). From this, relationships and interactions between the
planning and control system and its organisational embedding were discussed and
proposals for redesign were evaluated.
As mentioned above the foundation of the case studies was in a tentative
model which in itself consisted of a definition of four important aspects related to the
production and distribution system as well as in a further exploration of the expected
interaction and interdependence between the planning and control system and its

IST SOLL Change

Analysis process
situation situation

Transformation
system
Planning and
control system

Superstructure

Structure of
positions

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Figure 3 Overview of the distinctive phases in the research process
organisational setting. Based on the findings of the case-studies, the conceptual
framework was further refined and worked out in more detail. One can argue
therefore that the (empirical part of the) study shows all characteristics of a rather
classical research method (Yin, 1989).
Figure 3 summarises in a schematic way the research process that has been
applied. As depicted in figure 3 the empirical part of the research process can be
characterised by two lines of thought. First of all, a sharp distinction was made
between the specification phase (IST situation), the analysing phase, the redesign
phase (Soll situation) and the implementation phase (change process). So, in all
companies these distinctive phases were initially defined to decompose the complex
decision-making process regarding the organisational design of planning and control.
Secondly, during the whole research process our focus was concentrated on exploring
the distinctive characteristics of the production and distribution system, the planning
and control system being applied and its organisational setting. As stated above, the
main idea behind this was to reveal the underlying interrelationships between these
dimensions as they appear in practice and to sharpen our understanding of the ways in
which these dimensions frame the process of organisational design.

5. Results and analysis of the case studies

Table 1 presents an overview of some main characteristics of the organisations

examined. As stated above, three organisations are situated in the semi-process
industry. Semi-process production is characterised by batch production, usually a
large divergent product-structure and some heavily pressure on reducing batch sizes,
lowering delivery time and meeting new product specifications. As can be depicted
from table 1, these characteristics can all be addressed to the organisations examined.
The transformation process of the two remaining companies can be typified as
assembly-production. Comparatively speaking, assembly-production is characterised
by high volumes and a rather narrow variety of products being made. To a certain
degree, production activities in assembly environments are repetitive and often
largely predictable compared to engineer-to-order and job-shops situations.
One of the distinctive attributes also suitable for the companies examined, is
the decoupling of the production process and the packaging part c.q. the assembling

19
part of the production process. Stated in another way: in all organisations the 'final
assembly' process or packaging process was decoupled from the production process
by means of a stock point. In addition to this, all organisations distinguish between
various product-market combinations often referred to as ‘standards’ and
‘specialities’. In all cases, standard products were planned by some forecast-driven
planning system. The planning of specialities at the other hand was often based on a
mix of customer-driven and inventory-driven systems. Due to the existence of several
product-market combinations, control complexity was experienced as rather high in
four of the companies studied. At the same time, production and distribution planning
was considered as of eminent importance in these four organisations. In one company,
control complexity was experienced as rather low. This was mainly caused by the fact
that in this company a fixed planning period of six weeks was applied. During this
period, no changes in the production plan were allowed.
With respect to the organisational design of the planning and control system
all organisations showed a mix of formal and informal co-ordination mechanisms
between functional areas like Production, Sales and Distribution. In two organisations
an integrated view on these company functions was heavily advocated. In practice,
however, these two companies solved conflicting issues between Production and
Sales by applying a functional hierarchy and not by some integrating mechanism
between the parties involved. It is noticed that this is in line with the study of Chikán
who concludes from several surveys that the degree of integration between functional
areas in companies is much lower than one would expect from literature (Chikán,
2001, p.135). From the five companies examined, two organisations included a
logistical department. In one of these organisations, the main tasks of this department
consisted of making a long-term production and distribution plan. In the other
organisation, the main task of the logistical/materials management department was
explicitly addressed as making adequate trade-offs between production and sales and
as solving conflicting issues between Procurement, Production, Sales and
Dispatching.
It is interesting to note that all the organisations examined faced a necessity
for improving the overall (logistical) performance in terms of decreasing costs,
shortening delivery times, improving delivery reliability, quality and customer
service. From this, in all cases changing the planning and control as well as the

20
organisational design of the production and distribution system was regarded as a
potential opportunity to contribute to this improvement.
In the remainder of this section, some of the main observations are
summarised, drawing on both the questionnaires and the interview data. Because it is
not possible to deal with all the results extensively our main focus will be on linking
the planning and control efforts of the companies examined with the organisational
design strategies applied.

Confronting organisation design theory with practice

One of the research questions we have been trying to answer is whether
important ‘driving forces’ can be found for the organisation design strategies applied
by the organisations, especially concerning the organisation design of the planning
and control system being used. In theories of organisations it is for instance
extensively discussed that characteristics of the environment influence the
organisation structure (Thompson, 1967; Mintzberg, 1979). Much of this work has
been underpinned by studies based on contingency theory. In this context we refer for
instance to the classical work of Lawrence and Lorsch (1967) who suggested that
differences in organisational structures can be described and explained by two
dimensions: differentiation and integration. Differentiation refers to the difference in
orientation among employees of different (functional) departments. Integration refers
to the state of collaboration among departments/employees necessary to fulfil the
demands of the environment.
In none of the case studies performed, organisations explicitly formulated
design rules for neither the planning and control system nor for the superstructure and
the structure of positions. In fact, the organisational embedding of the planning and
control system apparently was often the result of a grown situation based on
something like heuristic knowledge and 'best practice'. Whenever some implicit
design rule was formulated, it was of a rather general and common nature and not
based on existing theoretical knowledge. This finding is somewhat surprisingly when
we take the tremendous amount of design rules regarding the structuring of
organisations in general and specific parts of the organisation in particular into
consideration. It is somewhat disappointing to conclude that in none of the
organisations examined, an outspoken design policy was formulated. In three of the
case studies both the planning and control of the production and distribution system

21
and the organisational embedding of the planning and control system were from a
theoretical design oriented standpoint even based on insufficient grounds. The
classical rule for a necessity of a balance between logistical authorities and
responsibilities for instance was in three companies deliberately violated. Political
reasons combined with pragmatic arguments can be considered as the main
explanation for this, often irrational, behaviour. In all the companies examined,
power, politics, personal preferences, opportunism and coalition formation were
playing an important role in the decision making processes regarding the
organisational (re)design of the planning and control system.

The organisational design of planning and control

In trying to explore the mechanisms that influence the organisational design of
the planning and control system being applied in the companies, we made use of the
technique of cognitive mapping (Eden et al., 1983). One element of cognitive
mapping which has been very helpful in understanding the complexity of the
mechanisms going on within the companies is the concept of 'rich pictures'. Rich
pictures can be considered as schematic representations of the problem situation,
expressing the underlying determinants and interrelationships between variables.
Starting point for making the rich pictures was the conceptual model as depicted in
figure 1. Based on the variables as described in the conceptual framework, several
rich pictures were constructed and discussed with the employees and management
involved. Figure 4 gives an example of a rich picture of one of the companies
examined. Based on a description and analysis of the existing situation, three
companies started a project aimed to improve the logistical performance of the
company. In all three companies, both the planning and control system and its
organisational design were subject of discussion and no area was excluded in
advance. During these projects alternatives were also described and analysed by
means of cognitive mapping and the information provided by the rich pictures.

22
 Absence of Uncertainties in the
No aggregated
priorities in production
production plan
allocating production
capacities
A large number of
Rush orders

No explicit overall
control concept Fragmented
allocation of
Instability in the authorities and
production planning responsibilities with
respect to
production and
distribution

Personal conflicts and

domain discussions
No formal co- between Production High degree of
ordination and Sales deconcentration
mechanisms between with respect to
Production and Sales planning activities

Functionalized
organisation

Figure 4 Example of a cause-effect diagram for one of the companies examined

The results of the case studies indicate that it is of importance to study the
transformation system, the planning and control system, the superstructure, and the
structure of positions in coherence. The interaction between these dimensions in other
words, can be considered as a dominant factor in explaining the overall performance
of the organisations studied. The interaction and interdependence between the
planning and control system and its organisational design can however be quite
complex. One would expect for instance that the characteristics of the planning and
control systems are reflected in its organisational design. Despite the fact that many
authors have stressed the importance of a fit between the characteristics of the
transformation system, the planning and control system being used and its
organisational design it cannot be concluded from our case studies that a misfit
between these elements leads to a poor performance. Following Donaldson (1996), it
seems to be that organisations can sustain a lack of fit without serious consequences.
One of the reasons for this observation that can be derived from the case studies is the
fact that the direction of the interdependence between the elements as shown in our
conceptual model can differ. Our case studies reveal that the interaction between the
above mentioned elements can both be positive as well as negative. A positive

23
interaction means that shortcomings in one of the subsystems (e.g. the transformation
system, the planning and control system, the superstructure, and the structure of
positions) are countervailed by the characteristics of one or two of the other
subsystems. A negative interaction between the subsystems exists whenever
shortcomings in one or more subsystems are reinforced by the other subsystem(s).
This finding implicates that the transformation system as well as the planning and
control system ought to be studied in coherence with its organisational setting. This
because it seems that not only the subsystems apart but especially the interaction
between the subsystems might be a major ground for explaining the overall logistical
performance of the organisation.

Design hierarchy
A major design rule that can be derived from the framework presented in
section two includes the hierarchy to be applied when (re)designing the production
and distribution system, the planning and control of these systems and the
organisational embedding of this control. Under norms of rationality, a clear and well-
defined sequence in the design of these subsystems exists. In many studies it is
advocated that first of all, the design of the production and distribution system should
take place (e.g. Hoekstra and Romme, 1992). Secondly, the planning and control
system has to be designed from which the superstructure can be conceived. Finally,
an outline should be made of the structure of positions. The rationality behind this
sequence is that the system to be controlled ought to be designed first. From this, the
planning and control system can be filled in. The organisational design is than
considered as the final step and includes the creation of functional areas like
Production, Sales, Materials management and the logistical function (e.g. Hoekstra
and Romme, 1992).
Clearly, the above mentioned sequence is an analytical ranking and it is
therefore not surprising that in practice often a deviating sequence is used. Our case
studies indicate that due to pragmatic considerations and sometimes for political
reasons, organisations tend to use a partial approach instead of an integral approach
with respect to the design of the production and distribution system. It is interesting to
notice for instance, that in four of the five case studies, organisations focused strongly
on implementing planning and control concepts without taking the organisational
embedding into consideration. In three cases, the organisational setting of the

24
production planning was only changed for internal political reasons. Based on the
case studies performed, there is a clear indication that organisations appear to neglect
a necessary design hierarchy when (re)designing the production and distribution
system.

6. Conclusions

This article explored the interaction and interdependence between the

planning and control of production and distribution systems and its organisational
design. Many organisations are facing nowadays the problem of how planning and
control systems ought to be embedded in the organisation. Although some research
has been performed the focus in the field of operations management is often on
planning and control itself and not as much on the organisational setting of the
planning system. Based on empirical research we developed a tentative framework
which can be of use in explaining the driving forces behind the logistical performance
of an organisation. The main fundament of this framework is in the notion that four
subsystems can be distinguished, e.g. the production and distribution system, the
planning and control system applied, the supplementary superstructure and the
structure of positions. As we have illustrated, these four subsystems are interacting
with one other in a very complex way. It can therefore be concluded that not only the
characteristics of each separate subsystem but particularly the interaction between the
subsystems involved seems to be of importance in explaining and understanding the
'behaviour' of production and distribution systems.
Obviously, this article has considered only five cases and generalizations from
them must therefore be treated with some caution. The understanding that the above
mentioned subsystems can interact with one another considerably has shown to be
very useful and clarifying, though. It is indicated by the case studies for instance that
not merely the division of planning activities or the planning and control system
being applied is responsible for the logistical performance. The case studies provides
us with some evidence that in particular the overall configuration consisting of the
transformation system, the planning and control system, the superstructure as well as
the structure of positions is far more important for the performance achieved. The
complexity of the interdependence between the production and distribution system,

25
the planning and control system being applied, and its organisational setting is
illustrated by the concept of the direction of the interdependence. One of the main
conclusions drawn from the case studies is that organisations sometimes can
neutralise shortcomings in the planning and control system by applying organisational
measures. In addition to this positive congruence, negative forms of congruence were
also found. Shortcomings in the planning and control system are then negatively re-
enforced by the organisational setting of the planning and control system. It can
therefore be argued that individual organisations seem to develop their own design
strategies and their own unique solutions to accomplish a better fit between the
planning and control system being applied and its organisational setting.
In conclusion, our study suggests a need to broaden the traditional perspective
on the organisational design of planning and control. The results of the case studies
indicate that there is some evidence that a simple linear design strategy based on the
assumption that a fit should be accomplished between contingency factors and the
overall design of the production system is not in line with design strategies applied in
practice. It seems that the appropriation process between the elements distinguished
in the model presented in section three is shaped by a process of muddling-through.
In this process, the existing production and distribution process situation is in many
cases taken as a starting point. Often, shortcomings in the existing situation are taken
for granted and are tried to be countervailed by additional organisational measures. At
the best, this leads to a sub-optimal situation. If the worst comes to worst, the
production and distribution system, the planning system being applied and the
organisational setting fall into a downward movement ultimately leading to an
instable configuration with a lacking (logistical) performance.
We consider our study to be only 'exploratory' in nature and a number of
limitations linked to our study should be addressed in future research. Our study for
example, was only based on five in depth case studies. Although a number of
important issues were addressed, future research should try to expand the analysis to a
larger number of organisations to insure more generalisable results. In addition, the
framework presented in this article needs more refinement. We did not operationalise
for instance the effects of the variables depicted in figure 1 on the performance of the
production and distribution system directly. To improve our understanding of the
organisation design of planning and control systems, we also think that it is of
importance that future research should focus more on examining quantitative

26
measures. Hopefully, this will lead to a more integrated body of knowledge relying on
both the field of operations management and organisation theory.

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29
 Company A Company B Company C Company D

General Medium sized Developer, producer and Large, multinational The core
character of Manufacturer of Paint marketeer of custom company of consist
the company -formulated chemical Pharmaceuticals, development
speciality products Chemicals and Coatings. production,
Research was performed after sales
within the chemical luxury coach
division

Paint for industrial and Chemical speciality Catalysts and additives Two pr
do-it-yourself products Eight product used in the production From sixte
Products applications. Important lines including cleaners, of polymers as well as products, a la
product groups are metal processing for the oil refining and of different c
varnish, wallpaint, lubricants and hydraulic petrochemical be produc
groundings and fillers. fluids. industries. Other engine, leng
The entire product products are Upgrading/se
assortiment includes intermediates for secondhand c
more than 30.000 detergents, cleaning, and
different products personal care products.

Seven main product- Major markets served Some main markets are European m
Product/Mar market combinations include automotive, oil refinery, tourist ope
ket (e.g. house decorators, glass, steel and petrochemical industriy many cases
combination do-it-your-self stores, aerospace. Eight major and the agricultural different cou
industrial company's and product lines/sixteen sector. Ethylene amines to meet spe
department stores) different market- are used in a wide requirements
segments variety of industries.

Semi-process oriented. (Semi) process oriented. (Semi)-process oriented. Line-product

Process Medium-High volumes. Medium-high volumes. High volume oriented. consisting
characteristi Four product lines. Batch-oriented. For most products, the stations.

30
 Company A Company B Company C Company D

cs Flexibility (volume- and production process is allocation of

product flexibility) high. batch-oriented. Throughput
Batch-oriented approximatel
weeks.

A combination of order-
A combination of order- Control structure partly Strong focu
driven and forecast
Planning driven and inventory- based on a MRP- master
driven control system.
and control driven planning systems. philosophy. schedule.
Production is initiated
structure On an aggregated Rather centralized structure i
from a eight-weekly
planning-level (yearly production planning. forecast-drive
production planning
planning) production Detail planning planning is o
(rolling horizon).
capacity is allocated to performed by logistical (customer-or
the product-market department specification
combinations coaches).
elements o
philosophy ar

Planning Relative high due to a Complex and uncertain Control complexity is Relative hig
and Control high product variety, product specifications relative simple due to a uncertainties
complexity some process are reinforced by a fixed period of eight and
uncertainties, and complex interactions weeks. Co-ordination throughput-ti
complex process-market and interferences between production and Procurement-
trade-offs (set-up and between several PMC's. physical distribution in rather
inventory costs versus some cases complex (changing
delivery time). material)

Characteristi Functionalized structure. Functionalized structure Divisionilized structure. Functionalize

cs of the No distinctive planning Purchasing and Within divisions, a Trade-offs
superstructu department. Strong Logistics is a sub- focus on functional Production,
re (organic seperation between department of area's. Materials Procurement
structure) Production and Sales. Manufacturing management department Logistical
High degree of is considered as an Detailed

31
 Company A Company B Company C Company D

centralization intermediate function planning

between production, Production.
sales and marketing

Characteristi Informal organisation Strong functional Highly formalized Informal com

cs of the with a traditional focus seperation of logistical structure. Complex lines. No c
structure of on the allocation of control tasks. Logistical communication between well-defined
positions authorities and manager is considered Production, Sales, of authori
responsibilities between as an interface function. Marketing and materials responsibilies
Production and Sales. The main logistical task management. No clearly goods-flow-c
No formal co-ordination includes the defined communication certain amb
procedures between authorization of the structures respect to w
Production and Sales. overall production logistical
schedule should be ce
not.

Table 1 Overview of the organisations studied

32