Centralized Structure Transforms Home Depot Case Study

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In short, the Caterpillar organizational structure was leading the company into a less competitive position from both an operating costs and time-to-market standpoint. This immediately affected the financial performance of the company, making it less profitable. The structure of organizations often follows a highly functional path, where manufacturing is centralized and each supporting functional area is integrated at the process level to production centers. For Caterpillar, their market had grown too diverse for a centralized manufacturing-based strategy to deal with. What Caterpillar decided to do was completely redefine its organizational structure with the concepts of lean manufacturing, time-to-market and demand-driven supply chains as the cornerstone of the new organization (Kee, 2003).

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Chairman and CEO Fites chose to define a more market-driven structure for the organization, while also infusing each division with profit & loss responsibility and ownership of their individual product roadmaps and production plans. Supporting the 14 product divisions are 4 centralized support divisions. This new approach, according to the text, reduced product development time 50% and increased productivity 30%. The infusion of responsibility for profit & loss performance by division, and the development of the cross-functional model for providing support to each of the 14 product divisions were highly effective in keeping Caterpillar competitive in the global markets they served......

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