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L.C.O             The organization of companies

The sections (suppliers and customers)

The section, subsystem of the enterprise system, can be a customer of several sets of suppliers and, like the enterprise itself, acts as a supplier of several sections or sets of customers.

Example: A commercial section in a computer company  takes orders of hardware and software. It transmits the commands to the production sections which are two, one produces the hardware, the other the software.

 

Here is the corresponding diagram :

You will notice in this example, the absence of deliveries, the installation being carried out by a implementation section.

Important note concerning the powers of a section :

We have located the SECTION subsystem in its environment. Any section acts as a supplier to its customers, and as a customer of its suppliers. One section has no hierarchical power over another, because all are placed at the same level in the system.


This should not hide an essential phenomenon, we must not forget the old adage: "The customer is king". The supplier-to-client functional relationships that we have just mentioned reveal a new power in the company, that of the client section on the supplying section (s).

We will take an example to illustrate this phenomenon. Suppose a company has a planning section as follows:

This diagram shows that the orders received from the salesman are broken down, by the planning section which determines and orders to purchases section, to ensure supplies. The same planning section orders the products to be manufactured and also orders the installation of the products at the customers.

Although in this example, the planning section was placed at the same level as the others in the hierarchical organization, because of its position in the order flow, it exercises considerable power since it is a client of three sections.

It is not a question of classifying this type of organization into the category of defective solutions, but rather of clearly explaining the rules of operation in order to avoid disastrous conflicts arising from the fact that in certain sections, we feeling to be placed more or less slyly under the control of others.

Consequently :

the rules for the organisation of the flows, are as important to define as the hierarchical organization and their determinations is nothing less than the definition of the management rules of the company.

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