How do centralized and decentralized supply chain models differ?

Centralized and decentralized supply chain models are distinguished by their decision-making structures. In a decentralized model, decision-making authority is allocated to multiple units or locations within the organization. This means that individual stores, branches, or departments have the autonomy to make decisions based on their localized knowledge and specific circumstances. Such an approach can enhance responsiveness to customer needs, as these units can adapt quickly to changes in demand and environment without waiting for directives from a central authority. The decentralized structure fosters innovation as each unit can implement strategies tailored to their unique market conditions.

In contrast, centralized models consolidate decision-making authority at a single point or central hub. This can streamline processes and facilitate uniformity across the organization, but may limit the operational flexibility that decentralized structures offer. By focusing on the role of decentralized decision-making, it becomes clear how this option accurately represents a key characteristic differentiating the two models.