The word I am hearing quite frequently at Supply chain meets, webinars, and presentation is ‘Supply chain segmentation’. I was not very sure what it is all about and how it can enable organizations to operate efficiently and effectively hence I thought to find out more about the concept of Supply chain segmentation. Finally I tried to connect learning on Supply chain segmentation with my understanding over SAP prodcuts and identify how SAP can provide relevant data points to help business in segmenting the supply chain .
In the first part, I will try to answers three basic questions to provide a brief idea on supply chain segmentation.
In the subsequent part, I will discuss on how SAP can provide data points, based on which business can segment supply chain and will touch very briefly on SAP’s capability to support segmented supply chains.
Question 1: Why Supply chain segmentation?
- With advent of globalization organizations need to cater diverse customers across globe with myriad bespoke requirement
- Organizations have complex and huge product portfolios with different product attributes viz. Service level, demand pattern, product life cycle, margin etc.
Single supply chain practice across board is not competent enough to meet different customer requirements and support vast product portfolios.
Question 2: What is Supply chain segmentation and how it can help organizations to meet the challenges?
Supply chain segmentation is classifying the customers /products with similar requirements/ attributes and then developing a unique supply chain operation around it. The objective is to build supply chain operations which are more agile, responsive and aligned to customer needs and also in line with the product’s inherent requirements. These segmented supply chains will provide opportunity to cater unique requirements of the customers and realize superior service delivery. Also vast product ranges will be supported by different supply chain operations, which are best suited for them, unlike single supply chain across the organization.
Question 3: How to do Supply chain segmentation?
There are many approaches of supply chain segmentation. and the appropriate approach for an organization depends on the prime objective of the segmentation .
Organizations can segment there supply chain based on the product attributes , customer Characterictics, and/or supply/demand patterns
Few approaches to segment supply chain
Segmentation on Product Attributes
For instance, Make to Stock (MTS) strategy for all the products with high demand consistency and sales or considering subcontracting option for the products with low sales volume and profit.
Segmentation on Customer Characterictics
Similarly, designing supply chain to work collaboratively with customers requiring high service level and sales volume or outsourcing the orders from the customer with lower margin and sales volume.