process for end-to-end coordination, collaboration, and
alignment with a single plan for the enterprise. The
process occurs over a monthly cycle, with weekly updates
and adjustments. S&OP is critical to the success of a segmentation strategy because it is the process by which an
enterprise aligns its decisions with profit and customer
service plans. These plans are then executed within the
policies that have been deployed to support the segmentation strategy.
S&OP is critical to segmentation in the following
respects:
▪ It enables financial and operational alignment with
customer/product service and profitability.
▪ It provides a monthly forum for discussion about
what is working and not working in regard to segmentation strategies.
• It includes what-if and scenario analysis to identify
policy anomalies.
Leading companies are now using demand-shaping
strategies and are linking their monthly S&OP processes
to their weekly CPFR channel processes for a closed-loop
feedback system. For example, some are using S&OP to
synchronize back-end supply to front-end allocation and
order promising. Supply that is slated for channels with
excess inventory can be diverted to channels that can
absorb it, or channel pricing changes can be made in
anticipation of the incoming excess supply. Thus, excesses
and shortages are immediately identified, and demand-shaping and cross-channel coordination strategies can be
put in place to synchronize demand with supply.
9. Implement a business optimization center for con-
tinuous learning
Leading companies have implemented “business optimization centers” or “supply chain centers of excellence”
whose mission includes establishing, implementing, and
monitoring segmentation policies, and then continuously learning as such policies are executed over time. This
type of center typically comprises a small team that is
responsible for creating the analytics behind segmentation and then sharing and gaining approval for the
deployment of associated policies. The center is also
responsible for the workflows associated with deploying
these policies to the appropriate functional business
processes. At a high level, this means maintaining the
customer service and profit strategies behind each customer/product intersection and the various segmentation policies associated with each intersection.
The business optimization center typically reports to a
high-level executive, in most cases the chief operating
officer (COO). In some companies the center reports to
the chief executive officer (CEO).
10. Automate policy management
The business optimization center described above is
responsible for policy analysis, deployment, and management. The center is also responsible for ensuring that
the various policies related to promising, fulfillment,
inventory, transportation, manufacturing, and sourcing
are coordinated, aligned, and synchronized in time.
Leading companies today are starting to automate the
administration of segmentation policy. In such cases, the
business optimization center gains approval for a certain
strategy for a customer/product intersection, along with
a deployment date. The policy is then automatically
deployed into the relevant systems on that date.
Concurrently, various automated workflows ensure
proper communication and approval.
SEGMENTATION GAINS GROUND
In previous generations, companies that wanted to create unique ways of serving customers or unique capabilities for a product would add physical assets. Today, they
must utilize the same physical assets to serve customers
and differentiate service, segmenting their supply chains
by means of information and decision making within a
management framework. Supply chain segmentation,
therefore, advances a continuing macro trend toward
information replacing the need to add physical assets.
Companies that successfully deploy segmentation
strategies will improve the reliability of their customer
service while increasing profitability across their product
portfolio. Segmentation does so through better alignment of supply chain policies to customer/product value
propositions. It also increases asset turnover (both fixed
and inventory) through inventory positioning and aligning manufacturing and distribution assets to customer
value propositions and profitability. Finally, it improves
customer service and sales by increasing the reliability of
delivering on promises. With so many financial and service benefits, it’s no wonder that Dell and other highly
successful companies are adopting supply chain segmentation strategies today. ●
Notes:
1. Gartner Inc., “Case Study for Supply Chain Leaders:
Dell’s Transformative Journey Through Supply Chain
Segmentation” (November 2010).
2. eyefortransport, “Chief Supply Chain Officer
Strategy Survey 2011” (June 2011).
