chain must be aligned to this value proposition with
different policies, as shown in Figure 2. This may
include unique policies for one or more of the following: promising, fulfillment, transportation, inventory,
manufacturing mode, and sourcing. It will also be
reflected in the supply chain network and transportation design.
This essentially means that there will be multiple,
virtual supply chains running against one physical
supply chain. These virtual supply chains will be
driven by unique value propositions for groups of
customer/product intersections and will be reflected
through policies that are managed and administered
by supply chain professionals.
Segmentation shows that supply chain management is evolving toward a process similar to portfolio
management. Companies have a portfolio of customers and channels, a portfolio of products, and a
portfolio of suppliers and supply modes. By matching those
portfolios based on the best way at a given time to reliably
and profitably serve each customer, companies will see tremendous value potential.
KEY PRACTICES IN SUPPLY CHAIN SEGMENTATION
Segmentation is not just a network strategy, or an inven-
tory strategy, or a fulfillment or manufacturing strategy.
Rather, it is an end-to-end strategy for the supply chain
that has implications for many areas, from the customer
through to the supplier. To achieve maximum value from
segmentation for both the customers and the enterprise,
companies must have policies in each area that are coor-
dinated to the value proposition offered to each customer/
product combination.
Figure 3 summarizes 10 key practices that support a successful segmentation strategy. The discussion that follows
describes these practices and their importance in aligning
the supply chain to the unique value propositions offered
to customers.
1. Perform regular demand and cost-to-serve analysis
[FIGURE 4] EXAMPLE PROFITABILITY DECISION FRAMEWORK
Customer Profitability Cluster Analysis Customer/Product Profitability
Volu
me
High
HighLow
Low
Volu
m
e
High
Low
Profit margin
HighLow
Profit margin
C3
D2
D1
D3 B3
B2
B1
C2
A1
A2
A3
P4 P1
P3 P2
[FIGURE 3] TEN KEYS TO SUCCESSFUL
SEGMENTATION
1 Perform regular demand and cost-to-serve analysis to segment
2 Implement differentiated demand policies in core functions
3 Implement differentiated inventory policies
4 Implement differentiated customer replenishment programs
5 Implement differentiated supplier replenishment programs
6 Implement regular total-landed-cost sourcing analysis
7 Implement differentiated allocation and order promising
8 Incorporate monthly and weekly tradeoffs into S&OP
9 Implement a business optimization center for continuous learning
10 Automate policy management
S&OP = sales and operations planning
SOURCE: JDA SOFTWARE GROUP INC.
SOURCE: JDA SOFTWARE GROUP INC.
