Supply Chain Segmentation: The Next Step in Supply Chain Excellence
There are a few different definitions of supply chain segregation floating about, and most are unnecessarily verbose and complex. The basic idea behind supply chain segregation is to split up your services in order to create more profitable one-to-one relationships with customers. In essence, supply chain segmentation moves away from a “one-size-fits-all” model and more towards one where services are tailored based on what makes the most sense for a given segment of customers. By definition, this is a more involved process than the status quo, but it is also one that can enhance logistic management and improve supply chain profitability if done well. Here are some ideas on how to begin segmentation.
Perform Regular Demand and Cost-Service Analysis
One of the main elements of supply chain segmentation is to figure out your different categories of customer and what services are or are not in demand. For instance, if there are certain services that are rarely used by customers purchasing certain products or by customers within a certain geographic area, it might make sense to consider discontinuing the options for those segments. Conversely, if something ends up being in high demand, you might want to focus efforts on refining and improving the service for that segment instead. These types of decisions are not inconsequential, so it’s important to make sure you have good data supporting your approach. Find a reliable costing model and make use of it in your assessments in order to get a proper view of the situation.
Use Differentiated Inventory Policies
You likely already use elements of supply chain segmentation in your inventory policies without even realizing it. Every distribution center has different levels of demand for your products, and inventory levels that satisfy one location might leave another with unsold items or a shortage of items. Recognizing which products and quantities serve the needs of an individual location best is one way that segmentation can help improve costs. To take the process one step further, assessing whether a product is most effective in a finished or partially assembled state is another method of finding segmentation opportunities.
Differentiate Customer Replenishment Programs
Your customers have different types of replenishment needs and your activities should be able to meet these needs. Some customers, such as those involved in consumer electronics, may have a mixture of retail, enterprise, and online distribution. An enterprise customer would be better off with build-to-stock or configure-to-order arrangements. Retail customers might want vendor-managed inventory, and so on.
Embrace Continuous Learning
Supply chain management is an ongoing and ever-evolving process. As technology and practices change, new opportunities can arise, which should be recognized and taken advantage of. At the same time, existing operations need to be monitored for opportunities that could be used to create further improvements and efficiencies. Having a dedicated team for this sort of continuous analysis and learning is always a good idea, since it ensures a commitment to the ongoing refinement of your processes.
Embrace Supply Chain Segmentation with Lean Supply Solutions
Lean Supply Solutions is a 3PL fulfillment company whose operations are based around the Lean Methodology, a proven philosophy focused on eliminating any operations, equipment, or resources that are not capable of adding value to our clients’ supply chain. By striving to ensure that the right products are provided to the right customers at the right time, Lean Supply Solutions is able to offer consistent, predictable, and quality results. To learn more about the Lean Methodology, outsourcing to Lean Supply Solutions, or to ask any questions, give us a call at 905-482-2590.