The concept of supply chain segmentation involves the alignment of customer channel demands and supply response capabilities that are optimized to maximize profitability and customer value across multiple market segments.
The rationale for this, according to an Ernst & Young “white paper” entitled Supply Chain Segmentation, is that the “business environment is getting increasingly complex, especially for technology companies dealing with rapid innovation, globalization and a growing number of business partners, business models and differences in expectations from different markets and customers.”
E&Y suggest five ways to consider segmentation:
- Product complexity based
- Supply chain risk based
- Manufacturing process and technology based
- Customer service needs based
- Market driven
The idea is that a “one size fits all” strategy won't work in today’s environment.
They suggest that while senior sponsorship is required for successful supply chain segmentation, you also need cross functional support from multiple organizational disciplines. The team must provide supporting policies, segment level processes and IT infrastructure to both automate the processes and provide metrics.
An example of this is Darden Restaurants owner of Olive Garden and Red Lobster restaurants which require unique supply chains to service over 300 million meals annually. While Darden’s supply chain is on the shallow side with, in many cases, only one tier of suppliers, they have four distinct supply chains… 1) smallware (linens, dishes, tableware, etc), 2) frozen, dry and canned products, 3) fresh food and 4) fresh seafood.
Many organizations may in fact have multiple, segmented supply chains but are not even aware of it. So whether your realize it or not, segmenting your supply chain may be a requirement to both survive and thrive in today’s complex global economy.