Executive Briefings

Supply Chain Segmentation is Back!

Supply chain segmentation is not new, despite recent articles to the contrary, as manufacturing companies have explored ways to manage parts of the supply chain differently for the varied requirements of product lines or categories for decades.  Yet, what was true for sales and operations planning in 2010, seems true for supply chain segmentation in 2011 - new life is being breathed into an old concept.

There appear to be a few reasons, and most relate either directly or indirectly to the 2008-2009 global recession. As we move further into 2011, the business landscape has changed.  The demand side of the supply chain is far more volatile and unpredictable, with forecast accuracy becoming even more of a challenge than it has historically been, and the conversation is starting to move to topics like fast planning and responsiveness. The supply side of the supply chain is also experiencing some seismic shocks (one literal, others figurative) that are causing manufacturing companies to re-look at their supply networks through the lens of risk management and lead-time assessment.  Whether these changes, on both the demand and supply side of the supply chain, prove to be short- or long-lived, there is little question that fundamentally, the complexity level that supply chain organizations are asked to manage has increased significantly over the last few years.

Driven by complexity, and an increasingly diversified manufacturing industry (where many companies have a broad range of product categories, often crossing B-to-B/B-to-C lines), segmentation is a way to address complexity where and when it is necessary, but reject it where it is unnecessary.

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Supply chain segmentation is not new, despite recent articles to the contrary, as manufacturing companies have explored ways to manage parts of the supply chain differently for the varied requirements of product lines or categories for decades.  Yet, what was true for sales and operations planning in 2010, seems true for supply chain segmentation in 2011 - new life is being breathed into an old concept.

There appear to be a few reasons, and most relate either directly or indirectly to the 2008-2009 global recession. As we move further into 2011, the business landscape has changed.  The demand side of the supply chain is far more volatile and unpredictable, with forecast accuracy becoming even more of a challenge than it has historically been, and the conversation is starting to move to topics like fast planning and responsiveness. The supply side of the supply chain is also experiencing some seismic shocks (one literal, others figurative) that are causing manufacturing companies to re-look at their supply networks through the lens of risk management and lead-time assessment.  Whether these changes, on both the demand and supply side of the supply chain, prove to be short- or long-lived, there is little question that fundamentally, the complexity level that supply chain organizations are asked to manage has increased significantly over the last few years.

Driven by complexity, and an increasingly diversified manufacturing industry (where many companies have a broad range of product categories, often crossing B-to-B/B-to-C lines), segmentation is a way to address complexity where and when it is necessary, but reject it where it is unnecessary.

Read Full Article