Supply Chain Segmentation: Concept and Best Practice Transformation Framework

Supply Chain Segmentation: Concept and Best Practice Transformation Framework

Ehap Sabri (University of Texas – Dallas, USA & JDA Software, USA)
DOI: 10.4018/978-1-4666-8228-3.ch004


The purpose of this chapter is to explore the factors that influence supply chain segmentation and provide a best practice transformation approach to ensure a successful journey. The initial research is based on a review of supply chain segmentation literature and the application of relevant transformation steps to specific case studies, comprising of companies from different industries. Supply chain segmentation strategy presents huge opportunities that are already being tapped by a few companies who achieved significant benefits and gained competitive advantage. The chapter provides a practical and proven supply chain segmentation framework for companies who are about to take the segmentation transformation journey.
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Definition for Supply Chain Segmentation Concept

Sabri and Shaikh (2010) defined Segmentation as the stratification of the channel/customer/product portfolio into groups which allows the company to have a different level of service by applying differentiated inventory, supply, and fulfillment strategies. The groups could be based on revenue, margin, variability, profitability, volume of sales, product life cycle, etc.

IT research and advisory firm Gartner describes supply chain segmentation as “Designing and operating distinctly different end-to-end value chains (from customers to suppliers) optimized by a combination of unique customer value, product attribute, manufacturing and supply capabilities, and business value considerations. In essence, supply chain segmentation is the dynamic alignment of customer channel demands and supply response capabilities optimized for net profitability across each segment.

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