Mid-Term: Segmentation inside the Supply Chain
Florida Institute of Technology: Extended Studies
Dr. Janice Spangenburg
Roughly 30 years ago the idea of logistics evolved from a military movement notion into what we consider today the complexity of supply chain management. Supply chain management has continued to blossom through immerging technological advances and the immense ability for data sharing. Strides for increasing profitability, customer satisfaction, and overall success of an organization are the driving forces for these immerging implantations. The imminent theory of supply chain segmentation has become an ensuring practice to boost profits. Organizations ...view middle of the document...
Segmentation “is the dynamic alignment of customer channel demands and supply response capabilities optimized for net profitability across each segment” (Gartner).
An organization’s catalyst for segmentation stem from the need for optimized profitability which manifests from reducing complexity, discovering synergies, increasing standardization, cross-functionally designing the chain, and matching customer value. Segmentation is not limited for these reasoning’s, but can be generalized within these areas. Any practice an organization takes on to better suffice the needs of the customer while increasing profits could be part of segmentation. Just as supply chain management has evolved, these practices of segmenting will evolve. As technologies emerge, segmentation practices and theories will grow and emerge alongside it.
Reducing complexity begins with analyzing the customer extensively; understanding how they purchase the product or service that is being purchased. When an organization thoroughly understands this data, it can then be used to combine strategies for what’s most profitable. Product design and delivery methods can also be added to this data in order to develop practices that best suite efficiency, and again increase profitability. Synergizing is done through leveraging economies of scale (Bender). This means leveraging volume across the various segments. When the organization can purchase larger quantities for less, inherently the saving can trickle down to the customer. Another example includes a company using separate manufacturing plants for a different customers, synergizing would entail the company taking the abilities of one plant and designing what other products for other customers could also be created there. Consequently, saving money by operating a single plant and also combining transportation routes; using one semi-truck for one facility instead of 2 large box trucks for two facilities. Increasing standardization is another component of leveraging volume. A successful example if this is Southwest Airlines who flies only one type of aircraft, the Boeing 737 (The Economist). Their V.P of ground operation, Chris Wahlenmaier, explains their success as, "We only need to train our mechanics on one type of airplane. We only need extra parts inventory for that one type of airplane. If we have to swap a plane out at the last minute for maintenance, the fleet is totally interchangeable—all our on-board crews and ground crews are already familiar with it. And there are no challenges in how and where we can park our planes on the ground, since they're all the same shape and size" (Sullivan, 2013). Designing the supply chain with a cross-functional team means to evaluate the impact of the design of the product or process will have on the chain and tweak it to the most efficient design....