SME Lean Supply Chain : Recommended Segmentation Supply Chain Solutions
In the world of supply chain, I always strongly believe the most and significant area require effort and can generate immediate benefit would be ” Product Segmentation”
How many category we need to segmentize?
How to segmentize your product ?
1) How many category we need to segmentize?
Segmentation of Demand and Supply Chain capabilities is to Identify key drivers of differentiation for Demand and Supply, Volatility of Demand, Product Count, Inherent Supply Chain Flexibility (capacity, lead times, sources) Segment business by these characteristics into High Runnder, Medium and Low Runner designations.
Develop focused capabilities from demand and supply chain perspective to accommodate these inherent differences while maintaining profitability.
For a start is recommended to categorized the product into 3 group :
- High Runner
- Medium Runner
- Low Runner
2) How to segmentize your product?
High Turn Over products( High Runner) by limited to no risk for inventory liability and allow 10 -15% upside flexibility for product that drive ~ 70% of revenue.
Medium Turn Over products( Medium Runner) with some risk of slow moving inventory exposure and provides flexibility to cover profiled demand upsides
Low Turn Over product ( Low Runner)by drive better profiling of attach rates and big deal forecasts and place appropriate material buys and focus on cost effective service delivery.
What would be the Segment Performance Metrics:
Poor Accy / Reasonable Accy / Better Accy
Long LT / More predictable LT / Near LT Goal
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Effective Product Segmentation not only ensures the proper management of inventory but helps to direct marketing initiatives designed not only to off-load excess inventory but also as a preventative measure to minimize inventory liability. Combined with the information derived from statistics gathered from Customer Segmentation, the statistics gathered from Product Segmentation allow for the development of effective marketing plans, strategies and budgets for and across all products, thereby helping to reduce costs and generate revenue at the same time. Companies benefit greatly from web-based applications that help them to keep track and cross-relate statistical information relating to Product Segmentation and Customer Segmentation.