Supply Chain Segmentation

Challenge:

Most companies start out with a relatively straightforward customer value proposition and a matching delivery strategy that helps them succeed in the market. Over time the company increases in size, product portfolios and the different customers it serves. This can lead to a mismatch between the supply chain strategy and the customers being served that results in higher costs and decreasing service levels and customer satisfaction.

Solution:

 Starting with a clear understanding of your customer and your value proposition to them, you can develop new models that better match customer needs, is efficient and diversifies your risks. Rule 3.2 from Dr. David Simchi-Levi’s book, Operations Rules, states that “the selection of the appropriate supply chain strategy—‘push’, ‘pull’ or ‘push-pull’ is driven by demand uncertainty and economies of scale. So, if your company’s products have a high uncertainty of demand and are relatively unaffected by economies of scale, a “Pull” model should be implemented. On the other hand, if your company’s products have consistent demand and their production benefits from economies of scale, a “push” model should be implemented. Many times, however, a “push-pull” model should be considered leveraging a “push” model up until the point of assembly, then a “pull” model from the point of assembly through to delivery.