A couple of weeks ago, someone mentioned to me that their organisation had undergone a major supply chain review with the aim to identify efficiencies and to design a lean supply chain. He then asked “You need to have a lean supply chain nowadays, right?”

While I agreed in principle that no organisation should waste resources, I responded “Well, it actually depends!”

I could see that I had triggered a major thought process and after a moment of silence he asked “Depends? Depends on what?”

So, we sat down and after we went through a couple of questions, I shared why some parts of his supply chain might have to be lean, while others have to be agile.

Find out what you need to think of when restructuring and optimising your supply chain and how supply chain segmentation can help you determine whether a lean supply chain is the most appropriate choice for you.

Why supply chain segmentation? What do I need it for?

In essence, supply chain segmentation aims to ensure you don’t “miss the forest for the trees”. In today’s highly complex business environment, those organisations looking at each “tree” individually, identifying commonalities or distinctions, and grouping them into segments won’t miss the “forest”. This leads to higher operational efficiencies and can increase the value for your organisation and the value for your different customer segments. By focusing on segmentation, a wide range of differentiable customer needs can be addressed in a time-efficient and profitable way and deliver a competitive advantage.

So what happens when segmenting your supply chain

Distinct segments or categories are created within your company’s supply chain in order to define individual goals for each segment. Each goal contributes to your overall strategic supply chain goal. Keep in mind that every supply chain is unique and the design depends on each company’s products, services, market and business objectives. Supply chain segmentation is a highly complex undertaking that demands in-depth knowledge. But it delivers you more control and a better overview of all parts of your supply chain in order to make decisions, identify cost drivers and increase profitability.

Supply chain segmentation can help you to find the right answers

Different products require different strategies and tactics, ranging from “lean/efficient”, “responsive”, “risk hedging” to “agile”. Sometimes, organisations can classify their products into one of these categories, but very often companies carry a wide range of products that scream for a differentiated supply chain.
To start with, I would like you to ask yourself what the different products or product groups of your organisation are, and whether one supply chain type could potentially fit them all?

Digging deeper…

When analysing your supply chain requirements, there are endless characteristics that you could look at, but in order to obtain a first idea, the following key questions are helpful:

    • What is the overall volume or quantity of this particular product? Is it a commodity, or are we talking about a customised product?
      How long is the product life cycle?
    • What is the product’s contributive margin?
    • What is the product’s value density and how much logistics costs can my product absorb?
    • What is the variety, or how many SKUs do you have in this product category?

Regardless of how many different distinctions you have identified, you will have to think about the entire supply chain and the related sub-processes in planning, sourcing, making, delivering and returning, and what the strategic, tactic and operational measures will be. Based on the demand pattern of your customers and your service level promises, you will ask yourself whether you can make products “to order” or “to stock”. In another instance you will question how to deliver your goods – do you choose Sea Freight or Air Freight, and what are the implications to your business when exchanging these modes of transport?

By asking yourself these questions you will automatically cluster your value chain requirements, and most likely you will come to the conclusion that your supply chain is not a “one size fits all”.

In the section Supply Chain Planning you will find more detailed information about optimising your supply chain and in future posts we will discuss next steps in how to implement the right measures. Do you have further questions? Get in contact with us.

Do organisations’ supply chains have to be necessarily “lean”? – It depends! Should organisations segment their supply chain? – Most definitely!

When segmenting your supply chain, which of the five elements represents the biggest challenge for you? Is it the “planning”, “sourcing”, “making”, “delivering” or “returning”, and why?

For more than a century, BCR has continued to help small, medium and large businesses achieve an optimum logistics solution with warehousing and transportation, including air freight and sea freight services to and from the major ports including BrisbaneSydneyMelbourne, Adelaide and Fremantle (Perth).