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How Can Supply Chain Analytics Inform Segmentation Decisions?

August 8, 2013BY AMS Editor

Distributors need strong supply chain analytics in order to adapt to customer requests and develop segmented supply chains.

A recent post on the Gartner blog says distributors should avoid always saying either “yes” or “no” to customer requests because both roads lead to problems. Instead, the author advocates using what he terms a “yes, but ...” approach in which you agree to meet their needs but charge more to cover your increased cost of doing business. The strategy is all about maintaining profitability while being flexible.

“If you start with customer segmentation, which is analysis of the different value expectations of your customers, you’ll find that demand is clearly not one-size-fits-all,” the article explains. “Some customers value price over speed, others services over price and some speed above all.”

A distributor following this methodology would need strong supply chain analytics in its ERP system in order to effectively perform the analysis necessary to create the customer and supply chain segmentations and to measure the costs of fulfilling expectations of each segment. The system would also need to be flexible enough in its configuration to support multiple standard business processes. For example, order-to-cash for consumer sales follows a different set of standards than order-to-cash for wholesale customers.

The reality is that decision making requires robust, real-time analytics so that decisions can be made in the context of historic data measured against multiple data points.

Distributors are often prone to say “yes” all the time without thinking through the decision and its ramifications. However, it’s not a good business practice to satisfy the customer no matter what it does to your business processes or bottom line. If you change your processes to accommodate every customer request, you might be earning more business, but at what cost? If there’s no profit margin, then it’s likely not a good business decision.

The value of supply chain analytics is that it takes the emotion out of decision making and allows distributors to focus on facts and data, making the best choices for their business.

Source: Gartner, July 2013

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