Tailoring Supply Chains to Customers & Segments

In today's competitive business landscape, customers expect personalized experiences and timely deliveries. As a result, companies must adapt their supply chains to meet these demands. One way to achieve this is by tailoring supply chains to specific customer segments.

This approach allows businesses to better understand their customers' needs, preferences, and behaviors, enabling them to create customized products and services that meet their unique requirements.

So, let's get started...!

Supply chain segmentation offers numerous benefits to businesses, including;

o?Better customer service: By understanding the unique needs of each customer segment, businesses can create personalized products and services that meet their specific requirements. This leads to higher customer satisfaction and loyalty.

o?Increased efficiency: Supply chain segmentation allows businesses to optimize their operations for each customer segment, reducing waste and increasing efficiency. For instance, a company may have separate supply chains for high-volume and low-volume customers, allowing it to manage inventory and shipping more effectively.

o?Reduced costs: Tailoring supply chains to customer segments can help businesses reduce costs by avoiding one-size-fits-all solutions. For example, a company may use a less expensive shipping method for low-value/margin items or a faster shipping method for high-priority/margin orders.

o?Competitive advantage: Companies that tailor their supply chains to customer segments can differentiate themselves from competitors who adopt a generic, one-size-fits-all approach, this can lead to increased market share and revenue growth.

A customer-centric supply chain puts the customer at the center of all decision-making processes. It recognizes that customers have unique needs and preferences and seeks to meet those needs through tailored products and services.

By adopting a customer-centric approach, businesses can increase customer satisfaction, build brand loyalty, and drive revenue growth far more easily.

To achieve a customer-centric supply chain, businesses must first understand their customers' needs and preferences. They can do this by collecting data on customer behavior, conducting surveys and focus groups, and analyzing customer feedback.

Once they have a deep understanding of their customers, they can tailor their supply chains to meet those needs, leveraging technology and data analytics to optimize their supply chain operations and ensure timely and efficient delivery.

Customer segmentation is a crucial step in creating an effective well-tuned supply chain strategy. By understanding customer segments, businesses can tailor their supply chains to meet the specific needs of each group. This approach not only improves customer satisfaction but also reduces costs while increasing efficiency.

To do this, businesses need to gather data on customer behavior, preferences, and demographics. This information can come from various sources, including customer surveys, sales data, and social media. Once businesses have collected and analyzed the data, they can identify patterns and trends that help them categorize customers into different segments. Common methods for identifying customer segments include clustering analysis, discriminant analysis, and factor analysis.

Let’s take a practical example, a business that caters to younger consumers may opt for a faster delivery model, such as same-day or next-day shipping, while a business that targets older consumers may choose a more traditional delivery model, such as standard ground shipping.

By linking customer segments with the right delivery models, businesses can enhance their customer's overall experience and build brand loyalty at the lowest possible cost. Because the organization’s supply chain has been fine-tuned and optimized to do so.

o?Geographical segmentation: This strategy involves dividing customers based on their geographical location, such as country, region, city, or postal code. Businesses that adopt this strategy can tailor their supply chains to meet the unique needs of each geographic location.

o?Demographic segmentation: This strategy involves dividing customers based on their demographic characteristics, such as age, gender, income, occupation, and education level. Businesses that adopt this strategy can create products and services that cater to the specific needs of each demographic group.

o?Psychographic segmentation: This strategy involves dividing customers based on their values, interests, attitudes, and lifestyles. Businesses that adopt this strategy can create products and services that resonate with their customers' personal beliefs and values.

o?Behavioral segmentation: This strategy involves dividing customers based on their behavior, such as purchase history, usage rate, and loyalty. Businesses that adopt this strategy can tailor their supply chains to meet the unique needs of each behavioral segment.

With the rise of e-commerce, managing inventory and logistics has become increasingly complex. To stay ahead of the competition, businesses need to optimize their inventory and logistics operations to ensure that the right products are delivered to the right customers at the right time.

Optimizing inventory and logistics operations is critical for businesses that want to provide customer service excellence while keeping associated costs to a minimum. By aligning inventory and logistics operations with product segments, businesses can ensure that they have the right products in stock when customers need them.

Businesses can align their inventory and logistics operations with their product categories by adopting a segmented approach to inventory management. This involves dividing products into different hierarchies, logical groupings, or families. Once businesses have identified their product segments, they can develop inventory and logistics strategies that are tuned to each segment from a supply chain perspective, not a marketing one.

As an example, a business could adopt a just-in-time (JIT) inventory system, for fast-moving products with high sales volumes, ensuring that they always have enough stock on hand to meet customer demand.

On the other hand, for slow-moving products with lower profit margins, businesses could adopt a vendor-managed inventory (VMI) system, where suppliers are responsible for managing inventory levels.

o?Reduced inventory costs: By aligning inventory levels with customer demand, businesses can reduce the amount of money tied up in excess inventory.

o?Improved customer satisfaction: By ensuring that the right products are in stock when customers need them, businesses can improve customer satisfaction and loyalty.

o?Reduced transportation costs: By optimizing logistics operations, businesses can reduce transportation costs and improve delivery times.

o?Increased efficiency: By streamlining inventory and logistics operations, businesses can increase efficiency and free up resources to focus on other areas of the business.

By implementing segment-specific inventory and logistics strategies, businesses can improve their bottom line and stay ahead of the competition.?

Aligning your organization's strategy and structure with your newly defined segments must be done properly. This alignment exercise is crucial for successfully executing the segmentation strategy and achieving the desired outcomes.

When aligning strategy and the organization's, it's important to clearly define the value propositions, goals, and priorities for each segment. This helps guide decision-making and resource allocation across the organization’s key supply chain stakeholders.

Additionally, assigning roles, responsibilities, and resources accordingly will ensure that everyone is working towards the same objectives and outcomes.

A good value proposition is a statement that clearly articulates the unique benefits that a particular segment receives from doing business with you, in simple terms it could be a differentiator that gives you the edge over the competition.

But, goals, on the other hand, are specific, measurable objectives that you want to achieve within a certain timeframe. Then there are the priorities, the specific areas or initiatives that an organization needs to focus on to achieve its goals.

Let’s use another example an organization that operates in multiple countries may define a value proposition for its international segment as, ”we offer globally recognized brands with localized product offerings and support, enabling our customers to compete effectively in their markets”. The corresponding goal might be, to “increase international sales by 20% within the next XX months”, while the priority could be to “expand our product portfolio to better serve local customer needs."

Another key aspect of aligning strategy and organization are the roles that the employees have that describe the specific positions or functions within an organization. Along with the accompanying titles, duties and accountabilities, as part of tailoring the organization's supply chain to customers job descriptions may need to be revisited and updated. Its surprising how many organizations job descriptions (if they have them), are out-of-whack compared with the work they're actually doing. This also usually means the individuals persons metrics and KPIs attached to a role are foundationally wrong or misaligned.

Let’s say an organization that wants to expand its e-commerce presence may assign a dedicated team to handle online sales, with specific roles for marketing, customer service, and order fulfillment.

The responsibilities of the marketing role might include developing and executing campaigns to attract online customers, while the customer service role would involve handling customer inquiries and issues via phone, email, or chat. Order fulfillment would be responsible for ensuring timely and accurate shipment of products.

Let’s touch on coordination, collaboration, performance, and job roles. Aligning strategy and organization can have a profound impact on several aspects of an organization. When everyone is working towards the same objectives, communication and collaboration across departments and teams tend to improve, leading to greater efficiency, effectiveness, and far better outcomes.

At the individual level performance metrics should be aligned with segment-specific goals, providing clear and concise targets for employees to work towards. The same goes for departments, stakeholder KPIs must be deeply intertwined and inextricably linked with departmental goals no matter where they sit along the organization’s supply chain.

Often by taking this approach job roles become more specialized and focused, allowing individuals to develop deeper expertise in their respective areas, which allows them to perform better and be more productive. And the by-product of that is better collaboration and interdepartmental cooperation.

Hopefully the organization's culture is also aligned and in the right place...if its not, then that's going to create its own set of unique issues and challenges..?

This is a critical step in ensuring that your segmentation strategy is effective and that your organization is meeting its goals, both short and long-term. This means that measuring and improving performance within a certain segment requires the use of segment-specific metrics, KPIs, and benchmarks. These metrics and KPIs should be carefully chosen to reflect the unique characteristics and goals of each segment and should be used to track and evaluate performance over time.

A company that operates in multiple countries for instance may use metrics such as revenue growth, customer acquisition rates, and customer satisfaction scores to track performance in its international segment.

However, for its domestic segment, the company may use metrics such as market share, customer retention rates, productivity, throughput rates, and/or cycle times to track performance.

Once you have selected the appropriate metrics and KPIs for each segment, you'll need to identify any gaps or opportunities for improvement. This involves comparing current performance (as-is) to desired performance (to-be) and undertaking the right activities to close any gaps or capitalize on opportunities.

Let’s say for example a company that operates in multiple countries identifies a gap in customer satisfaction scores between its international and domestic segments. Upon further investigation, the company discovers that this gap is due to differences in product offerings and customer support.

To address the issue, the company decides to roll out a new product line tailored to the needs of its international customers and invest in additional customer support resources.

I’ll assume continuous improvement is already embedded into the organization’s DNA.

Let’s take a quick high-level view of the key steps when implementing a supply chain segmentation strategy and some of the best practices. Having a roadmap, a well-thought-out Implementation strategy, a detailed plan, and following best practices will go a long way in ensuring that your segmentation strategy is successful and generates the results you’re after.

1.?Develop a plan for implementing segmentation and include metrics and benchmarks across the organization, you need multiple reference points (the as-is) before you begin.

2.?Define roles and responsibilities for collecting, analyzing, and the key stakeholders that will be part of the implementation and exactly what they will be doing (WBS).

3.?Project management; have a detailed project plan in place, ensure you have a highly experienced project manager in place and a steering committee.

4.?Ensure that all necessary data sources are integrated and accessible, and make sure the data is correct up-to-date, and unbiased, you want a single source of truth for everyone to reference.

5.?Establish a regular review process for (all) segmentation performance, as well as collectively) with metric and KPIs fully developed before the project is formally closed and handed back to the business.

6.?Above and beyond regular performance reviews I highly recommend you use data visualization tools to facilitate ongoing understanding and actionable insights as part of the ongoing continuous improvement process that should remain in place.

7.?Continuously monitor and adjust segmentation strategies based on performance data, experimentation, and the evaluation of emerging technologies that could be used is a must.

o?Start small and gradually scale up segmentation efforts to avoid overwhelming the organization

o?Use a phased approach to implementing segmentation metrics and benchmarks, focusing on high-impact areas first

o?Engage cross-functional teams in the segmentation process to ensure broad buy-in and ownership

o?Utilize data governance policies and standards to ensure data quality and consistency

o?Regularly review and update segmentation criteria and metrics to adapt to changing market conditions and customer needs

o?Foster a culture of experimentation and continuous learning, using segmentation data to inform decision-making and drive innovation

o?Use segmentation data to personalize and customize customer experiences, enhancing engagement and loyalty

o?Monitor and analyze competitors segmentation strategies to identify potential opportunities and threats

o?Consider leveraging third-party data sources and external experts to augment internal capabilities and gain fresh perspectives

o?Foster collaboration between different departments and levels of the organization to ensure that segmentation insights are shared and acted upon effectively.

In today's intensely competitive business environment, taking a one-size-fits-all approach to managing supply chains is a recipe for mediocrity or worse. As outlined in this article, the path to supply chain excellence lies in deeply understanding your customers, segmenting them strategically, and sculpting differentiated end-to-end value chains tailored to their distinct needs. Basically, leveraging a well-thought-out and designed supply chain for all it’s worth and then some is what it comes down to.

There is no doubt that segmentation is a complex exercise, the organizations that embrace it develop a competitive advantage that is extremely hard to beat. It also means that your organization can keep pace with the blistering speed and evolution of omnichannel commerce, ever-demanding and increasing customer expectations. By tailoring your supply chain to the customer, you create highly personalized and relevant shopping experiences that foster brand loyalty, higher margins, growth, and revenue

By rigorously analyzing your customers, rearchitecting your supply chains around your customers, and embedding customer-focused performance metrics into everything you do, you will trounce your competitors at every single turn.

By intimately understanding your customers, their wants, and expectations you can not only meet them but exceed them at the lowest possible cost. Done right, strategic supply chain segmentation allows you to turn your organization's supply chain into an extremely potent and multifaceted sustainable competitive advantage.

The choice is yours - will you be an industry leader in this new technology-driven customer-concentric supply chain orientated world, don't wait until your competitors puts you behind the eight ball...

[And, if you need a remote Supply Chain Specialist, Subject Matter Expert, Advisor, Consultant, or Project Manager or know someone who does, please feel free to connect & message me directly on LinkedIn.]