Segmenting your Supply Chain for Digital transformation

Robust and relevant processes are the foundation of digital transformation

Digitization happens around a process and if the processes in place are not optimal,  realizing the true value of digitization of your Supply Chain will be challenging. What is the most effective strategy to implement digital is a very broad discussion topic in itself. You will find a plethora of white papers and videos from “experts”  on best approaches.  The fact is-there is no standard cookie cutter approach to Digital Transformation in Supply Chain. That topic is also not the focus of this article but the gist is that one of the most important aspect of Digital Transportation approach is that:

Process transformation needs to happen before technology comes into play.  That does not mean that you can ignore the technology aspect completely during process transformation. Being aware of the technology elements during the process transformation stage is critical as it helps you design your processes in a way that technology can be leveraged in the most efficient way.

Where does Supply Chain Segmentation come into play in this?

In Supply Chains, segmentation plays a key role in process transformation. To better understand that, we need to understand what Supply Chain segmentation means. Chopra el al define Supply Chain segmentation as:

Segmentation stratifies the end-to-end Supply Chain into logical groups based on the various characteristics of the product, customer, supplier, distribution channel, etc.

These grouping are used to optimize demand and supply planning and scheduling  by providing differentiated services for each group. For example, it can be used to group customers with similar fulfillment needs and then develops distinct Supply Chains to meet those needs.  As evident from the definition above, it leads to creation of multiple Supply Chains within a Supply Chain, each of which are optimized for a particular segment.  It is therefore critical that any digital implementations take place only after these multiple Supply Chains have been implemented.

For a more in depth understanding of how Supply Chain segmentation works , please refer to this post on Supply Chain segmentation approach:

Supply Chain segmentation : An applied example

Examples of Digital Transformation after Supply Chain segmentation

Example 1 : A leading beverages company

Based on a segmentation exercise, a leading beverage company figured out that  a segment of its customers need a more personalized experience. The company created a fulfillment process exclusively for this segment and leveraged Digital technology to deliver the personalized experience.  The company completely digitized its Supply Chain in the development of freestyle machines. Freestyle presents more than 100 different beverage options, with all of the company’s drink products available to the consumer from a single source at the point of sale. The machines are managed and replenished with raw materials in an entirely automated manner.

Example 2: A leading Pharma retail chain

A leading Pharma retail chain determined through segmentation that it can leverage both efficient and responsive Supply Chains within the same Supply Chain for mail order prescription fulfillment. There were other nuances involved as well in the segmentation like the storage and logistics temperature requirements of the medicines etc. but the gist is that based on the segmentation exercise, the company created multiple Supply Chains. Then, for the segments and Supply Chains where rapid fulfillment and visibility was critical, it leveraged best in class Digital technologies to provide the visibility, interface and planning. It even created separate warehousing processes for these different Supply Chains, where the pick, pack and dispatch process for the responsive Supply Chain were highly automated.

Example 3: A leading Fashion retailer

A leading fashion retailer segmented its different brands and developed separate Supply Chains for each of these brands. For the brand where the end customer was seeking more personalization,  and new varieties and was more tech savvy, a complete digital experience was provided. On the marketing side, it allowed them to personalize certain aspects of the apparel, whereas on the Supply Chain side, digital enablement allowed for rapid customization and fulfillment.

Summary

Technology plays a key role in Digital Transformation but leveraging technology on top of a robust, digitally aligned process is the key to successful transformation.

In my next post, we will go through an example of how to select optimal digital technologies for a Supply Chain after a successful process transformation.

 

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