We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • INDUSTRY PRESS ROOM
  • SUBMISSIONS
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
Home » Focus your supply chain on profitable customers
Perspective

Focus your supply chain on profitable customers

September 19, 2014
James A. Cooke
No Comments

One of the most popular articles on CSCMP's Supply Chain Quarterly's website is "Supply chain segmentation: 10 steps to greater profits." It's an article on how to implement supply chain segmentation written by Kelly Thomas, an executive with the JDA Software Group.

The article's appeal is that it illustrates a fundamental problem in supply chain strategy today. Manufacturers are being asked to provide higher levels of customer service at a time when customers are unwilling to pay more. On top of that, manufacturers face a looming threat from new technologies like 3-D printing, which make it possible for customers to become competitors. Moreover, retailers today are just as stressed as manufacturers. Merchants face intense pressure to maintain the right amount and type of stock for fickle consumers, who can instantly check with a smartphone whether a competing merchant can provide the same or similar product at a lower price.

In this type of competitive landscape, it makes no economic sense for a retailer or manufacturer to offer high levels of customer service or product availability to low-margin buyers. Supply chain segmentation—a topic I cover in my book, Protean Supply Chains}—allows a company to rank its customers and then align its supply chain strategies based on those rankings. After all, why should a company give inventory priority to a customer that generates little or no profit for the enterprise?

The problem with customer segmentation is that it's extremely hard work. It's not easy to determine which customers are the most profitable. Companies that do supply chain segmentation on the basis of a cost-to-serve analysis must examine a broad range of costs, and then delve down into the expense details. Since existing software systems don't easily categorize all the relevant costs for such an analysis, creating a credible customer ranking involves considerable time and effort.

Despite the difficulty of evaluating customer profitability, it's an exercise that companies will be forced to carry out in the decade ahead. As the retail and manufacturing climate continues its transformation, ushering in a legion of new competitors, the winners will be the companies that successfully segment their customer base. Companies can no longer afford to be all things to all customers.

  • Related Articles

    Does your company need a supply chain SWAT team?

    Commentary: Modeling your competitor's supply chain: The untold story

    From many, one: IBM's unified supply chain

James A. Cooke is a supply chain software analyst. He was previously the editor of CSCMP's Supply Chain Quarterly and a staff writer for DC Velocity.

Recent Articles by James A. Cooke

Getting smart about using software intelligence

The payback challenge

A farewell, with thanks

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • Survey: most Americans unaware that truckers face shortage of parking spaces

  • Best practices in logistics sustainability

  • Supply chain executives not yet seeing expected results from technology investments

  • Postal Service plans to seize items mailed with fake stamps

  • Inflation drops again as interest rate hikes hit home, NRF says

Featured Video

20221107korber large vs

Enhancing Customer Experience with Your Supply Chain Strategy

Viewer Contributed
With the rise of e-commerce, many businesses have had to transform their warehouses to handle online orders in addition to regularly scheduled inventory shipments. This means warehouses need more information than ever before to ensure they can meet customers' needs. As a result, companies need to select warehouse...

FEATURED WHITE PAPERS

  • Guide to Pallet Rack Safety

  • 3PLs: Complete Orders Faster with Flexible Automation

  • A shipper's guide to navigating post-pandemic holiday freight

  • THE NEW WAY TO WAREHOUSE: 4 Innovations in Automation & Robotics to Boost Warehouse Productivity

View More

Subscribe to Supply Chain Quarterly

Get Your Subscription
  • SUBSCRIBE
  • E-NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2023. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing