Product value‐density: managing diversity through supply chain segmentation

Abstract

PurposeAims to identify the importance of segmentation both as part of the network design process and as an operational tool for correctly allocating products to appropriate supply chains.Design/methodology/approachThe allocation is based upon a wide range of possible factors relating to the characteristics of the product, to the market, to the source and to the geographic/commercial context. The application of this framework is presented in a case study of a global electronics company, where large costs savings were achieved through the segmentation of supply chains.FindingsA logical basis for segmentation is derived and an operational framework developed, which highlights the importance of product value density (PVD), throughput volume and product availability.Originality/valueDemonstrates the paramount importance of throughput, demand variability/service factor and PVD as the key drivers in the segmentation process.