Product value-density: managing diversity through supply chain segmentation

Author： Lovell Antony Saw Richard Stimson Jennifer

ISSN： 0957-4093

Source： The International Journal of Logistics Management, Vol.16, Iss.1, 2005-06, pp. : 142-158

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Abstract

Purpose ‐ Aims 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/approach ‐ The 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. Findings ‐ A 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/value ‐ Demonstrates the paramount importance of throughput, demand variability/service factor and PVD as the key drivers in the segmentation process.