A Supply Chain Segmentation Strategy Requires Executive Leadership

Last Thursday night I was in Dallas facilitating a discussion on supply chain segmentation at a very, very nice restaurant for JDA.

The way JDA defines supply chain segmentation is as “the dynamic alignment of customer channel demands and supply response capabilities” across the extended value chain.  You can segment by customers, products, channels, or regions, and as some in the discussion pointed out, by suppliers as well.

The part of the discussion that sticks with me was initiated by a supply chain executive from an alcoholic beverage distributor.  When they were short on inventory for a hot selling product, their strategy was to allocate the product to “white dining cloth” establishments, despite that fact that there was no evidence that these customers were more profitable, more important, or will drive growth.  He said he would love to implement a supply chain segmentation strategy at his company.

When I asked him what was preventing that, was it people, process or technology?  He said they had all the technology they needed already.  It was mainly people, and the fact that it would be hard to get key players to follow new segmentation processes.

“We are a family owned business.  It is very hard to get fired except for breaking policy.  That makes putting new supply chain strategies in place very difficult.”

“Don’t get me wrong, this is not all bad.  I use to consult for another family owned business that worked to squeeze every penny out of the business.  Every other week they would fire someone and escort them out of the building.  Meanwhile, the third generation all had multiple mansions.  The climate was oppressive.”Of the two, he made it clear, he much preferred working at a people friendly company.

I was moderating.  It was not my job to offer any advice.  And truthfully, at the time, I didn’t have any.

But as I thought about this, one of the things that came to mind is the last slide of so many supply chain presentations I have seen.  That slide generally gives advice to other companies that would like to pursue the same kind of project.

And on that slide, you will almost always see “Executive Sponsorship” as one of the keys to a successful project.

What would executive sponsorship mean in this context?  If the CEO, or another top leader, called key obstructers or laggards into the office and told them that the supply segmentation strategy was very important to the company, explained briefly why that was so, and asked the employee to get on board, most employees would find it very difficult to refuse.

In short, I don’t always think achieving supply chain success is a choice between being cut throat or people friendly, but I do agree with that last slide in so many presentations.  Executive leadership is critical for success when initiating new supply chain projects.