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Exploring Supply Chain Segmentation

Supply chain segmentation is the process of dividing a supply chain into smaller, more manageable parts, or segments, in order to improve the efficiency of the supply chain. Segmentation allows for the optimization of resources and ensures that the correct resources are allocated to the right areas. This process of segmentation can involve breaking down the supply chain into components such as transportation, production, inventory, and distribution. Segmentation also allows companies to identify areas of improvement and areas that require more attention and resources.


The concept of supply chain segmentation first emerged in the late 1990s, as companies began to realize the potential for improved efficiency and cost savings that could be achieved by breaking down the supply chain into smaller, more manageable parts. Since then, the concept of supply chain segmentation has become more widely accepted and applied in many industries.


The key authors in supply chain segmentation include:

-John Gattorna: Gattorna is widely considered to be the father of supply chain segmentation, having first proposed the idea in his book "The Living Supply Chain."

-Philip Anderson: Anderson is widely cited for his work on supply chain segmentation and is the author of "Managing Supply Chain Risk: A Strategic Approach."

-Steven L. Goldman: Goldman is the author of "Supply Chain Segmentation: A Guide to Understanding and Implementing the Key to Profitable Management" and is an expert on supply chain segmentation.

-Peter Drucker: Drucker's book "The Effective Executive" is widely cited for its discussion on supply chain segmentation.


The main theories in supply chain segmentation include:

-Optimization theory: This theory suggests that a segmented supply chain can be optimized to achieve the highest level of efficiency and cost savings.

-Risk management theory: This theory suggests that segmentation can help reduce supply chain risk by allowing companies to better identify and manage risk-prone areas.

-Competitive advantage theory: This theory suggests that segmentation can help a company gain a competitive edge by allowing it to better differentiate its supply chain from its competitors.

-Dynamic theory: This theory suggests that segmentation allows for the creation of a more dynamic supply chain that is more responsive to changes in the market.


The leading theory on supply chain segmentation is the optimization theory, which suggests that a segmented supply chain can be optimized to achieve the highest level of efficiency and cost savings. This theory is based on the idea that segmentation allows for the optimization of resources and ensures that the correct resources are allocated to the right areas. By segmenting the supply chain, companies are able to identify areas of improvement and areas that require more attention and resources.


Some of the industry leaders in supply chain segmentation include Amazon, Walmart, Apple, and Microsoft. These companies have implemented advanced segmentation strategies to improve the efficiency and cost savings of their supply chains. Amazon, for example, has segmented its supply chain into four distinct parts: delivery, warehousing, production, and customer service. These segments provide Amazon with a competitive advantage and allow them to optimize its resources and costs.


The way forward for supply chain segmentation is to continue to improve the process and apply it more widely. Companies should look to leverage the latest technologies to improve their segmentation strategies and increase their efficiency and cost savings. Additionally, companies should look to apply segmentation to a wider range of activities, such as inventory management and customer service, in order to gain a competitive edge.

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