Matt Davis

A member of the Gartner Blog Network

Matthew Davis
Research Director
3 years at Gartner
12 years IT Industry

Matt Davis is a Supply Chain Research Director and lead analyst for Supply Chain Strategy. Read Full Bio

On-Demand Supply Chain Webinars

by Matt Davis  |  August 21, 2013  |  1 Comment

 “Would anyone actually sit for 45 minutes or so to listen to a webinar?”  It’s a question I’ve asked a lot recently in talking with supply chain organizations on strategy and segmentation.  Both topics are essential to long-term profitability and both are most directly encumbered by communication issues.  In fact, I asked 103 companies working on supply chain segmentation initiatives what their biggest roadblocks have been so far and 86% of the responses were directly related to communication.

A common link to communication issues in both broader supply chain strategy and in segmentation initiatives is that people use the same term to mean different things AND they have different ideas on the scope of the work.  It will take time to get everyone rowing the same boat at the same speed, but step one is establishing a base of knowledge across the core team… and often across the entire supply chain organization.  So then comes the question, “Would anyone actually sit for 45 minutes or so to listen to a webinar?”  If the answer is “yes”, then you need to take advantage of the free on-demand supply chain webinars our research team has recorded. 

Below, I have included five of the highest rated webinars we’ve recently recorded.  You can also download all of the slide content from these links as well.  At the bottom of this post you’ll find a link to a full list of available webinar content.  Have fun!

How to Create a Demand-Driven Supply Chain Strategy

An understanding of the journey to demand-driven maturity will aid in communicating a long-term supply chain vision and sequencing improvement activities to achieve the vision faster. In this webinar, we examine how supply chain executives should move their companies through the journey. In this webinar, you’ll learn:

  • If there is a known path to reaching demand-driven maturity
  • How to use Gartner’s the five-stage Demand-Driven Value Network maturity model to create short-and long-term strategies
  • How best-in-class companies create a supply chain strategy that connects to corporate strategy while providing clear guidance to each of the supply chain functions

 Maximize Profitability: How to Integrate Cost-to-Serve and Supply Chain Segmentation

Most companies don’t allocate the cost of supporting customers and products based on the complexity they drive in operations.  As a result, unprofitable business relationships are secretly subsidized by a profitable minority.  Several leading organizations are using a “menu of supply chain services” to set differentiated cost/service goals and maximize profitability across all customers and products.  We will explore:

  • Best practices in analyzing the trade-off between supply chain costs and service levels
  • How leaders are integrating cost-to-serve analyses with supply chain segmentation through a “menu of services”
  • How to start or accelerate progress on cost-to-serve initiatives at your company

 Value Chain: Implementing Supply Chain Segmentation

Becoming demand-driven requires the ability to understand customer value, as well as the capabilities to deliver upon those findings. The next generation of supply chain leaders will manage a portfolio of supply chains that provide differentiated outputs, aligned to unique customer value characteristics. We will explore:

  • How the supply chain can create differentiated value for customers
  • How integration of customer segmentation, supply chain segmentation and cost to serve enhance customer value
  • How to create a customer-driven vision that you can execute

 Supply Chain Strategies for Emerging Markets

We are on the cusp of the most explosive growth opportunity since the industrial revolution, with emerging market consumption expected to grow by $30 trillion by 2025. Businesses are positioning to tap into that opportunity and supply chain organizations are tasked with being the engine to serve that growth. While the opportunity is compelling the challenges are daunting. This webinar presents recent research on how to build a successful supply chain that addresses emerging markets. In this webinar, you’ll learn:

  • How manufacturing strategies should be localized to support emerging markets
  • What is most important to ensuring effective demand planning in emerging markets
  • How to implement a supply network that manages the unique eco-system in these regions
  • How to define the best talent management program so essential to these markets

 How the Nexus of Forces is Transforming the Service Supply Chain

Building on the research for the Magic Quadrant for Field Service Management, this webcast will highlight how the Nexus of Forces (social, mobile, cloud, and information) is creating competitive differentiation for service businesses in many industries.


Supply chain organizations face unyielding pressure to reduce costs, improve service and support new growth initiatives. The Nexus of Forces creates new opportunities to accomplish these goals. In this webinar, you will learn:

  • How the Nexus of Forces applies to service businesses and their supply chains.
  • What new technology companies should consider.
  • How to use the factors in the Nexus of Forces to create new service opportunities.

 You can access the full list of available content at All On-Demand Supply Chain Webinars

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Category: Demand Sensing and Shaping Gartner Supply Chain Top 25 Supply Chain Risk Management Supply Chain Segmentation Uncategorized     Tags: , , ,

US High Tech Manufacturing: Do a Few Actions or Many Words Speak Louder?

by Matt Davis  |  July 16, 2013  |  1 Comment

As a supply chain practitioner in the High Tech industry for 10 years and having covered the industry as an analyst for 2, I tend to keep an eye out for High Tech supply chain stories.  Over the last year, there have been several announcements about opening sites in the US or at least plans to do so.  In fact, links below include Motorola (now Google), Apple, Foxconn, Intel and Lenovo all with single examples of US manufacturing plans.

Motorola to Make Moto X Mobile Phones in Texas

Apple’s $100M US Investment

Foxconn Talks US Manufacturing

Intel Helps Make Oregon #1 in Manufacturing Jobs

Lenovo Opens Plant in North America

So as I started to see these stories build, I wondered, “Are these early signs of a larger trend?” 

WHAT? Fortunately, my colleague runs an offshore/nearshore/reshore study every three years.  2012’s study had 300 global, supply chain director and above respondent’s, 50 from High Tech companies.  The study includes a lot of great findings with a common theme.  Reshoring (including to the US) is occuring, but it’s not a massive wave (full results available to Gartner clients at “Asia Plays a Key Role in U.S. and European Supply Chains Through 2015“).  What we are seeing in these news links above – and across industries – are smart supply chain organizations balancing their global manufacturing strategies so that they can meet regional requirements for speed, quality and agility.  Let’s look specifically at supply from Asia used for demand in the US… I’ve included the cross-industry results but take a look at the High Tech respondents.


Between 2009 and 2012, High Tech companies did shift some of the US demand volume to be supplied from regions other than Asia, but going forward into 2015, they plan to increase percentage even beyond 2009 levels.

WHY?  Cost, quality and speed are present in the top 6 influencers on outsourcing expectations, but security of the supply chain a particular challenege for High Tech manufacturers who want to sell to larger corporations or government customers. IP / brand protection has been a consistent issue in evaluating High Tech outsourcing and the 2012 study shows continued disappointment.  In fact, you’ll see that High Tech responds the most negatively across the supply chain industries represented.


There is a fair amount of work in the space of secure supply chain and I have found particular value in the efforts of The Open Group.  We also address the trends of secure supply chain and it’s impact on High Tech supply chain strategy in a recent publication High-Tech Industries Supply Chain Update, 2013.

WHO?  The final piece of data that jumped out at me in reviewing the study results is who is responsible for the outsourcing strategy.  It’s the light blue bars that really grabbed my attention.  Outsourcing is truly a cross-functional decision and organizations have involved the entire supply chain even if the final decision tends to fall with Business Leadership and Manufacturing.


These results say something clearly. Outsourcing is not a silo’ed decision and it has progressed beyond functional cost reductions.  The decision on where to manufacture is a supply chain… no rather a corporate strategy decision.  My takeaway is that what we’re seeing in the news stories is a recognition that supply chain and manufacturing stratgy cannot be one-size-fits-all.  It is better decision making.  Manufacturing in Asia is right for some customers and some demand but not all.  A return to US manufacturing will enable companies to deal with IP protection, speed and agility challenges for specific customers.  It does not mean that all or even the majority of volume will move.

Will we continue to see announcements about US manufacturing? Yes. And it’s good news for many reasons.  One of those reasons is that supply chain organizations are now operating globally.  We’ve tried manufacturing in region for region. We’ve tried global hub for all regions. And now we are seeing hybrid models.  By starting with total global demand, supply chain can help create a global supply strategy that meets many customer needs.  I believe we are seeing yet another positive result of operating demand-driven value networks.

What do you think? Near-shore, reshore, no shore… What’s going to happen?

I’m now on Twitter @psumattdavis

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Category: Demand Sensing and Shaping Emerging Markets Gartner Supply Chain Top 25 Supply Chain Segmentation Uncategorized     Tags: , , ,

One Month Until Gartner Supply Chain Exec Conference in Melbourne

by Matt Davis  |  July 8, 2013  |  Comments Off

As I look at this week’s 90+°F forecast with thunderstorms every afternoon, the thought of traveling to Melbourne for a mild winter break sounds awesome.  We are putting final touches on presentations and prepping our industry co-presenters currently and the content is going to be great.  This event is extra special for me because it has been more intimate which leaves a lot of time to really get to know everyone there, both peer interactions as well as for me as an analyst with the attendees.  Our ANZ/APAC conference on August 12 & 13 is the newest of the three Supply Chain Executive Conferences Gartner runs each year so I thought I would collect all the relevant links in one place for anyone thinking about attending.

Wondering about the conference theme and content?  Check out this quick video I recorded: Reimagine Supply Chain: Fast, Forward, Focus

We recently announced all of our speakers including our guest keynote presentations HERE.  Here is some quick information on our speakers and  keynotes.


After our US conference in May, I left with so much positive energy that I created a Top 10 Moments.  Check it out to get a sense of what we expect in August in Melbourne.

And of course, the main conference site has all of the information on agendas, accommodations, speakers and other helpful tools.

I really hope to see you there!

I am now on Twitter @psumattdavis

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Category: Uncategorized     Tags:

Can Your Supply Chain Say, “Yes, but…”?

by Matt Davis  |  July 1, 2013  |  Comments Off

A supply chain that says “yes” to every customer request, without enforcing required tradeoffs, will erode profitability and cannot manage a set of standard, repeatable processes. It overservices certain customers, while inconsistently servicing others.

A supply chain that says “no” to any customer requests outside the standard process is stuck with one-size-fits-all processes and cannot satisfy varying customer needs or pursue new profitable growth opportunities.

The most profitable supply chains can say “yes, but ….” They are able to translate internal and external customer requests into required capabilities and trade-offs, while capturing the impact to key metrics. Yes …” we can develop a 24-hour delivery supply chain, but…it will require finished goods inventory, which increases cost by X%. So… Can your supply chain say “Yes, but …”?

I just published new research “Supply Chain Guide to Making Smart Trade-Offs With a “Yes, but …” Value Chain” which details the concept and provides a roadmap on how to implement in your business.  In that research, I define the “Yes, but …” Value Chain as an integrated value chain that can profitably make customer-focused trade-offs by assessing the different value requirements of customers, identifying the constraints against delivering those requirements and enabling the right capabilities in the supply chain when value is greater than cost. It is the result of integrating customer segmentation, supply chain segmentation and cost to serve.


Consider how this model works.  If you start with customer segmentation, which is analysis of the different value expectations of your customers, you’ll find that demand is clearly not one-size-fits-all.  Some customers value price over speed, others services over price and some speed above all.  In one example, I spoke to a Pharma manufacturer that wants to have service level differentiation in different markets.  It is trying to identify what it does different to support 97% and 99% service level models.  This question is answered in the intersection of customer segmentation and supply chain segmentation. What’s my constraint?  A high volume / low variability product will have to be serviced with a 99% service level differently than a low volume / high variability product.  Supply chain segmentation is the process of identifying exactly what those differences are both from a physical network design as well as with business processes.  And a complete solution must solve across the end-to-end supply chain and not just with inventory or distribution. 

As you segment the supply chain, you have to understand the quantitative impact.  Back to the service level example… Hitting 99% with a low volume / high variability product will likely require additional inventory buffer and/or increased agility in planning, sourcing, manufacturing and distribution.  All of these changes will increase cost.  So the critical third element is understanding and enforcing cost / service tradeoffs.  The “Yes, but…” company will ask “How much does this cost us?” and then take that cost back to internal and external customers to ask, “Are you sure you’re willing to make this tradeoff for what you’ve asked for?”

That’s the theory, what does it look like in practice.  From a case study I wrote on a Consumer Products manufacturer… By starting the segmentation process with customer needs, it uncovered that smaller trade stores typically can’t afford to stock inventory and, therefore, delay placing orders and end up out of stock regularly. Consumers, who are paying a premium for certain products, expect 100% on-shelf availability of these same products which have low volume and high variability week-to-week. This company designed a segmented model that could ship a mix of products in a newly designed, single package by courier daily at a guaranteed 24-hour time frame. Yes, it could create 100% on-shelf availability, but only if it changed packaging and distribution processes with a higher cost per unit. After implementation, however, sales in this segmented approach grew at more than five times the growth rate of the stores without this option.

So why should you care about any of this?  Just check out the results of three companies that I’ve written case studies on over the past three years.

  • High-tech manufacturer — A three-year transformation resulted in a 30% reduction in supply chain cost, a 97% reduction in SKU complexity and a double-digit increase to forecast accuracy.
  • Consumer goods manufacturer — A pilot of segmentation resulted in 150% revenue growth for a product line within a market and sustained growth of 200% postpilot.
  • Mobile device manufacturer — Supply chain worked with product development to complete product segmentation and reduced supplier complexity by 70% and component parts complexity by 35%.

I continue to see a lot of discussion on supply chain segmentation, the potential benefits and why leaders have moved on it, but very, very little in terms of how to do it.  The “how to” advice has been a gap that we’ve worked the last three years to help address.  And it is exactly what this most recent publication brings together; a standard definition and scope, a roadmap that will take you through design, implementation and governance, AND tools and frameworks to help throughout that roadmap.  The research breaks down a very big topic to:

  • Get alignment — Solve the single biggest issue with communication. Get everyone aligned on the definitions, scope and scale of customer segmentation, supply chain segmentation and cost to serve.
  • The known road map — Learn our seven-step methodology for integrating customer segmentation, supply chain segmentation and cost-to-serve implementation initiatives. We break down this seven-step road map into three key phases, with specific guidance, tools and frameworks for:
    • Designing
    • Piloting and implementing
    • Governing and refining
  • Readiness assessment — Are you ready to begin the seven-step road map? Assess your supply chain to see if you have the foundational capability needed to implement segmentation and cost to serve.
  • Communicating the strategy — We provide tools to craft and communicate a strategy plan that connects your long-term vision, short-term initiatives and sequence of activities in between.

This advice is based on 3 years of dedicated research on supply chain segmentation with over 130 companies.  The immediate reaction on this new research has all been very positive and I look forward to helping more and more companies through this journey.  If you’re interested in learning more, check out this complimentary, on-demand webinar that I recently recorded. – Implementing Supply Chain Segmentation –   It shares the 7 Step implementation roadmap and provides more examples of how companies have been successful with the “Yes, but…” concept.

And please chime in… share your successes, questions or objections on The “Yes, but…” Value Chain.

Follow me on Twitter @psumattdavis

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Category: Supply Chain Segmentation     Tags: , , , ,

Has Supply Chain Made It On Broadway?

by Matt Davis  |  June 21, 2013  |  1 Comment

Kinky Boots, this year’s Tony winner for Best Musical, is about saving a shoe manufacturing plant in a small UK town by switching production from men’s loafers to high-heeled boots for drag queens. Probably sounds like your average day in supply chain, right?  Are we all the inspiration for Broadway and never knew it?!

I recently moved to NYC and in addition to gorging myself on great food, I also discovered same day rush tickets for Broadway that come at half the price of regular seats.  One of the shows I’ve been able to see is “Kinky Boots” which just last week won Tony’s for Best Musical, Best Lead Actor and several others.  And what’s really amazing, a good two-thirds of the show takes place in an old manufacturing plant.

The basic story is:

  • Family manufacturing plant of men’s shoes has slumping sales
  • Son takes over plant to discover financials are terrible as demand for shoes has shifted from quality to low cost, quick fashion
  • Son senses an unmet demand: high-heeled boots that can support the weight of a man dancing on stage
  • Son aligns product, demand and supply. Demand for kinky boots is analyzed, translated into new product specs and supply is aligned with objectives for quality, how to use new materials and updated processes
  • Boots a huge success, commence celebration group dance number

It might as well have been titled: “Kinky Boots: How demand-driven principles can save your factory!”  Ok, so there’s one example of Broadway’s admiration of supply chain, but are there others?  If we look for the real, hidden meanings, I think so.

  • Is “The Lion King” not an homage to product lifecycle management?  The “Circle of Life” is clearly describing the difficulties with new product launches and end-of-life management.
  • “Wicked”, the story of conflict between a good witch who’s not too good and a bad witch that’s really not that bad, celebrates challenges between Sales and Supply Chain in Sales & Operations Planning. (you can choose who’s which witch)
  • “Les Mis” tells the story of one man harassing another for the rest of both of their lives because one got some bread for free.  If it’s not the story of the procurement profession, I don’t know what is.
  • “War Horse” is literally a dog and pony show.
  • And “Phantom of the Opera” is about a dude who refuses to show his face at meetings and just goes around ruining other people’s plans. I had that job. It’s called master scheduling.

Maybe I’m wrong, but I do know I had a great time seeing an assembly line as a main stage prop.  What do you think? Are there other shows with hidden meanings?

I am now on Twitter @psumattdavis

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Category: Demand Sensing and Shaping Gartner Supply Chain Top 25 Supply Chain Segmentation Uncategorized     Tags: , , , , ,

Supply Chain Segmentation: A “How to” Webinar

by Matt Davis  |  June 4, 2013  |  Comments Off

I recorded a webinar yesterday on supply chain segmentation that provides a seven step methodology to implementing the concept as well as some easy to use frameworks to move through those seven steps.  It is available at:

Implementing Supply Chain Segmentation

We begin the webinar with findings from our 2013 CEO study in which we asked 180 CEOs in supply chain related industries about key strategic challenges.  Some of the findings were quite compelling:

Based on these challenges, we then share how you can use the supply chain as a competitive advantage in addressing these issues by integrating these three areas:

  • Customer segmentation — Understanding the unique requirements of different customers. Identifying clusters of similar demand across all customers, products and services that will dictate requirements for value chain capability.
  • Supply chain segmentation — The process and governance to create differentiated capability for end-to-end supply chains to support unique demand requirements. Moving from one-size-fits-all supply chain management to managing a portfolio of supply chains that delivers upon different value characteristics such as speed, cost, service and differentiation, among others.
  • Cost to serve — The ability to broadly and deeply understand supply chain costs and their relationship with the activities and services that drive them. A fact-based method for determining the appropriate service mix and operational model for each customer or product. Analytical capability to calculate the historical and forward-looking profitability of products, customers and routes to market.

We go into detail on this “Yes, but…” Value Chain model in the webinar and explain how it can address these key challenges identified by our CEOs.  The webinar is live on demand… and reminder that I am now on Twitter @psumattdavis

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Category: AMR Supply Chain Top 25 Gartner Supply Chain Top 25 Supply Chain Segmentation Uncategorized     Tags: , , , ,

Complimentary Supply Chain Segmentation Webinar – June 3 / 4

by Matt Davis  |  May 29, 2013  |  Comments Off

I’ll be hosting a complimentary webinar next week on supply chain segmentation and its role in enabling demand-driven maturity.  Supply chain segmentation only continues to grow in importance as global customer requirements challenge the one-size-fits-all supply chain and is a best practice being implemented by 19 of our Supply Chain Top 25.  The webinar is timed for our ANZ and APAC audience at 10:00 AM AEST on June 4 but is also available for any night owls or early birds.  US time is 8:00 PM ET on June 3rd (detailed information and links below).


If you’re interested in additional information on supply chain segmentation, here are a few blog entries I’ve written on the subject:

ANZ and APAC community, can’t wait to see you in Melbourne in August. 

I’m on Twitter now @psumattdavis


Webinar details…

Please join us for a complimentary Gartner webinar designed especially for supply chain leaders.

Tuesday, 4 June

Value Chain: Implementing Supply Chain Segmentation

Presented by: Matthew Davis

10:00 a.m. AEST   REGISTER

Note: This webinar is LIVE.

Leading Gartner analyst Matthew Davis will provide insight into Supply Chain Segmentation best practices and tools to create a demand-driven value network.

Becoming demand-driven requires the ability to understand customer value, as well as the capabilities to deliver upon those findings. The next generation of supply chain leaders will manage a portfolio of supply chains that provide differentiated outputs, aligned to unique customer value characteristics.

We will explore: 

  • How the supply chain can create differentiated value for customers
  • How integration of customer segmentation, supply chain segmentation and cost to serve enhance customer value
  • How to create a customer-driven vision that you can execute

After registering, you will receive a confirmation email with a calendar invitation and instructions on how to join the webinar.

View all upcoming webinars at


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Category: AMR Supply Chain Top 25 Emerging Markets Gartner Supply Chain Top 25 Supply Chain Segmentation     Tags: , ,

Top 10 Moments from Gartner’s Supply Chain Executive Conference

by Matt Davis  |  May 28, 2013  |  Comments Off

Our supply chain community is pretty damn amazing.

As I collected my thoughts on the flight back from Gartner’s Supply Chain Executive Conference, I kept coming back to the incredible positive energy that permeated through all the events of the week.  The three days was a celebration of the best of what supply chain can be and a world-class example of sharing our stories to move the supply chain discipline forward.  My top 10 moments:

#10: 1,100+ Attendees – Over 1,100 supply chain and IT professionals in attendance!  It was incredible to see such a large group and an honor to meet so many of you.

#9: #gartnerscc – A group of tweeters attending sessions throughout the conference kept everyone up-to-speed on all the great messages being shared.  With so much outstanding content running simultaneously, I was delighted to have such a great source of real-time information… especially all the pictures.  Thanks to all who were so active this week!

#8: Packed Track Sessions – I was amazed to see the 300+ chairs filled in several sessions.  We worked especially hard to find a balance of core research with innovation topics, strategy with execution and what to do with how to do it.  I left the conference feeling good about our progress based on my small exit survey of attendees.

#7: Big Data and Supply Chain Analytics – The last day of the conference and still we had standing room only for our session for “Big Data = Big Supply Chain Analytics.” I was excited to share some of the amazing analytics research completed by Noha Tohamy integrated with her and my findings on Big Data in the supply chain released for the first time for our attendees.  The case examples were a hit, especially the use-case from Syngenta on using Big Data for supply chain segmentation analytics.  Attendees (and Twitter) were full of buzz on Noha’s analytics framework:


#6: 3 Newbies in the Top 25 – The 2013 list of the world’s best supply chains was unveiled and we welcome Qualcomm (#24), Ford (#22) and Lenovo (#20) to the list.  Qualcomm excels in its supplier management programs, Ford in product complexity optimization and Lenovo in efficiently growing volumes across several global markets.  Full list here.

#5: 5 Stages – Our recently published 5 Stage Demand-Driven Value Networks (DDVN) model was a key feature in several of the track sessions.  Providing a unifying framework to the many core, foundational and innovation themed sessions, the 5 Stage Model provides granular detail on the journey to a supply chain that enables profitable trade-offs for its customers and business partners.  Click here for a free copy from E2open.

#4: Jim Collins – After rifling through a series of amazing leadership messages, he was referenced by many for the rest of the week.  His best quote: “You are not entitled to anything than the opportunity to be better.”

#3: Supply Chainnovators ™ – Dana Stiffler, VP Research, launched an exciting new program called “Supply Chainnovators” that will share innovations from Supply Chain organizations in companies $1B – $10B in annual revenue. It’s a great new program that will give insight into what leading mid-market companies are doing in their supply chains and how you can implement in your businesses.  Congratulations to the first two Supply Chainnovators, Celestica and Eastman Chemical!

#2: “The Truth Tellers” – Fred Wagner, VP Global Supply Chain Customer Connectivity at Johnson and Johnson, stated in his keynote that the supply chain organization acts as the “truth tellers” for the business highlighting that supply chain has elevated the need for fact-based decision making.  Fred rolled through a series of great takeaways including commentary on the entire supply chain discipline when he said, “Twenty years ago, there was no chief supply chain officer, rather a materials manager in the basement. Now they’re at the table with the CEO.”

#1: Our Community – Cheesy as it may sound, I really am proud to work in an area where the people care so much about what we do.  This attitude was exemplified in the reactions I saw to the announcement of the Top 25 which were, almost without exception, overwhelmingly positive.  At its core, the Top 25 is the best way to start a conversation about supply chain leadership and this year’s group demonstrates leadership in performance and in sharing the knowledge with others.  And to have so many company co-presenters, case studies and inspirational keynotes only further showed why the supply chain community will continue to create value for our customers and provide the globe with the products and services needed, every day.

After an intense week of non-stop action, I left the conference more energized than when I arrived.  Can’t wait to see you in Melbourne and London!

Have a great story to share from the event?  Drop a comment below.

I’m now on Twitter at @psumattdavis

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Category: AMR Supply Chain Top 25 Demand Sensing and Shaping Gartner Supply Chain Top 25 Supply Chain Segmentation     Tags: , , ,

Gartner Supply Chain Top 25 and Supply Chain Segmentation

by Matt Davis  |  April 1, 2013  |  Comments Off

Our Supply Chain research organization is in full swing of our annual Top 25 data gathering, assessment and voting cycle for 2013.  Having just completed many briefings with leading organizations across every supply chain industry, I decided to sit down with Debra Hofman who leads our Top 25 research practice to discuss why so many companies are talking about supply chain segmentation.  Below is a transcript from the conversation we had…

Matt: Before we get into the conversation on supply chain segmentation, can you explain for readers who aren’t familiar with Gartner’s Supply Chain Top 25, what is, why we do it and how we make the list?

Debra: Sure.  The Top 25 is our annual ranking of demand driven leaders – which companies, globally, are furthest along that journey.  Our goal?  To foster innovation in supply chain practices by providing a forum to debate and discuss what it means to be “excellent” in supply chain – when you really dig down into the concept of excellence, you start to realize quickly what a rich discussion it is.   The way we come up with the ranking each year is through a combination of objective financial data for each company, coupled with a more subjective opinion component by supply chain executives from around the world. For anyone who is interested in the details, our methodology is very transparent by design, detailed in the report which is publicly available at

Matt: We just completed briefings with companies from industrial manufacturing, healthcare, chemical and process manufacturing, retail, consumer products and high tech on their 2012 results and future strategies.  I’d say that more than half and at least one company in every one of those industries mentioned supply chain segmentation at some degree.  I’ll readily admit a bias toward the topic given my coverage, so did you hear this as much as I did?  Given you’ve run the Top 25 analysis for 8 years now, have you heard an increase in interest on the topic or is it always on the radar?

Debra:  Absolutely an increase, not only in interest but in companies actually working on segmentation.  Companies have been talking about it for awhile, but more and more are doing something about it now.

Matt: I just looked back at 2012’s Top 25 and 19 of the top 25 companies on the global list are doing some form of segmentation in their supply chain and 11 of those 19 are actively maturing end-to-end supply chain segmentation.  Is supply chain segmentation a differentiator that helps get you into the Top 25?  If not today, do you think it will become that differentiator in the near future?

Debra:  I do see supply chain segmentation as a differentiator for companies.   The “one size fits all” approach almost guarantees that you’re sub-optimizing in some aspect of your supply chain performance. With segmentation, you are identifying the different end to end supply chains that you operate, setting supply chain targets that are aligned with the business goals for each one, and then measuring against those differentiated targets.  It makes sense the benefits of doing that are going to show up in your financial performance.   

Matt: Back in 2010, we analysts went through several sessions to align our positioning on supply chain segmentation.  At that point, we agreed that supply chain segmentation and cost-to-serve were complimentary but NOT interdependent.  Has that positioned changed based on how companies have progressed the last three years?

Debra:  Yes.  We started to find, both through the Top 25 analysis and in our in-depth research on supply chain segmentation that companies who were working on supply chain segmentation also had initiatives for customer segmentation and cost-to-serve as part of the process.  So we asked why…  We uncovered that supply chain segmentation is the process by which companies change parts of their supply networks, business processes or metrics targets to get differentiated outcomes from the supply chain.  Without an understanding of the costs of those changes, the value generated for a customer or what value characteristics customers wanted – and would pay for – supply chain segmentation was like a ship without direction or control.  Customer segmentation identifies the value characteristics which will dictate the needed outcomes from supply chain segmentation (the direction of the ship) and cost-to-serve analysis identifies the impact of designed changes and can estimate the new net profitability (the control of the ship).  Essentially, when supply chain people say they want to do “segmentation”, they will have to address all three of these areas. 

(Matt: by the way, shameless plug… we’ve written a 7 step process by which to do this in “The Seven Steps of the Supply Chain Segmentation Journey”)

Matt: Is supply chain segmentation a fad?  And, if it’s been around as a concept for more than 10/15 years, why are so many companies working on it now?

Debra:  It is not a fad.  Companies have been doing inventory segmentation through item classification, market segmentation in pieces as they’ve grown globally and segmented supplier relationship management for a couple years now.  End-to-end supply chain segmentation extends the benefits from these activities by aligning processes across all supply chain functions rather than just in pockets.  In our demand-driven maturity model, companies at higher levels of maturity are focused on generating profitable value for customers by making tradeoffs, and you can’t do this without segmentation.  It’s emerged – quite rapidly and broadly – because many companies have now integrated their supply chains strongly enough that managing the end-to-end, rather than just silo’ed functions, is finally possible.  The theory always made sense, now it is becoming practical – it’s  a question of evolutionary growth occurring in and across supply chain.

Matt: Should everyone be working on supply chain segmentation?

Debra: No. Well at least not yet.  Supply chain segmentation is a fairly advanced concept and can create a new form of complexity to govern when processes and parts of the physical supply network are split.  Only an advanced company which has strong integration across functions and visibility across the end-to-end network, to cost data and to how decisions are being made will be successful in managing a segmented supply chain.  Even the initial design of a segmented supply chain requires a certain base level of maturity.  As part of the tradeoff analysis which shapes segmentation, companies will need to model impacts to end-to-end inventory, perfect order fulfillment, manufacturing lead time, lead time to customers and profitability.  Many aren’t ready for this yet.  After the design, piloting the segmentation design only works when there is collaboration across supply chain and between supply chain, sales and parts of the product organization.  So, no, not everyone is ready to start working on it.  We tell companies to assess the current supply chain capability and then address any foundational gaps before starting the segmentation design.  Using the value of a segmented supply chain for differentiated business models as a long-term vision can definitely help move along the foundational work, but it doesn’t mean that every company should be working on it now.

Matt: I’m sure you get this all the time… I often hear from people that the peer voting process is a secret, that it’s exclusive or that we selectively filter who actually votes.  It’s a pretty straight-forward process… can you tell people how to vote if they’re interested?

Debra: Yes, we hear all kinds of things about it!  We’d love to hear from anyone who is interested in being a voter – just go to and click on “become a voter”.  It’s true that we can’t take all applicants – we only allow one voter per company, for example, so we have to check and make sure that we don’t already have a voter from your company.  Besides the “1 voter per company rule”, the requirements are pretty simple:  voters have to be in a supply chain or related role at a manufacturer, retailer or distributor.   You don’t have to be at one of the companies being voted on in order to vote, and you most certainly don’t have to be a Gartner client! Voting starts this year on April 3, so let us know.

Some background… Debra and I are both analysts in Gartner’s Supply Chain Research group and work cross-industry with leaders of supply chain organizations globally.  In addition to managing the annual Top 25 methodology and analysis, Debra specializes in metrics, performance management and demand-driven best practices.  My area of coverage is supply chain strategy planning and governance, supply chain segmentation, customer segmentation and cost-to-serve.

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Category: Gartner Supply Chain Top 25 Supply Chain Segmentation     Tags: ,

Supply Chain Segmentation… Why is everyone so one-size-fits-all?

by Matt Davis  |  December 10, 2012  |  Comments Off

Pharma. High Tech. Apparel. Consumer Products. Med Devices. Agrochemical. Heavy Equipment. Even Retailers and Grocers.  All working on supply chain segmentation.  Over the last two years, I’ve watched as supply chain has shifted out of first gear on segmentation initiatives.  If we’re going to call it a bandwagon, let’s just say that it’s starting to get crowded in here.

The goal with supply chain segmentation is to move from a “one-size-fits-all” approach to a portfolio of supply chain execution options.  Most “how to” advice on supply chain segmentation focuses exclusively on 2×2 analysis of historical SKU, product or demand data.  Most often, the 2×2 is a compare of volume versus variability or demand predictability.  The result is a distribution of product performance that can be broken into four quadrants.  In general, companies will arrive at something similar to this 2×2:

Once SKUs / products / demand / etc is broken into these quadrants, you can now define the processes and physical supply network best suited for each environment.  High volume / low variability items can be managed “no touch” or efficiently with a focus on lowest possible cost.  AND it’s actually achievable because the supply response is aligned with the demand pattern.  Other strategies include agility (high touch) and resposiveness (low touch).   But isn’t this internally focused?  What if a customer demands 100% availability? Or a born-on date to show freshness? Or a unique route to market?

Is the approach on moving from “one-size-fits-all”… one-size-fits-all itself?

It is the focus on value as defined by the customer that will challenge (NOT invalidate) the 2×2 analysis.  In starting with the value outcome, you must now address more than just volume and variability.  The key is to marry the two together.  The value outcome is a demand segmentation and the volume / variability analysis is the constraint against that outcome.  Even just defining “customer” gets a bit tricky when you look at the demand network … especially in Industrial Manufacturing and Healthcare industries.

Customers are both the channel partners (distributors, retailers, IDNs, doctors) as well as the end users of products (patients, farmers, consumers).  These customers define value in different ways and your analysis must begin by selecting how far into the demand network the value-based segmentation will extend.  To capture all of these requirements, I have defined three forms of supply chain segmentation. 

(detail on these three types, the implications for your initiative, timelines and budgets shared in “Design the Right Type of Supply Chain Segmentation for Your Business“)

  1. Internal product/supply network — Using historical SKU data on product demand volume and variability, companies design end-to-end efficient, agile and responsive supply chains. Companies with legacy cost-focused supply chains carve out an end-to-end service-driven supply chain. Organizations that compete with service and differentiation create an end-to-end efficient or low touch network.
  2. Channel-back — In order to address varying channel requirements, analysis begins with an understanding of how value is defined by partners or markets. Value attributes include speed to market, freshness, predictability, price (cost), availability, delivery frequency and lead times. The supply chain is then segmented to deliver these value outputs by managing the necessary trade-offs.
  3. End-user-back — Analysis of how end users — patients, farmers, consumers, businesses, etc. — define value highlights required trade-offs. Value attributes can include price (cost), on-shelf availability, value-added services, specialty packaging or labeling, seasonal needs and integrated solutions. The supply chain is then segmented, based on these criteria as opposed to regional or industry-vertical customer segmentations.

The analysis, future-state designs, implementation plans and timelines for these three forms vary. While there tends to be a natural progression through the three types, no one form is necessarily better than the other, and not every company will pursue all three.  So why is so much of the supply chain segmentation conversation focused on volume / variability analysis?  

1) It works… and it adds value.  An analysis of the volume and variability is a great way to estimate the complexity required to bring products to market.  It highlights where variability is increasing required resources and shows which products are predictable enough to automate process support.  It is often a first view into the fact that demand is already segmented and that the legacy one-size-fits-all approach only works for a portion of that demand.

2) It’s where you have the most control.  Historical SKU analysis is going to surface constraints of the supply network.  It enables you to create balance internally by managing inventory, cost, forecast accuracy, perfect order and other supply chain metrics with different targets.  When segmentation stretches into demand outcomes (think lowest cost, fastest speed, always available, highest service level, etc), you have less control.  You are extending the need for differentiated processes outside your four walls into the demand channel, which often has multiple layers of distributors and routes to markets.

3) It was a first step.  Supply chain segmentation is far from a new concept and, yet, very few companies have executed upon it.  It is a concept that has had to wait for the rest of the supply chain discipline to catch up in order to become viable.  Many companies have broken down the functional silos, have enabled collaboration with their network partners and have translated customer value requirements into tangible supply chain needs.  All of this activity was needed to show that supply chain could, in fact, manage trade-offs without undoing years of work on cost reductions.  Product / supply network segmentation is a natural extension of this journey as processes and resources are aligned to the complexity needed based on which quadrant they land in.  Great value… but only a first step.

The most advanced practitioners of supply chain segmentation have advanced into channel-back and end-user-back approaches.  It has likely been a multi-year journey.  Gartner has written case studies on a few of these companies to share their stories, but, in general, any “how to” literature is few and far between.  Here’s why.

1) It is THE source of competitive advantage.  While there has been a lot of talk on supply chain segmentation for at least 20 years, very few can accurately lay claim to successful implementations.  Even fewer can show that their work has progressed past internal product / supply network segmentation into truly (and profitably) managing differentiated outcomes.  So for those who have cracked the nut, now is the time to quietly reap the benefits while the rest catch up. 

2) It is pretty darn complicated to explain.  Internal product / supply network segmentation is often boiled down to the 2×2 analysis and is often directly connected with known product segmentation techniques.  When you extend the analysis into the demand channel, you’re now adding in customer segmentation… and a new form of customer segmentation no less.  Rather than the historical splits by geography or business unit, you must now segment customers based on their desired outcomes.  I have found that to have an effective discussion on channel-back and end-user-back segmentation, the only answer is time.  The solutions are often an overhaul to the entire business model.  Time is needed to work through analysis of customer segmentation and product segmentation while showing how segmentation of the supply chain can be the connective tissue between the two.

3) The wave is coming.  I have actively been working with many companies, in every manufacturing industry, on channel and end-user-back approaches.  Many are through the analysis and planning phases and are now running pilots on the proposed segmentation solutions.  This work is largely kept tight to the hip and the pilots are often in one region or on a select few products.  With success will come expansion.  Expect to see a broad swath of case examples emerging in 2014 on “value based outcomes” and “differentiated business models” as that will be the story of success with these latter two forms of supply chain segmentation.  In particular, I expect to see some unique use cases from consumer products, high tech and pharmaceutical companies.

What do you think?  Is supply chain segmentation just more of the same? Or will it be another step forward for supply chain as a facilitator in corporate strategy?

Bottom Line: If the only analysis you see is a 2×2 of SKU data or comparing volume versus variability, you’re only hearing part of the story… And you’re competitors are certainly happy about that.

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Category: AMR Supply Chain Top 25 Demand Sensing and Shaping Supply Chain Segmentation     Tags: , , ,