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An Evaluation Of Managing Diversity In The Supply Chain: A Case Study Of An Electrical Distributor In The UK

Burgess, J., Maden, Will, Savage, Christopher J. and Slater, Alan (2010) An Evaluation Of Managing Diversity In The Supply Chain: A Case Study Of An Electrical Distributor In The UK. In: Proceedings of the 15th Annual Logistics Research Network Conference. The Chartered Institute of Logistics and Transport UK, Northamptonshire, UK, pp. 81-88. ISBN 9781904564348

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    Abstract

    Purpose
    The method of understanding and managing the diversity within a business is at the heart of the
    reasoning behind the concept of ‘supply chain segmentation’. The overarching principle is to find
    economical segments within the diverse product and customer mix and to match differentiated
    strategies accordingly. In essence the strategy balances supply chain costs for individual products
    against their value to the business. The strategies are selected depending on the properties of each
    segment. The aim is to prioritise resource to the products and customers which contribute the highest
    proportion of sales and to reduce operational costs to those that contribute the lowest proportion of
    sales, whilst matching service level requirements. As a result overall costs are reduced and
    subsequently profits are increased. The research project aims to show how a segmentation
    methodology can be applied to all planning levels, strategic, tactical and operational and the extent of
    which this can improve service levels and reduce operational costs.
    Research Approach
    The research project is based on a UK company operating in the electrical industry. A case study
    research strategy is appropriate in this context due in part to the complexity of the problem but also
    because it is the most feasible way of testing the efficaciousness of the strategy employed.
    Furthermore, a working supply chain provides the platform to implement new solutions where
    observable results can be examined. It is not possible to form a supposition of the benefits of such a
    strategy without carrying out a project of this kind. The inventory system is modelled using a discrete
    event simulation (DES) method and this provides the platform to test a number of segmentation
    strategies.
    Findings and Originality
    Uniform policies have created high volumes of stock obsolescence and logistics costs that exceed
    product margins and these have left many products and customers unprofitable. When segmentation
    strategies were employed within all levels of the business it was shown to create significant
    improvements. The results from the DES model showed that by aligning appropriate inventory
    strategies to sectors of products which are categorised by volume and variability there was a
    reduction in overall stock holding and an increase in service levels. Extensive documentation is
    available regarding many of the concepts and principles which are adopted as part of the supply chain
    segmentation methodology; however, little information has been published regarding a specific
    approach, the financial justification, and measurement of supply chain performance improvements of
    segmentation strategies.
    Research Impact
    The impact of research has been to show the use of segmentation using multiple variables throughout
    the supply chain. Building on the six segments proposed by Smith and Slater (2001) an extra
    dimension is added for lead time variability. Furthermore, it shows which specific strategies and
    respective parameters are suited to each segment.
    Practical Impact
    The adoption of a supply chain segmentation methodology has real benefits for companies. The
    importance of segmentation has been stressed for some time (Fuller et al., 1993; Fisher, 1997; Lee,
    2002; Payne & Peters, 2004) and the application of this strategy can provide a method which provides
    businesses with a great opportunity to use smarter ways of purchasing, storing and delivering their
    products.

    Item Type: Book Chapter
    Subjects: H Social Sciences > HB Economic Theory
    H Social Sciences > HD Industries. Land use. Labor
    Schools: School of Applied Sciences
    Related URLs:
    Depositing User: Sara Taylor
    Date Deposited: 05 Oct 2010 13:36
    Last Modified: 19 Oct 2010 14:55
    URI: http://eprints.hud.ac.uk/id/eprint/8761

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