𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 𝗯𝘆 𝗲𝘅𝗰𝗲𝗽𝘁𝗶𝗼𝗻….

Segmentation goes beyond mere Pareto analysis; it requires a consensus-driven process with buy-in from both Sales and Supply Planning.

The 80/20 rule is handy, but only focusing on top sellers can miss risky, unpredictable SKUs that disrupt your supply chain.

True segmentation means prioritizing based not just on volume, but also on demand volatility/predictability.

While supply planners often employ their own version of Segmentation using ABC classification based on planned stock levels, simply incorporating these classifications into demand forecasting may not yield significant benefits — so you need to consider the other dimensions:

✅ Volatility/Unpredictability
✅ Intermittency
✅ Age of the SKU
✅ Customer Concentration – how many customers are buying this
✅ New Product – PLM enabled

Classify and assort your SKU population along two key dimensions:

𝗛𝗶𝗴𝗵 𝗩𝗼𝗹𝘂𝗺𝗲, 𝗟𝗼𝘄 𝗩𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆 (𝗧𝗵𝗲 “𝗛𝗼𝗿𝘀𝗲𝘀”)

These are your bread-and-butter products. They sell in large quantities, and the demand is stable.

𝗛𝗶𝗴𝗵 𝗩𝗼𝗹𝘂𝗺𝗲, 𝗛𝗶𝗴𝗵 𝗩𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆 (𝗧𝗵𝗲 “𝗕𝘂𝗹𝗹𝘀”)

These are high-stakes items. They drive significant revenue but are hard to predict.

𝗟𝗼𝘄 𝗩𝗼𝗹𝘂𝗺𝗲, 𝗟𝗼𝘄 𝗩𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆 (𝗧𝗵𝗲 “𝗦𝗹𝗲𝗲𝗽𝗲𝗿𝘀”)

These items move slowly but predictably.

𝗟𝗼𝘄 𝗩𝗼𝗹𝘂𝗺𝗲, 𝗛𝗶𝗴𝗵 𝗩𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆 (𝗧𝗵𝗲 “𝗣𝗿𝗼𝗯𝗹𝗲𝗺 𝗖𝗵𝗶𝗹𝗱𝗿𝗲𝗻”)

These items are the most difficult. They don’t sell often, but when they do, it’s unpredictable.

This is a good start. Simple to do. Higher precision can be achieved by replacing volatility with Forecastability.

Read our related posts:

• Segmentation Is Dead. Long Live Segmentation!
• How to Solve the PLM Trap in Demand Forecasting
• Demand Planning Maturity Model: Why Most Companies Stall at Level 2-3