- SAP Managed Tags
As the landscape of global trade continues to evolve, the possibility of new tariffs is creating waves of concern across the world's supply chains. Whether driven by shifting geopolitical alliances, trade disputes, or protectionist policies, tariffs can dramatically alter the cost-to-serve, disrupt sourcing strategies, and challenge existing supplier relationships. Companies must stay agile and be prepared to adapt their supply networks and fulfilment strategies with speed and precision to protect margins, maintain service levels, and stay competitive.
To build a truly responsive supply chain, companies must ensure that trade-related strategies are consistently reflected across all key operational processes—from procurement and manufacturing to logistics, costing, and order fulfilment. Only by creating a unified framework can businesses detect, track, and act on exceptions such as tariff changes, sourcing constraints, or shifts in trade policy. At the heart of this framework lies SAP Supply and Demand Segmentation—a foundational capability that serves as the axle around which all these moving parts revolve.
What is SAP Supply and Demand Segmentation
SAP Supply and Demand Segmentation enables companies to plan and execute their supply chain processes considering market and product -specific attributes, without the need of creating lots of SKUs differentiated only by those characteristics. Segmentation based on key characteristics such as country of origin, destination, certifications, and product value, companies can design differentiated, tariff-aware strategies that guide planning, sourcing, and execution decisions with precision.
Segmentation value essentially encapsulates the blueprint of the product and business attributes and can be attached to all supply chain relevant objects or documents. For example, the supply segmentation value can hold the attributes like country of origin and other tariff related parameters along with relevant configuration or logistical characteristics. The demand segmentation value can hold the attributes like country of destination and similar characteristics. The segmentation rules match the demand and supply segmentation values ensuring compliance. These rules are respected throughout end-to-end order-to-cash and supply chain processes.
Integration of Supply and Demand Segmentation with end-to-end business processes
SAP Supply and Demand Segmentation plays a crucial role in optimizing supply chain operations by integrating seamlessly with various processes to mitigate the risks from tariff related turbulences.
Integrated Business Planning
Characteristics Based Planning with segmentation enables sourcing decisions based on country-of-origin constraints, ensuring compliance with trade regulations and tariff strategies. This approach supports optimal supplier selection, cost control, and supply continuity in volatile trade environments.
Procurement
Purchase orders are generated in alignment with supply and demand segments, ensuring that materials are procured from the most suitable suppliers. By considering tariff related parameters in the supplier segmentation, organizations can minimize exposure to high tariff costs.
Manufacturing
Segmentation aligns production planning and scheduling with both supply and demand segments, ensuring raw materials are available on time and schedules meet specific customer needs. By factoring in tariffs, companies can strategically plan production in regions with lower duties or favourable trade agreements—optimizing resource use, reducing lead times, and minimizing tariff costs while improving delivery performance.
Inventory Management and Warehousing
With Segmentation, inventory is optimized by aligning stock levels and warehouse placement with product attributes, demand patterns, and tariff exposure. This approach reduces holding and handling costs, improves efficiency, and enhances service by strategically positioning inventory near low-tariff end markets.
Quality Management
Segmentation enhances quality management by aligning quality checks with product attributes and market-specific regulations. This ensures compliance, reduces defects, and minimizes costs and risks—especially in high-tariff, high-regulation markets.
Sales Order Management
Segmentation in order management enables priority handling based on demand attributes and performs availability checks against segmented inventory and production plans. By factoring in tariffs, the system optimizes fulfilment routes and commitments—boosting service levels while minimizing tariff costs.
Product Costing
Product costing can be calculated at the valuation type level using segment values, allowing for more accurate, attribute-based cost insights. This enables better pricing, margin analysis, and tariff impact visibility across differentiated segments.
An example scenario
Let’s take practical example of how Supply and Demand Segmentation works.
A high-tech company manufactures and distributes electronic components globally. The company sources semiconductors, displays and other hardware from various countries, assembles and sells finished products to multiple international markets. Due to tariffs and trade regulations, it is crucial to segment both supply and demand based on the country of origin and the country of destination, along with other physical configuration or logistical parameters.
SAP Supply and demand segmentation helps the company plan sourcing based on tariff exposure, prioritize procurement from low-risk regions, align manufacturing schedules with regional demand needs, and calculate costs based on country-of-origin inputs. In this example, supplies with certain segmentation value can be sold to customers in Europe, but can't be sold to customers from Europe. Thus, segmentation ensures smarter production, lower landed costs, and optimized fulfilment tailored to each market's trade requirements.
Conclusion
In today’s volatile environment, resilience isn't optional; it’s a strategic imperative. Segmentation enables companies to navigate tariff complexities by aligning sourcing, production, and fulfilment strategies with specific trade attributes. This approach minimizes tariff costs, enhances supply chain efficiency, and ensures smarter decision-making, ultimately driving profitability and resilience in global operations.
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