You have just been hired as supply chain manager at Primo Caf. Marco, the chief operating officer is your boss. Primo Caf uses the same supply chain processes for all three of its products.

• Each month, the company produces 25,375 Bean Boiler units, 20,600 Family Man units, and 11,500 Caffissimo units.
• The same number of Bean Boiler, Family Man, and Caffissimo units are sent to the same retailers each month.
• The goal of this supply chain design is to minimize costs by standardizing the process for all three products, so that the exact same number of units are produced and shipped each month.

As the purchasing manager for Primo Caf, you have noticed some problems with this supply chain approach. For instance, there have been stock outs of the Caffissimo at some retail locations, while at other locations Caffissimo units have been sent back because the retailer still had inventory from the previous month.

Marco is a big proponent of the single supply chain structure because he is convinced that standardizing the process is the most efficient way to run his operations. He also thinks that any issues with retailers is the Marketing departments problem. You think theres a better way but first, you need to convince Marco.

Based on material presented in the class, answer the following questions.

1. How could Primo Caf use customer segmentation as a way to start addressing some of the problems the company is facing? In answering this question, (1) identify the different customer segments Primo serves, (2) describe the main value requirements of each customer segment, (3) describe the demand patterns (particularly demand variability) of each customer segment.

2. Given what you know about the different customer segments that Primo Caf serves, how might the company design its supply chain to serve the main value requirements of each customer segment. In answering this question, be sure to address the type of relationship Primo would want to build with suppliers for each customer segment.

3. You tell Marco that on the demand side of the business, segmenting customers would improve customer service. And on the supply side of the business, you tell him that strategic sourcing can lower costs. Marco is interested, but has a basic question: Why should Primo Caf focus on the profitability of goods/services, rather than simply their costs?