Demand Segmentation Definition

A graphical representation of the sales/consumption volume of products vs. demand variability. High volume low demand variability products are treated differently than low volume high demand variability. This technique is more informative than ABC or P-Q.

Source: Blair R. Williams, Manufacturing for survival: the how to guide for practitioners and managers (Reading Massachusetts: Addison-Wesley), 1996, pp 281 – 286.

Demand Variability is measure of volatility of sales in the market place, and c an be expressed as either:

1. Standard deviation of the demand over time divided by the mean (Coefficient of Variation Cv), or
2. the ratio of: the peak to base demand divided by the average demand , or
3. the ratio of: the average demand to 6 sigma