Demand Segmentation involves categorizing products, customers, or geographic markets based on demand characteristics such as frequency, variability, volume, and predictability. This helps businesses tailor inventory, pricing, and fulfillment strategies for each segment rather than applying a one-size-fits-all model. By understanding demand segments, companies can optimize stock levels for fast-moving (A-class), slow-moving (C-class), or seasonal items separately. For instance, high-volume, predictable products may require lean inventory and frequent replenishment, while erratic-demand items may need higher safety stock or made-to-order strategies. Demand segmentation enhances customer service while reducing excess inventory and waste. It enables differentiated service levels, better forecasting accuracy, and more strategic allocation of working capital. When integrated with systems like ABC analysis, AI-based forecasting, and multi-echelon planning, demand segmentation becomes a cornerstone of strategic inventory optimization.
