Data fragmentation occurs when a piece of data in memory is broken up into many pieces. The de-fragmentation tool is to rearrange blocks on disk so that the blocks of each file are contiguous. There are two types of fragmentations. They are External Fragmentation and Internal Fragmentation.

In the external fragmentation, the free space, that is available for storage is divided into many small pieces. The storage space is of many different sizes. In dynamic memory allocation, a block might be requested, but the contiguous block has a free space. There are ten blocks of 300 bytes of free space, separated by allocated regions; one still cannot allocate the requested block of 1000 bytes.

External fragmentation also occurs in file systems as many files of different sizes are created, change size, and are deleted. The effect is even worse if a file which is divided into many small pieces is deleted, because this leaves similarly small regions of free space. In the external fragmentation, the process are moved into one large adjacent block, leaving all of the remaining free space in one large block. The garbage collectors are moved in order to improve dynamic memory allocation performance, and tools that disk drives perform.

In Internal fragmentation, the space is wasted. it is often accepted in return for increased efficiency or simplicity. For example, in many file systems, files always start at the beginning of a sector, which simplifies organization and makes it easier to grow files. Any space left over between the last byte of the file and the first byte of the next sector is internal fragmentation.

Similarly, a program which allocates a single byte of data is often allocated many additional bytes for metadata and alignment. This extra space is also internal fragmentation. Another common example: Letters are often stored in 8-bit bytes even though in standard ASCII strings the 8th bit of each byte is always zero. The "wasted" bits are internal fragmentation. Similar problems with leaving reserved resources unused appear in many other areas. For example, IP addresses can only be reserved in blocks of certain sizes. This is contributing to the IPv4 address shortage.

Unlike other types of fragmentation, internal fragmentation is difficult to reclaim; usually the best way to remove it is with a design change. For example, in dynamic memory allocation, memory pools drastically cut internal fragmentation by spreading the space overhead over a larger number of objects.

Now products traded between firms in different countries are components instead of final products. Final products may be sold to outside the region in which fragmentation happens. Producers in less developed countries get positions of production chain that add less value to final product. Their challenge is to "climb upwards" on transnational production chain.

Production chains are often vertical hierarchies in which big multinational companies may be those who sell final products and set production standards for "lesser" producers. This kind of fragmentation is an important part of contemporary globalization.

Fragmentation has various meaning, fragmentation in terms of economy means an organization which is used for different stages of production which are divided among different suppliers that are located in different countries.

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