The greater the commonality among items sold in multiple countries, the greater the advantage of unicentric postponement. Deferred packaging is recommended when only the label and packaging differ among products sold in multiple countries. When the products themselves vary among countries, the choice is between deferred assembly and bundled manufacturing. In the latter case, products are designed to enable postponement. Pagh and Cooper developed a 2 X 2 matrix of postponement—speculation strategies. The options in the matrix include time postponement, form postponement, neither time nor form termed full speculation , and a full postponement strategy where both time and form are employed.
The matrix is a unique contribution proposing that time and form postponement may be employed either separately or jointly. They additionally suggest cost, product, and market characteristics that support decision making among those strategies. Pagh and Cooper offered an example of the full postponement strategy.
The product was both only assembled and only moved after the receipt of a customer order. The choice is based on cost and service considerations, where service is measured as customer waiting time. They propose that time postponement is preferable to form postponement once the number of products passes a threshold level. This is because the cost of time postponement is independent of the number of products, while the cost of form postponement and the number of products are related.
As pointed out above, the bundled manufacturing strategy proposed by Cooper conceptually extended postponement from the warehouse back into the production plant. In this option, the manufacturing process is split, with components common to multiple versions of a product assembled first into a semifinished product.
Customization happens at the latest point in the production process, still in the plant, as further information is received. Conversely, while Cooper proposed an upstream extension, Van Hoek, Commandeur, and Vos extended postponement downstream by suggesting that final customization may happen at the point of product delivery to the customer place postponement.
The design and manufacturing sequence of deskjet printers was altered so that printers destined for export were stored in a semifinished state. Upon the receipt of an order specifying the destination country, the printer's manual and power supply module were then added at the regional warehouse level. A further extension identified manufacturing postponement opportunities in multiple stages of the manufacturing process. As Garg and Tang pointed out, there can be more than one point of differentiation during the manufacturing process.
Free Postponement Strategies In Supply Chain Management 2010
They extended Cooper's research, which assumed a single point of differentiation in the manufacturing process. Take, for instance, the classic example of printer manufacturing. Garg and Tang suggested two points of differentiation opportunities: one at the product family level Mac vs. PC and a second at the product differentiation level color vs. These were referred to respectively as early and late postponement.
Garg and Tang then suggested factors favoring early or late postponement in terms of their impact on inventory level. Results related to these suggested factors, such as lead time and demand correlation, were consistent with findings in prior research. These different extensions were captured and summarized by Yang and Burns Building on Lampel and Mintzberg , they provided a schematic of postponement options e. These strategies range from firms that source, make, and deliver products based on forecasts to those that operate on the basis of customer orders.
In their schematic, each supply chain strategy is composed of six processes. These processes go from product design to final product distribution and include purchasing, fabrication, assembly, and packaging. By showing that each process in the supply chain may or may not be postponed until a customer order is at hand, Yang and Burns created a continuum covering postponement options in the supply chain. Postponing product purchasing until actual usage reduces the cost of ownership, as inventory levels and the risk of shrinkage and obsolescence are reduced.
On the other hand, purchasing postponement likely reduces volume and thus impacts purchasing and transportation cost. Its implementation, interorganizational in nature, benefits from a collaborative relationship between buyer and seller. They focused on interorganizational time postponement and considered how a postponement decision by one firm impacts all other firms in the same supply chain, thus expanding on Bucklin's paper. As noted earlier, time postponement shifts inventory among firms within the supply chain.
This shift is partly explained by the lead time to move product between firms and by the fact that the value of products increases as they move downstream in the supply chain. Results showed that a reduction in inventory by one firm might result in an increase in inventory by others and, furthermore, in an increase in the overall inventory investment in the supply chain. Thus, to minimize the overall cost of the supply chain, inventories have to be shifted in a way that does not benefit all firms in the supply chain equally.
The implication is that that implementation of time postponement at a supply chain level depends on governance structure and requires leadership and collaboration if the total cost is to be minimized. In every postponement configuration, there is a fundamental step when, triggered by a customer order, a product is committed to either a location or a final form.
This step has been variously termed order penetration point, postponement point Cooper , or decoupling point by, among others, Van Hoek and Commandeur and Olhager In some of the earlier literature, decoupling points were implied rather than explicitly discussed. Decoupling points received considerable attention in the literature.
At the decoupling point, decisions begin to be made in response to a customer order and are no longer made on the basis of a forecast. Olhager argued for the strategic importance of inventory at the decoupling point as it serves as the basis for delivery promises, since delivery time and inventory availability are computed with that inventory in mind. The decoupling point is distinct from a point of differentiation. The latter is any point in the supply chain where products are made more unique by, for instance, being assigned to a warehouse or painted a certain color.
Reducing Risk With a Postponement Strategy
Lee and Tang suggested that at the point of differentiation, products assume their unique identities. In other words, there are more stock keeping units skus after the point of differentiation than were before it. The presence of a point of differentiation may or may not be linked to customer orders. They proposed that the benefit of postponement is maximized when the decoupling point is moved upstream the supply chain and points of differentiation are moved downstream.
Postponement strategy from a supply chain perspective: cases from China
Customer orders carry only the information from the previous echelon in the supply chain. This information is often distorted by the bullwhip effect. The information decoupling point indicates the location in the supply chain where market information is made available.
They also alerted that the information decoupling point requires a significant level of information sharing among firms in the supply chain and that this is potentially a managerial challenge. The benefit from design for postponement can come from either or both product and process redesign.
Supply Chain Management: Postponement as Supply Chain Strategy
In the former case, the product itself is modified to permit delayed differentiation. This can be done in two different ways. One is to design products so that they use common parts and thus retain commonality until a later stage in the production process. The second way is to design products in modules that can be combined in different options at later stages in the production process. In the latter case, production and logistics processes are rearranged to delay product final configuration. Lee and Tang suggested that the rearrangement can be broken down further into the options of postponement or reversal of operations.
Benetton's production process is an example of the former. As opposed being dyed at the moment of production, textiles are stored undyed until a customer order is received specifying the desired color Zinn a.
The process is changed dye early vs. The option of postponing the final configuration with a modular production strategy was explored by Swaminathan and Tayur They developed a model to determine the optimal number of vanilla boxes given a production configuration and subsequently the optimal inventory level for each vanilla box. The concept of modular production as an enabler of form postponement was explored in a supply chain context by Van Hoek and Weken Using the production of SMART cars in Europe as a sample case, they showed how suppliers and distributors can be connected to the manufacturer to deliver a customized product to consumers.
Consumers in retail centers then specified the options desired in the car, which was subsequently delivered. The issue of postponement as an enabler of customization is a natural segway to the design for postponement literature. The principle of postponement thus reaches beyond enabling the delivery of customized products to support an expansion of customer choice in terms of product variety. A case in point is the manufacturing of wool yarn Zinn b. By postponing the dyeing of yarn until a customer specifies the desired color, the number of color variations that can be offered to customers is greatly increased.
In fact, the number of colors offered could be supposedly limitless given a feasible allowance for customer delivery time. They proposed that an optimal level of postponement exists for each level of product customization and that, as expected, customization and postponement are positively related. Waller, Dabholkar, and Gentry further explore this relationship by adding inventory cost, lead time, and speed of production as parameters impacting this relationship.
They additionally suggest that when postponement is allied with a drive toward shorter cycle times, it might be possible to simultaneously pursue product customization and cost minimization strategies. In the former case, customer choice is wider, products are typically made or assembled to order, and there is waiting time until customers receive products after choices are made.
In this case, the structure of the distribution channel is shorter because products can be shipped directly to the customer from the manufacturing facility. In the case of soft mass distribution, products are manufactured to stock in a large number of variations and shipped to retail stores. Customers then choose from available options. Salvador, Rungtusanatham, and Forza pointed to cell phones as an example of soft mass customization.
To a greater extent than customization as customer service or cost and risk reduction, the notion of mass customization as a major increase in product variety offered to customers reconnects postponement research with its marketing origins. One of the examples mentioned earlier support this point by illustrating how modular production enabled a car manufacturer to offer customers a wide array of options van Hoek and Weken A number of research papers explored factors that favor the application of postponement.
While these papers adopted a range of different methodologies such as simulation, mathematical modeling, case method, and survey research, their findings converge considerably. Zinn and Bowersox suggested that the higher the value of a product, the higher the potential benefit of postponement.
This is due to the value of the inventory savings generated. Clearly, the higher the level of uncertainty, the greater the potential benefit of postponement. A factor that emerged in various forms is the notion of product variation. This can be expanded to other forms of product variation, such as number of vanilla boxes or product modules, with similar findings in both the former Swaminathan and Tayur and the latter cases Van Hoek and Commandeur Findings also converge on demand correlation. The more negative the correlation of demand among different product versions, the higher the potential benefit of postponement.
Some additional factors emerged from the research. The higher the cube or weight reduction obtained from postponement implementation, the greater the benefit from postponement Zinn and Bowersox ; Van Hoek and Commandeur The less complex the customizing operations, the greater the benefit from postponement Van Hoek and Commandeur Swaminathan and Tayur identified capacity limitation as a factor.
The benefit of postponement increases as production capacity also increases. Magnitude is defined as the ratio of standard deviations of demand in two or more inventory locations. Magnitude reflects the relative uncertainties of demand among these locations. The more different the magnitudes, the lower the benefit of postponement. This is because the limited uncertainty in one of the locations caps the potential gain from postponement.
There are a significant number of papers addressing postponement issues in global settings. This attests to the universality of the principle. These different approaches often overlap in the same paper. Cooper and Van Hoek address key issues relating to postponement as a factor in the globalization of business. That means having flexible capacity in assets, resources and people. More specifically, make sure you have access to a flexible labor pool so you can ramp up and down with demand, multiple packaging lines to fill multiple orders and a co-packer or stable of co-packers on standby.
That might include services like research and development for types of materials, product types or graphics or turnkey solutions that encompass everything from packaging to display design and fulfillment. Could postponing packaging be a good thing for your food manufacturing supply chain and business?
Read Full Article. May 1, Three Reasons Postponing Packaging Makes Sense By positioning product packaging further downstream in the supply chain, you can : 1. Want to add a packaging postponement component to your supply chain?
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