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Introduction on what is Postponement

Over days gone by 10 years, there's been a growing consciousness in industry towards the value of effective Resource Chain Management (SCM). The term supply chain has turned into a standard area of the business vocabulary. There are as many definitions for the term as articles or books on this issue, but the basic idea is integration. Excellent performance may be accomplished by taking an integrated view of all the activities necessary to convert recycleables into completed goods. To archive that kind of performance, companies are actually focusing on the logistics activities. Logistics activities have gained increasing tactical importance for most companies. Predetermined costs of development have increased, consumer requirements have become more technical and are harder to predict, both in time and place (Hoek, 1998a). Technology is speedily changing and product life cycles have shortened while product range has increased (Gattorna and Walters 1996).

Companies are actually faced with the task of producing an increasingly large variety of products in a responsive manner while keeping materials and inventory to the very least. Inventories must buffer the uncertainties and inefficiencies. Therefore, inventory has turned into a vital part of source chain management. The making world is facing the challenge of delivering what the customers want, when they want, while get together the financial need to keep inventory levels down. To be able to stay survive in the market, business strategies must be consider and totally implement. Probably the most efficiency strategy in today period will be using postponement strategy.

Why choose Postponement

Postponement refer to the amount that elements of processing and logistics operations can be delayed until customer commitments are known and the doubt associated with procedures can be reduced or removed' (Pagh and Cooper, 1998). Postponement is actually a type of network configuration that aims to lessen risk by making Trade-offs between versatility and costs. Similarly postponement gets the potential to increase a companies' versatility to react to changes in demand from different marketplaces, improve responsiveness to orders and reduce investment in inventory (Lee et al, 1993). At the same time, the strategy can make something more expensive to produce since economies of level may be sacrificed for a far more fragmented system of production (Waller et al, 2000). Transfer costs can also grow since products may be delivered on demand and in smaller volumes.

Postponement is also called delayed differentiation, can be an "adaptive supply chain strategy that allows companies to dramatically reduce inventory while enhancing customer service" (Muzumdar et al. , 2003). The concept is to wait the point of determination of work-in-process inventory into a final product and, in that way, gain control of efficient asset utilization in a uncertain environment.

Nowadays, individuals are demanding higher degrees of customization, yet aren't happy to pay extra or hold out longer. Product adjustment is a common task for companies for providing personalized products. Postponement may be used to manage this challenge as component commonality is one of the most popular supply string strategies to tackle the challenges such as complications in estimating demand, managing inventory, and providing high service levels for customers. Postponement may be accomplished by postponing the construction of universal components into a wide variety of end products. In postponement something is prepared till it remains generic and the customization is postponed until demand is realized. A generic product offers more overall flexibility when demand is uncertain since it can be altered into any last product. Rather than keeping high finished goods inventory or suffer stock outs which can bring about lost sales or interrupt place production schedules, the customization of the merchandise can be postponed until customer requests arrive.

Postponement concept of delaying the point of product differentiation has been found to be a powerful strategy in product variety. Postponement delays product differentiation at a spot closer to the customer. This involves making and developing generic products that may be customized once the actual demand is known. It also includes the execution of precise inventory approach to position inventory further away from the client while satisfying the service levels and reducing the inventory costs. Postponement lessens the forecasting horizon and thereby solves the uncertainty of end product demand (Whang and Lee, 1998). Also better inventory performance may be accomplished by redesigning something or its resource chain.

How to Implemented Postponement Strategy

Implementing a postponement strategy will involve important changes to a company's creation processes and internal operations. Configure-to-order production demands a high degree of collaboration and visibility over the supply chain. Traditional manufacturing techniques - mass-producing completed products in predetermined, established quantities - are about as straightforward as it gets. In razor-sharp contrast, stopping creation at a universal product condition, and offering a selection of different configurations and options, takes a flexible, just-in-time creation model. If terribly implemented over the supply string, mass customization can result in cost overruns and longer lead times. Outsourcing gives another layer of intricacy. As more of the worthiness chain moves outside of the organization, the company is ever more reliant on outdoors suppliers and agreement manufacturers. While outsourcing partnerships allow OE Manufacturers (OEMs) to boost their financial performance and focus on their central competencies, there's a downside in conditions of inventory. Incorrect decisions increase procurement costs, of course, if product doesn't move, the expenses are unrecoverable. Therefore, postponement strategies must control variability in source, as well as demand, and notice that cost and risk characteristics will change as time passes.

Postponement Strategies will demand a higher product variety, modular and standardized product design, adaptable manufacturing system, real-time information and communication, fast response logistics, strategic supplier relationship to become correctly applied. A postponement strategy also is dictated by the merchandise lifecycle: not having right inventory early on in the lifecycle will mean missing customer service level focuses on and the possibility to gain market talk about. Products by the end of life pattern lose value quickly and risk obsolescence, leading to costly write-offs. In addition, if old products are held in a generic status, their components and parts can be "recycled" for next-generation products.

Logistics Postponement

The idea of postponement has a long history of useful applications, as well as academics literature. Practical application of the concept can be tracked back again to the 1920s. The first specific empirical descriptions came out in the 1960s. Inside the literature, the concept was originally proposed by Alderson (1950) and later extended by Bucklin (1965). The logic behind postponement is the fact that risk and uncertainty costs are tied to the differentiation (form, place and time) of goods occurring during production and logistical operations. To the amount that elements of the creation and logistical procedures can be postponed until last customer commitments have been obtained, the risk and uncertainty of those operations can be reduced or completely eradicated. So we can determine postponement as a strategy to postpone changes in form, id and spot to the latest possible point of creation and distribution sites (Zinn and Bowersox, 1988; Pach, 1994). Postponement was first implemented in developing processes to reduce costs of inventory and improve service level inside the company as the product variety increases. The variety growth is because of motivations of supplier (Lancaster, 1999) and motivations of consumers.

The general idea of logistic postponement is to keep up a full-line of anticipatory inventory at one or a few strategic locations. This means to postpone changes in inventory location downstream in the source string to the latest possible point. Finally the idea was put on distribution procedures, using the risk pooling theory by stocking differentiated products at the strategically central warehouses that balance between inventory cost and response time (Bowersox and Closs, 1996). This plan requires cooperation between your two major celebrities of supply chain: distributors and stores (vehicle Hoek et al. , 1999). In this plan, manufacturing is based on speculation, and logistics is based on postponement. This is completed by direct syndication of totally finalized products from a centralized inventory to final vendors/customers. All production procedures are inventory initiated, and performed prior to the logistical operations. The logistical businesses are purely customer order initiated.

The major features of logistic postponement are increased on-time deliveries of complete orders, shorter plus more reliable lead-times, reduced inventory costs, faster introduction of services in the variety, the anticipatory dynamics of logistics is reduced or completely eradicated, since products are sent out directly to vendors/customers, the centralization of inventories reduces the quantity of stock required to offer high in-stock availability, shipment cost may increase credited to smaller delivery sizes and faster settings. Anyway the tasks of vendors and retailers are well defined. Distributors are liable of product variety and response time for total market of sellers: decision creators on variety of products and stock localisation; owners of companies at central and peripheral warehouses; liable on logistics (carry, warehousing and service level). Retailers are accountable of product variety and response time at local market of consumers: immediate website link with consumers, decision maker on response the perfect time to consumer; owner of local stock.

Warehouse tasks in the Postponement Process

A warehouse in the logistics postponement strategy will keep finished inventory at a central location, immediately transport products only on demand. This reduces the chance of experiencing product in the wrong place at the wrong time, reserving the inventories for the regions with the highest demand. This strategy ends in higher circulation costs, but it reduces inventory in the route. Just-in-Time delivery, Efficient Consumer Response, Quick Response and Supply Chain Management are the warehouse process in the logistics postponement strategies. Semi-finished products are shipped in mass to a warehouse near to the market. The ultimate procedures such as light making, final assembly product packaging and or labeling are performed once a customer order is received. The final differentiating step occurs at a decentralized point near to the marketplace and also distribution costs are low because the merchandise are sent in volume to the local packing center or assemblage site. Inventory risk is low because the undifferentiated product can be diverted to another form, location and or packing operation if demand shifts. But development and packaging costs may be higher in this plan as a result of need for procedures in a number of locations. Final developing, presentation and logistics procedure on hold before moment that a customer order is received. The products are stocked and personalized in one central location. The order causes the ultimate process to produce a custom-made product and ship it directly.

Labelling: By focusing on labelling firms contain the possibility to sell products under several brands. The strategy is the fact that products should be standardized and not labelled until order is positioned. This can lower inventory cost as inventories are constituted of general products. What is seen as important is how warehouses are placed from a tactical perspective.

Packaging: When postponement is linked to packaging it means that customer is asking for different product packaging types of the same product when ordering. Example could be color, chemicals and remedies. By using product packaging postponement products can be modified to customer requirement and transportation need.

Assembly: This sort of postponement has it concentrate on aesthetic features like pcs, cell phones, IPods, t-shirts etc. Cell phones are designed to fit different international market segments are similar from a common point of view and can be finalized regarding software packages, manuals, etc. when achieving the last customer market.

Manufacturing: Corresponding to Zinn and Bowersox processing postponement happens when parts are sent to the finishing middle from more than one supplier. Creation postponement is seen as an expansion of assemblage postponement factor.

Manufacturing and Logistic Characteristics

Packaging and developing strategies can be an chance of international manufacturers to compete keenly against regional suppliers. Often localized companies make and sell highly custom-made products whereas global business make standard products. Postponement offers the chance to do both. Postponement can donate to both localization and globalization. It creates it better to adapt and customize products for specific local customers. At the same time, it can enhance global efficiency through modular design. Postponement allows concurrently for customer service improvements and functional cost benefits. Packaging increases a company's versatility to respond to changes in the mix of requirements from different market segments. It can improve responsiveness to customers and reduce inventory risk and investment. It can dramatically reduce travelling costs depending on size or weight of the product packaging materials and the price tag on transportation.

Product Characteristics

All packaging postponement applications have one thing in common, a worldwide standard product personalized for local market segments. Although the essential product is a typical module throughout the world, the package's dialect, composition, and or product peripherals differ for geographically local markets. Packaging can maximize the global probable of a typical product. It presents the chance to simultaneously standardize and localize. Another important of the merchandise factor is how much volume or weights the product gains during packaging. The unpackaged product shipped in large to the regional processing centers will almost always occupy less volume level and weigh less than when it's packaged. The higher the difference between the weights, the higher the opportunities to lessen the carry costs. It is important to note that virtually all products gain weight once they are packaged. That is a powerful reason to consider presentation postponement as a way to reduce transfer cost. Other product characteristics to consider are level in the product life circuit rate of obsolescence and commonality between products verses the breadth of products. Market Demand Characteristics One of the most crucial factors for selecting a postponement strategy is the needs of the ultimate customers. When demand is unpredictable, the risk of speculation is high. When demand is uncertain, presentation can reduce the threat of having products in obsolete packages.


From all the postponement strategies that had implemented, that will assist the organization to stay competitive in the market. In today age, a whole lot of organizations are transitioning to use Postponement as a technique and then modify the ways of suit their requirement. But the operation process cannot just continue to be exactly like organization have to be flexible and change their ways of suit the demand on the market, if the procedure didn't change, the business will be out-dated and eventually it will then lost with their competitors and gradually it'll then be kick right out of the market.

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