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Postponement in Developing and Supply Chain

In general production process, lots of the end products stocks some typically common process plus some of them in the original periods. At some specific point along the way, specialized techniques or components are being used to personalize the work-in-process, that was the (generic) product up to that point in the process, into the different end-products. This aspect is referred as point of product differentiation. Postponement identifies redesigning the process to delay the idea of differentiation. The point of differentiation might occur in two stages of supply string, first it could occur in early on stage which is referenced as early level of postponement and in the other case it may take place in the later in the source chain which is referenced as late level of postponement. This concept experienced actually been mainly found in the logistics business (Shapiro and Haskett, 1985). Even consumer products business started using this type of principles in their process to boost their service for customer's purchases.

In every situation we have to follow a special strategy for effective results. In Manufacturing and distribution of products, we need to use the next structure, which represents the process in which product variety is proliferated. Let's feel the five important steps of a product in its resource chain:

Manufacturing (2) Integration (3) Customization (4) Localization (5) Packaging

Here these series of steps suits to the majority of the process circulation in the companies.

Manufacturing: This is actually the initial step where the core of the product is manufactured. Usually small amounts of products or a single generic product are created at this stage.

Integration: This is actually the step where all the primary core products are put together with the sub assemblies. For instance in the case of computers, the body will be made in the developing stage and it will be built with the Mom plank and circuits in this integration level.

Customization: This stage refers to the further assembly of the product with different accessories to create distinct product options. For example in the case of computers, this is actually the stage where they put all the required I/O cards, set up all necessary software's and accessories planks constitute different end product options.

Localization: Here all the merchandise are localized to match the neighborhood requirements of different locations or countries. For example different countries may have different power supply requirements and various languages for their manuals. We are able to imagine that each one of the product options gets raised into more different end products for different places.

Packaging: This task sounds meaningful only for the few products, those requires some special kind of packing. For example regarding Computers, monitors need to be packed properly so that they don't affect when they are in transit.

Here the below body shows the product variety proliferation tree that branches out at various levels:

Diag from pg 6

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In this context of product variety framework, postponement as a strategy to defer, it can be of two types: Time Postponement and Form Postponement.

Time Postponement: This identifies delaying the many product differentiation jobs as late as you can. It is something like switching from Build-to-Stock to a Build-to- order mode (Zinn 1990). One more great benefit of this time around postponement implementation is related to the physical location in which the differentiating duties are performed. Usually these jobs will be performed at making factory, Circulation centers or distribution channels and customer sites. Here the earliest level of postponement identifies the case, when all the tasks are performed at the processing factory. Along with the latest degree of postponement identifies those, where the tasks are performed at the customer sites.

This strategy is usually helpful in the case where delivery or distribution of a product is postponed until customer demand is known. This enables inventory to be reduced as it reduces the need to keep inventories or companies at syndication centers. Let's go through some case, which can provide a clear notion of this strategy being used. Whirlpool, washing machine manufacturer has carried out this strategy very effectively in their All of us procedures (Waller, et al, 2000). By one of these market research, they have found that the majority of the consumers don't expect their order to be supplied immediately, as almost all of them will be purchasing for his or her new houses, into that they cannot move immediately. So they redesigned their source chain so that the inventories in the shops are stored to minimum and this delayed delivery until the orders have been received. This reduces the need for combination docking to a great amount and reduces inventory and travelling costs considerably. In overall it enhances customer support and diminishes stock outs.

Form Postponement: This strategy delays certain stages in manufacturing process of something until a customers order has been received (Zinn and Bowersox, 1988). This mainly is aimed at standardizing the upstream phases to the maximum extent.

Here they follow a different kind of manufacturing strategy. Initially, parts or components that are normal to more than a model are being used to build a generic program. Now these semi completed items will be shipped to separate marketplaces and specific countries or items are added when a customer order is received.

Most of the computer manufacturers use this strategy in their operations. A lot of the components of some type of computer are relatively general and common to many marketplaces (e. g. casing, mouse, mother board), while other components restricted to certain marketplaces (e. g. power supply, differs in one country to the other) (Aviv and Federgruen, 1999). Usually demand in few places may be secure, demand in specific places may be difficult to anticipate. Thus using Form postponement strategy, all the basic components of your computer are assembled at a central location. As these components have longer life routine, compared to other components, the inventory risk is reduced at this stage. Then modules are sent to different marketplaces and country specific or quality value components are inserted, after the customer purchases are received.

Markets leader Dell is a classic exemplory case of this. By firmly taking up a build to order (BTO) procedure, the company started out maintaining very low levels of inventory (Radstaak, 1998). This strategy allowed the business to boost their customer service, as their products can be customized on demand.

Place Postponement:

This strategy can be used to redesign the location of process, to be able to postpone the product differentiation. HP possessed used this strategy in their functions; in cases like this they put off their last assembling activities and made the ultimate product at the syndication centre. This reduces the Inventory costs and response time for you to the customer. This strategy can be executed in seven different ways. The first one targets delaying the differentiation jobs to downstream in the final processing and processing. Zinn and Bowserox 1988(manufacturing, labeling, set up, product packaging) postponement, Lee and Billingtons(1994) time postponement, Lee and Tangs (1997) procedures postponement, Lees (1998) Logistics postponement and vehicle hoeks (1999) Place postponement all deals with the same strategy. Here are some places, where these strategies are put in place successfully.

European computer maker implemented this strategy; they started out assembling all their personal computers in their local syndication centre to the response of customer's order, rather than concluding in the manufacturing plant. Then their concentration transformed in delaying the downstream activity of goods which is mentioned by time and place postponement.

Logistics postponement discusses about the motion of goods, which really is a delay in deployment of inventory. Rover - car company had implemented this strategy, which centralized the inventory from all his traders, so that he can react to customers quickly.

If a company will not start manufacturing or assemblage before customers order is received then it is been around the highest possible level of postponement. On the other hand if company is able to meet customer requirement as close as end user then it is the lowest possible level of postponement where maximum versatility is been around.

Decoupling Point

http://www3. unicatt. it/unicattolica/centriricerca/cersi/allegati/wp12009. pdf

Applications of Postponement

Inventory reduction

Better forecast accuracy

Logistics Cost reduction

Improved Customer service levels

Inventory Cost reduction

More Variety

Risk minimization

Procurement cost reduction

Transportation cost reduction

Manufacturing and procurement cost reduction

Challenges in Postponement

Product Modularity

Ability to quantify benefits

Misperception with dangers, costs, benefits and general lack of understanding

Competing Interest

Visibility into Supply Chain

Change Management

Which indicates Top-down support

Ability to recognize Postponement Opportunity

Fundamental changes to manufacturing and logistics processes

Too costly to implement

Complex to implement

Consumes too much of management time

Too difficult to align organizationally

Critical Success Factors

Business process reengineering

Product design standardization

Enabling supply chain technology

Collaboration with Customers / Suppliers

Organizational design and accountability

Enabling collaborative internet technology

Internal cross-functional collaboration

Issues relating to Postponement


Case research:

When we think of postponement and their advantages, Auto industry is one which strikes the mind first for most reasons. Firstly a car can be described as a modular system of components. This implies that there is an chance of commonality by creating a system and adding modular subassemblies personalized in line with the customers demand. Then second of all, individually personalized vehicles have higher forecast variability. Since this circumstance shows that there are way too many types to be forecasted effectively of each combination, there is typically disagreement on the forecast within the several divisions of the company. Finally is high inventory holding costs. It is much riskier to hold a finished vehicle in the showroom floor than to hold a partly finished one looking forward to last customization because of high forecast variability for end products and high obsolescence.

General Motors (GM) offers over 600 million combos, when different mixtures are considered. Because of these many options, forecasting becomes very difficult. Extra inventory on the field is evidence of this. So they began to visit a way to build variety and mass customize beyond the idea of the systems, GM looked at software settings as a different way to work with postponement. From software view, each one of the systems in a car can be viewed as as central handling unit (CPU) made up of several electronic control items (ECUs). At present they are using 30-35 ECUs per vehicle because software is now essential in automobiles for many reasons. Before postponement, GM confronted many problems regarding product variety proliferation and higher inventory costs of storing ECUs for individual models. Usually these ECUs come to GM in done form with all the software's pre-loaded. And each of this is designated to a particular vehicle nevertheless they all searched same from outdoors. Suppliers billed GM for custom software assembly which not only lifted the purchase price but also led to issues with repair and maintenance. Then GM decided to assume the duty for software configurations and postpone the installations till the latest possible point in the assemblage process. Foe this to be executed, GM needed to redesign both assembly process and the ECU hardware. Then in middle 1990s they achieved to install the custom software's for individual orders by the end of the assembly process. Now the ECUs result from suppliers to GM in a common form. After knowing that even software can be postponed, they started out looking for other systems that might be postponed until purchase. Now GM offers 99 % make sure to deliver the automobile within 1 day of the projected delivery day to a supplier closer to the client. In a study done by GM to measure the advantages of postponement, they may have projected inventory cost savings to be 10-15 percent and even maintenance cost savings.



Here GM has taken great things about both outsourcing and postponement. All the subassemblies are outsourced to suppliers with the comparative good thing about know-how and quality. As vehicle industries go with predominately build-to-order making system, their suppliers need to invest in the increase demand for custom-made features instead of aggregate requests.

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