Postponement
Strategy
In Supply Chain Management
Johnny WAN
22nd March 2006
Who am I?
Grew up in Hong Kong, China
1st year PhD student of the Centre for
Strategy and Performance (CSP)
Dr Ken Platts is my supervisor
This month is my 6th month in Cambridge
Struggle
I am struggling in building the conceptual framework
at this moment.
Advices and comments from all of you are welcome
after the presentation.
At any time, be my mentors.
The story begins…
While I was having my MPhil thesis viva,
At the end, one panel member suddenly
pointed at a bottle of mineral water in
front of him and asked me
“Mr. Wan, what postponement strategy
has been used for making this bottle of
water?”
Let’s think about it…
Presentation Outline
1.
What is a postponement strategy?
2.
What are the types of postponement strategies?
3.
Why using a postponement strategy?
4.
How a postponement strategy works?
5.
What companies are using postponement
strategies?
6.
What are my preliminary research directions?
What is a postponement strategy?
What are the types of postponement strategies?
Why using a postponement strategy?
How a postponement strategy works?
What companies are using postponement strategies?
What are my preliminary research directions?
A postponement strategy aims at
delaying some supply chain activities
until customer demand is revealed in
order to maintain both low systemwide
cost and fast response.
First
suggested by Alderson in 1950
Followed
Became
by Bucklin in 1965
popular since 1990s (Lee, van Hoek
and Yang)
A supply chain
Demand driven information
Forecast driven information
purchasing
X
manufacturing
storage & delivery
X
Physical product flow
Monetary flow
X
What is a postponement strategy?
What are the types of postponement strategies?
Why using a postponement strategy?
How a postponement strategy works?
What companies are using postponement strategies?
What are my preliminary research directions?
Four Major Strategies
Purchasing postponement
Manufacturing postponement
Products in semi-finished forms and can be
customized quickly in production facilities
Logistics postponement
Delay purchasing of some expensive and fragile
materials
Products in semi-finished forms and can be
customized quickly in production facilities close to
customers
Time postponement
Finished products are kept in central location and are
distributed quickly to customers
Purchasing Postponement
Demand driven information
purchasing
manufacturing
storage & delivery
X
Physical product flow
Purchasing postponement
Manufacturing postponement
Products in semi-finished forms and can be
customized quickly in production facilities
Logistics postponement
Delay purchasing of some expensive and fragile
materials
Products in semi-finished forms and can be
customized quickly in production facilities close to
customers
Time postponement
Finished products are kept in central location and are
distributed quickly to customers
Manufacturing Postponement
Forecast driven
information
purchasing
Demand driven information
manufacturing
storage & delivery
X
Physical product flow
Purchasing postponement
Manufacturing postponement
Products in semi-finished forms and can be
customized quickly in production facilities
Logistics postponement
Delay purchasing of some expensive and fragile
materials
Products in semi-finished forms and can be
customized quickly in production facilities close to
customers
Time postponement
Finished products are kept in central location and are
distributed quickly to customers
Logistics Postponement
Forecast driven information
purchasing
manufacturing
Demand driven information
storage, light
manufacturing &
delivery
X
Physical product flow
Purchasing postponement
Manufacturing postponement
Products in semi-finished forms and can be
customized quickly in production facilities
Logistics postponement
Delay purchasing of some expensive and fragile
materials
Products in semi-finished forms and can be
customized quickly in production facilities close to
customers
Time postponement
Finished products are kept in central location and are
distributed quickly to customers
Logistics Postponement
Forecast driven information
purchasing
manufacturing
Demand driven information
storage & delivery
X
Physical product flow
Other Postponement Strategies
Product development postponement
Price postponement
Delay the pricing decision until customer demand is known
Postponement of passage of title
Delay critical product development decision
Delay the transfer of product ownership from seller to buyer
Demand postponement
Split demand due to capacity constraint
What is a postponement strategy?
What are the types of postponement strategies?
Why using a postponement strategy?
How a postponement strategy works?
What companies are using postponement strategies?
What are my preliminary research directions?
Reduce
inventory cost
Reduce
transportation cost
Reduce
risk of obsolescence
Reduce
demand variability
Improve
competitiveness by offering
customized products quickly
What is a postponement strategy?
What are the types of postponement strategies?
Why using a postponement strategy?
How a postponement strategy works?
What companies are using postponement strategies?
What are my preliminary research directions?
Requirements
High product variety
Modular and standardized product design
Flexible manufacturing system
Real time information and communication
Fast response logistics
Strategic supplier relationship
Example: A Sony PSP Supply Chain
Products sold in Japan, HK, China and Taiwan
Total number of units sold is roughly estimated
But, the number of units sold in each location is
unknown
Products are highly modular and standardized
Differences in
Manual and packaging (different languages)
Plugs (different sockets)
Option 1: Time Postponement
+
Traditional
Chinese
peripherals
+
Traditional
Chinese
peripherals
+
Japanese
peripherals
+
Simplified
Chinese
peripherals
Finished product stored in any
one location
Hong Kong
Taiwan
Japan
China
Option 2: Manufacturing/logistics Postponement
+
+
System
+
Traditional
Chinese
peripherals
Hong Kong
Traditional
Chinese
peripherals
Taiwan
+
Japanese
peripherals
Japan
+
Simplified
Chinese
peripherals
China
Option 3: Purchasing Postponement
Hong Kong
purchase
make
assemble
deliver
What is a postponement strategy?
What are the types of postponement strategies?
Why using a postponement strategy?
How a postponement strategy works?
What companies are using postponement strategies?
What are my preliminary research directions?
Germany (Automobile)
Japan (Electronics)
Japan (Automobile)
US (E-commerce)
US (Computer)
US (Breaker
Manufacturing)
Italy (Fashion)
US (Printers)
Sweden (Furniture)
US (Storage Devices)
US (Semiconductors)
What is a postponement strategy?
What are the types of postponement strategies?
Why using a postponement strategy?
How a postponement strategy works?
What companies are using postponement strategies?
What are my preliminary research directions?
Option 1: Company Level Survey
Collect quantitative data by sending questionnaires
to a large number of target respondents
Employ statistical techniques such as structural
equation modelling or regression to confirm the
causal relationship between
Company capabilities (requirements) and different
postponement strategies
Postponement strategy and competitive advantage
Competitive advantage and organizational performance
information
modularity
logistics
Capabilities of
a company
supplier
management
Choose the
right strategy
FMS
Competitive
Advantage
Organizational
performance
Option 2: Company Level Case Study
Collect qualitative data through participations,
interviews and observations of some selected
companies
Explore more requirements to enable
postponement strategy implementation in
different situations
information
logistics
modularity
FMS
Capabilities of
a company
supplier
management
?
?
?
The story ends…
“Mr. Wan, what postponement strategy
has been used for making this bottle of
water?”
I replied
“Is it the postponement of getting my
degree?”
In order not to let the history repeat
itself, your comments are valuable.
Thank you.
Email: [email protected]