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 by Bucklin in 1965

Became popular since 1990s (Lee, van Hoek

and Yang)
A supply chain

Forecast driven information Demand driven information

purchasing manufacturing storage & delivery

X X X
Physical product flow

Monetary flow
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

Delay purchasing of some expensive and fragile
materials

Manufacturing postponement

Products in semi-finished forms and can be
customized quickly in production facilities

Logistics postponement

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

Delay purchasing of some expensive and fragile
materials

Manufacturing postponement

Products in semi-finished forms and can be
customized quickly in production facilities

Logistics postponement

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
Demand driven information
information

purchasing manufacturing storage & delivery

X
Physical product flow

Purchasing postponement

Delay purchasing of some expensive and fragile
materials

Manufacturing postponement

Products in semi-finished forms and can be
customized quickly in production facilities

Logistics postponement

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 Demand driven information

storage, light
manufacturing &
purchasing manufacturing
delivery

Physical product flow


Purchasing postponement

Delay purchasing of some expensive and fragile
materials

Manufacturing postponement

Products in semi-finished forms and can be
customized quickly in production facilities

Logistics postponement

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 Demand driven information

purchasing manufacturing storage & delivery

X
Physical product flow
Other Postponement Strategies

Product development postponement

Delay critical product development decision

Price postponement

Delay the pricing decision until customer demand is known

Postponement of passage of title

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
 Improvecompetitiveness 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
Hong Kong

Traditional
+ Chinese
peripherals
Taiwan

+ Japanese
peripherals
Japan

Simplified
+ Chinese
peripherals
China

Finished product stored in any

one location
Option 2: Manufacturing/logistics Postponement

Traditional
+ Chinese
peripherals
Hong Kong

System
+ 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)

Italy (Fashion) US (Breaker

Manufacturing)

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 FMS

Choose the Competitive Organizational

right strategy Advantage 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: cljw2@cam.ac.uk