Postponement article

Postponement may be defined as a dimension of sequence and timing based on the concept of substitutability, subsequently maintaining the the opportunity of interchangeability and irreversibility

• The benefits of postponement mainly come from changing the sequence of activities or delaying them in time.

• First, changing the sequence of activities could lead to a demand aggregation effect where the planning is based on aggregated demand. The demand aggregation effect reduces the forecasting horizon, resulting in better resource planning and allocation. It also reduces risk by pooling the variance of the demand, which is aligned with the concept of centralization of inventories.

• Second, delaying activities in time enables companies to learn from the behaviour of the demand and other environmental factors. This provides an opportunity to incorporate more actual information (e.g. about customer demands) into companies’ decision-making processes. The forecast can also be improved after observing some actual demand

The implementation of postponement strategies also affects the structure of the supply chain, since postponed activities will be most likely to be placed closer to the time and locus of consumption. Consequently, these effects can be reflected in the design of supply chains from product development, to sourcing and on to final distribution of products

• logistics postponement

  • Seeks postponement opportunities in the final movement of products, which have taken their final form in advance of customer orders, to the customer

• production postponement

  • keeping undifferentiated semi-finished products for as long as possible will increase a company’s flexibility in response to changes in customer demand.

  • Undifferentiated inventories are cheaper

• purchasing postponement

  • allows companies to postpone the purchase of incoming components or raw materials until demand is known, eliminating the risk of holding obsolete inventory in stock

• product-development postponement

  • No inventory

  • Following the postponement philosophy, they assign most resources to the riskiest and longest lead-time knowledge development first, and postpone low-risk subprojects as late as possible so that all pieces of the total knowledge package come together simultaneously.

• Customer decoupling point (CODP), where in the supply chain the customer order penetrates and that distinguishes forecast and order-driven activities.

• Success of a postponement strategy increasingly relies on a supply-chain wide thinking

• Downstream players must be concerned about possible order fulfillment problems occurring upstream in their supply chains.

• Otherwise, downstream players order as late as possible to avoid the lack of flexibility associated with giving an order at an early stage, while their suppliers do not have the opportunity to better plan and schedule their production and distribution (e.g. even out operation load), and the utilization of their resources system drops to the disadvantage of the performance of the whole supply chain

Too often, the implementation of postponement requires certain levels of capacity and resources to be reserved for those activities that benefit most from the additional information gained by the delay. Capability of the postponed transformation process to respond to high demand variability requires excess capacity and high throughput efficiency. This requires creating and maintaining slack resources, thus placing enormous demands on capacity planning.

• By initially focusing on product specification decisions that are likely to remain stable, design decisions about less stable portions of the product can be postponed until better information is available

• Postponement requires the adoption of more collaborative working practices based on the integration of business processes within a wide community of business partners

• Formalization is a key dimension to capture an inter-organizational structure. In an inter-organizational context, formalization refers to the degree to which the supply chain and network is controlled by explicit rules, procedures, and norms that collectively prescribe the rights and obligations of the individual companies

• Standardization of business processes is necessary to allow communication and integration between business partners within the supply network due to the complexity of processes in the supply chain

• A manufacturer can also choose its level of purchasing postponement, which is the choice of the decoupling point (work-in-process or finished goods) at which the manufacturer responds to a specific customer request. Meanwhile, the manufacturer needs to provide an advanced warning to a supplier for a change to an order quantity’s size or timing, but the warning may come within the effective lead time horizon, leaving the supplier to somehow cope with the change.

• restrictive supply contracts and infrequent schedule revisions are positively related to the implementation of purchasing postponement.

• If an order’s delivery could be postponed to a later time, and the truck is not loaded to capacity, the order can be held for later delivery in the hope of consolidating it with other orders that might arrive in the future. At this point, production and logistics postponement may be involved in production, logistics, and marketing.

• In summary, tailoring logistics service to production and logistics postponement need to be responsive, aiming at supply-chain flexibility and speed

The DBR is about dealing with bottleneck: the drum is the bottleneck constraint and its pace should be the pace of the entire system; the buffer is inventory held in front of the bottleneck constraint to avoid idleness on the bottleneck constraint; and the rope is a prioritization mechanism which pulls materials towards the bottleneck

• With the growth in demand uncertainty, supply chains now need to strategically locate inventory and capacity to enable both timely and efficient delivery in line with market demands. That is, the most important bottleneck is the market demand.

• postponement enables activities to be performed based on the actual market demands, thus synchronizing the entire system to the real demands. It can therefore improve the coordination of resources and the optimization of activities across the supply chain

The degree of postponement relates to the rationale behind the choice of CODP, where product variety usually increases significantly in the chain

• P represents the production lead time, and D represents the delivery lead time. In this sense, postponement facilitates capacity planning by utilizing the opportunity to stabilize the process upstream the supply chain and invest in a responsive capability downstream in response to marketdemand variation. This can be highlighted by the role of postponement in shifting the position of CODP

• capacity planning in pull postponement can be appropriately conducted through the interaction between mass production and mass customization. By the development of the supply network, it is also possible to move CODP upstream. This can help to reduce the size of the order specific inventory significantly but will increase the demands for precision throughout the specification processes including selling, order management, product configuration, and service.

To optimize the bottleneck operations, it may also need to have the bottleneck upstream of the CODP, rather than using them to respond to volatile demands. The bottleneck capacity can thus be run based on forecast, instead of being postponed. If capacity is constrained, it is beneficial to hold stock before the bottleneck, which can be built during slack periods.

Increase the efficiency and effectiveness of the supply chain.