johnny wan

Postponement Strategy

In Supply Chain Management

Johnny WAN22nd 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

Physical product flow

Forecast driven information Demand driven information

Monetary flow

purchasing manufacturing storage & delivery

X X X

� 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

Four Major Strategies

Purchasing Postponement


Demand driven information


X

Manufacturing Postponement




X

Forecast driven information

Logistics Postponement



purchasing manufacturing

storage, light manufacturing &

delivery

X


Logistics Postponement




X


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

� Reduce inventory cost

� Reduce transportation cost

� Reduce risk of obsolescence

� Reduce demand variability

� Improve competitiveness by offering customized products quickly

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

Japanese peripherals

Simplified Chinese

peripherals

Hong Kong

Japan

China

Taiwan

+Traditional Chinese

peripherals+

+

+Finished product stored in any

one location

Option 2: Manufacturing/logistics Postponement

Traditional Chinese

peripherals

Japanese peripherals

Simplified Chinese

peripherals

Hong Kong

Japan

China

Taiwan+

+

+

+

System

+

Traditional Chinese

peripherals

Option 3: Purchasing Postponement

Hong Kong

purchase make assemble deliver

Italy (Fashion)

Japan (Electronics)

US (Breaker Manufacturing)

Germany (Automobile)

Sweden (Furniture)

US (Semiconductors)

US (Printers)

US (Storage Devices)

US (Computer)US (E-commerce)

Japan (Automobile)

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

Capabilities of a company

Choose the right strategy

Competitive Advantage

Organizational performance

information

logisticsmodularity

supplier management FMS

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

Capabilities of a company

?

information logistics

modularity

supplier management

FMS

? ?

The story ends…

I replied

“Is it the postponement of getting my degree?”

“Mr. Wan, what postponement strategy has been used for making this bottle of water?”

In order not to let the history repeat itself, your comments are valuable.

Thank you.

Email: [email protected]

johnny wan

Business

postponement strategy

postponement delay

postponement of passage

customers time postponement

semifinished forms

major strategies

offeringcustomized products

central location