What is Supply Chain Postponement Strategy?

Supply chain postponement strategy is a approach to managing the flow of goods and materials through a supply chain in which final product customization and assembly are delayed until as late as possible in the production process. This allows organizations to respond more quickly to changing customer demands and reduce inventory levels by only producing and stocking the components and raw materials needed to meet current demand.

There are two main types of postponement strategies: location-based postponement and process-based postponement.

Location-based postponement involves postponing final product customization and assembly until the product is close to the end customer. This can help organizations reduce transportation costs and improve delivery times by locating production closer to the end customer.

Process-based postponement involves postponing final product customization and assembly until the product is in the final stages of production. This can help organizations reduce inventory levels by only producing and stocking the components and raw materials needed to meet current demand.

Advantages and Disadvantages

There are a number of potential advantages to using supply chain postponement strategy, including:

It allows organizations to respond more quickly to changing customer demands by delaying final product customization and assembly until as late as possible in the production process.
It helps organizations reduce inventory levels by only producing and stocking the components and raw materials needed to meet current demand.
It can help organizations reduce transportation costs and improve delivery times by locating production closer to the end customer.
It can help organizations reduce the risk of obsolescence by delaying final product customization until closer to the time of sale.

There are also some potential drawbacks to using supply chain postponement strategy, including:

It may require significant changes to an organization’s production processes and logistics systems.
It may require increased coordination and communication within the supply chain to ensure that the necessary components and raw materials are available when needed.
It may not be appropriate for all types of products or industries.
It may increase the complexity of the supply chain and increase the risk of disruptions or errors.

Cost Savings: Postponement Strategy

Supply chain postponement strategy can help organizations reduce costs in several ways.

First, by allowing organizations to respond more quickly to changing customer demands, supply chain postponement strategy can help organizations reduce the risk of obsolescence and excess inventory. By delaying final product customization and assembly until as late as possible in the production process, organizations can reduce the risk of producing products that do not meet current customer demand, which can lead to lower inventory levels and reduced storage and carrying costs.

Second, by reducing inventory levels, supply chain postponement strategy can help organizations reduce the costs associated with storing and managing inventory. By only producing and stocking the components and raw materials needed to meet current demand, organizations can reduce the amount of inventory they need to hold and the associated storage and handling costs.

Third, by locating production closer to the end customer, supply chain postponement strategy can help organizations reduce transportation costs and improve delivery times. By postponing final product customization and assembly until the product is close to the end customer, organizations can reduce the distance that products need to be shipped, which can lead to lower transportation costs and faster delivery times.

Supply Chain Quotes

“Planning is everything. The plan is nothing.” ~Dwight D. Eisenhower
“Globalization has taken a hit in that there is some sand in the gears because most of us have supply chains that are all over the world that we’ve had to lengthen.” ~Jack Welch
“Combating climate change is absolutely critical to the future of our company, Green Cooler customers, consumers-and our world. I believe all of us need to take action now. PepsiCo has already taken actions in our operations and throughout our supply chain to ‘future- proof’ our company-all of which deliver real cost savings, mitigate risk, protect our license to operate, and create resilience in our supply chain.” ~Indra Nooyi
“People can buy the kind of things they consider as normal and take for granted because of globalization and trade and use of supply chains and the reduction of the cost base of the manufacturing of some products.” ~Christine Lagarde
“We care about every worker in our worldwide supply chain… what we will not do – and never have done – is stand still or turn a blind eye to problems in our supply chain. On this you have my word.” ~Tim Cook
“The Dell Theory of Conflict Prevention argues that no two countries that are both part of the same global supply chain will ever fight a war as long as they are each part of that supply chain.” ~Thomas Friedman