POSTPONEMENT STRATEGIES
POSTPONEMENT STRATEGIESPostponement refers to delayed decision-
making about a product.The commitment to product- specific
characteristics are delayed to acquire customer or market specific
characteristics by indulging in customization of the inventory . It
allows to meet the customer/ market demand and avoids mismatch of
orders and inventory on hand.It enables forecasters to make better
predictions about end product demand over time as the finished
product is built to a better forecast or even built- to- order.It
also enables to lower inventory costs due to risk pooling as
semi-finished goods can be used to assemble more than one type of
finished goods.The point of postponement can vary from the
beginning to the end of manufacturing cycle i.e. from design phase
to the packaging and distribution, depending on the product and
market characteristics.Strategies to postpone production include
shifting from MTS (Make-to-Stock) production to ATO
(Assemble-to-Order) production.
By retaining inventory at a sub-assembly level and assembling
product only when a firm customer order is received, companies
achieve more flexibility this is applicable in cases where a
sub-assembly (or sub-assemblies) can be used to make multiple
finished products.
Such a shift enables a company to be more flexible and better
respond to changes in demand. Companies across several industries
are already evaluating such a shift as part of their overall supply
chain strategy.
Trying to create a pull environment
However, a shift from MTS to ATO strategy may not be the right
strategy for all companies. The decision to implement a
postponement strategy should be based on careful consideration of a
company's supply chain characteristics such as commonality of
sub-assembly products, length of production cycle times, customer
lead time expectations etc.From Push To Pull
