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Postponement

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Postponement
Postponement Strategy

Materials Management

End Term Project

(Term –IV)

Date: 15th September 2009

Submitted To: Submitted By:

Prof. Vivek Kumar Namrata Agarwal(81031)

Prof. Kaushik Paul Neha Gupta(81034)

Contents
Chapter 1 4
Introduction 4 1.1 What is Postponement? 4 1.2 A specific example 5 1.3 Postponement in operation 7
Chapter 2 9
Literature Review 9
Chapter 3 14
When is Postponement Appropriate? 14 3.1 The Postponement/Speculation (P/S) Matrix 14 3.2 Costs & Benefits of Postponement 15 3.2.1 More variety 15 3.2.2 Inventory reduction 18 3.2.3 Better forecast accuracy 19 3.2.4 Inventory cost reduction 20 3.2.5 Logistics cost reduction 22 3.2.6 Improved customer service levels 22 3.2.7 Increased product development cost 23 3.2.8 Increased manufacturing cost 23
Chapter 4 24
Case Studies 24 4.1 Automobile Manufacturing: GM 24 4.2 Aircraft Manufacturing: Embraer 26 4.3 Clinical Equipments: Dade Behring 29 4.4 Sports Goods Manufacturing: Reebok 32 4.5 Xilinx 34
Chapter 5 36
Conclusion 36
Chapter 6 38
Future of postponement 38 6.1 Services and postponement 38
References 40

Chapter 1

Introduction

Over the past 2 decades, logistics activities have gained increasing strategic importance for most companies. Fixed costs of production have increased, consumer demands have become more complex and are harder to predict, both in time and place. Technology is rapidly changing and product life cycles have shortened while product range has increased. Now more than ever, companies are faced with the challenge of producing an increasingly large variety of products in a responsive manner while keeping materials and inventory to a minimum.

These issues represent significant challenges for companies producing and selling in a variety of international markets. Not only does



References: [4] Agrawal, M., Kumaresh, T. V. and Mercer, G. A. (2001) ‘The false promise of mass customization’, The McKinsey Quarterly, Number 3 pp. 62-71 [5] February 2005 [6] Wroe Alderson. Marketing Behavior and Executive Action. Richard D. Irwin, Inc, 1957. [7] David M. Anderson. Outsourcing; the reality for cost reduction, 2005. [8] Saif Benjaafar, Joon-Seok Kim, and N. Vishwanadham. On the effect of product variety in production-inventory systems. Annals of Operations Research, 126:31, 2004. [12] Lee, H. L. and Tang, C. S. (1997), ‘Modelling the benefits of delayed product differentiation’, Management Science, No 1, pp. 40-53 [13] Jonathan Byrnes [15] Feitzinger, E. and Lee, H. L. (1997), ‘Mass customization at Hewlett-Packard: The power of postponement’, Harvard Business Review, Jan-Feb 1997, pp. 117 -116. [21] Alvin P. Lehnerd and Marc H. Meyer. The Power of Product Platforms. The Free Press, NY, 1997. [22] Frank Levy and Richard Murnane. The new division of labor: How computers are creating the next job market. 2004. [23] Gattorna, J. L. and Walters, D. W. (1996) Managing the Supply Chain, MacMillan, UK. [24] Hoek, R. I. (1998a), ‘Reconfiguring the supply chain to implement postponed manufacturing’, International Journal of Logistics Management, Vol. 9, Iss. 1; pp. 95-111 [25] Bridget McCrea [26] Hoek, R. I. (1998b), ‘ Reconfiguring logistics systems through postponement strategies’, Journal of Business Logistics, Vol. 19, Iss. 1; pg. 33-56 [27] Burns N [30] Radstaak, B. G. and Ketelaar, M. H. (1998), ‘ Worldwide logistics : the future of supply chain services’ Hastings, P. (ed) Holland International Distribution Council. [31] Waller, M. A, Dabholkar, P. A. and Gentry, J. J. (2000) ‘Postponement, product customization, and market-oriented supply chain management’, Journal of Business Logistics, Vol. 21, Iss. 2; pp. 133-27 [32] Pagh, J [34] Janus D. Paugh and Martha C. Cooper. Supply chain postponement and speculation strategies: How to choose the right strategy. Journal of Business Logistics, 19(2):21, 1998. [35] Joseph Pine. Mass Customization: The New Frontier in Business Competition. Harvard Business School Press, 1993. [36] Joseph Pine and James Gilmore. The Experience Economy. Harvard Business School Press, 1999. [38] Barry Schwartz. The Paradox of Choice. Harper Collins, 2004. [41] Edward Silver, David F. Pyke, and Rein Peterson. Inventory Management and Production Planning and Scheduling. New York: Wiley, 1998. [43] Johnson, E. M. and Anderson, E (2000), ‘Postponement strategies for channel derivatives’ International Journal of Logistics Management, Vol [44] Fisher, M. L. (1997) ‘What is the right supply chain for your product’, Harvard Business Review, March – April, pp. 105-116. [45] Karen Tung and Karl Ulrich. Fundamentals of product modularity. Master’s thesis, 1991. [47] Thomas F. Wallace and Robert A. Stahl. Building to Customer Demand. T.F. Wallace and Company, 2005. [48] Drew Winter and David Zoia. Rethinking platform engineering – automobile industry overview. Ward’s Auto World, 2001. [50] Walter Zinn and Donald J. Bowersox. Planning physical distribution with the principle of postponement. Journal of Business Logistics, 9(2), 1988.

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