AN APPLICATION OF POSTPONEMENT STRATEGY

Abstract

This article examines the problem of how a business can manage low-volume high-mix products in conditions of demand uncertainty and seasonal pattern.  The solution is to use postponement strategy in the manufacturing and purchasing areas.  Postponement, as applied to manufacturing, retains the product in a neutral and non-committed status as long as possible in the manufacturing process.  Because the inventory is generic its flexibility is greater: the same components, modules or platforms can be embodied in a variety of end products.  This makes postponement one of the most beneficial strategic mechanisms to manage the risks associated with product variety and uncertain sales.

Products and processes are examined to find their commonalities and to explore the level of material by summarizing the demand of the semi-assembly commonality, and pre-building when production has idle capacity.  A project model is designed for As-Is and To-Be situations.  The result is that the average order fulfillment lead times are reduced by 12.7%, and labor utilization results in lower labor cost.