1. Aims of the Dissertation:
The aim of this research is to investigate how postponement as a manufacturing and procurement strategy in supply chain management can add strategic value to a firm’s operations
This will be investigated through the following research questions
How can a postponement strategy provide practical strategic value to companies
How can the relationships in the supply chain be managed to best support a postponement strategy
How can the low rate of postponement adoption amongst companies be addressed in the future
What theoretical and empirical developments are needed to boost the value of postponement
A research can achieve its objectives by gathering and analysing qualitative and/or quantitative data. Qualitative data adheres to an interpretivist research philosophy wherein reality can be understood through subjective interpretation of its context (Hussey and Hussey, 1997). On the other hand, quantitative data is in line with the positivist research philosophy which views reality from a strictly objective perspective (Levin, 1988).
Some of the most popular approaches which can be used to gather either qualitative or quantitative data are: surveys, action research, case studies and experimentation (Saunders et al, 2007, p. 126). Of these, surveys tend to be used mostly for descriptive and exploratory research that covers a broad and relatively undefined topic. In contrast, action research is based on researchers actively collaborating and working with practitioners in a highly specific field in order to investigate a narrow and well defined issue or problem. This tends to be for the purpose of finding practical solutions to a specific issue and thus is a highly involved research methodology. Case studies are a middle ground between action research and surveys, aimed at carrying out in depth research but without the direct involvement of practitioners, helping the researcher to avoid becoming too involved with the organisation, and developing a narrow view. Finally, experimentation focuses on the creation and investigation of specific scenarios, with the aim being to determine how these scenarios unfold, with certain external factors controlled to allow other factors to be investigated in significant detail (Saunders et al, 2007, p. 128).
In the case of this research, postponement is a relatively well defined area, but one that has still not been fully investigated and formulated in the literature as discussed above. As such, when investigating postponement it is important to use a methodology that is focused enough to be strongly rooted in the existing research, whilst not being so narrow that it fails to consider the potential for gaps in the theory. This implies that the best methodology to use is a case study of organisations that have implemented postponement strategies. This methodology will help understand how these postponement strategies have provided practical strategic value to the companies that have implemented them. It will also provide insight into the impact on postponement on the supply chain and the relationships in the supply chain, as well as the steps that could be used to address the low rate of postponement adoption amongst companies in general.
In case studies, both quantitative and qualitative method can be used to gather data. This study will mainly use a qualitative method. The qualitative approach is considered most suitable when a researcher wants to explore a problem through different variables which are not possible to be measured statistically (Ghauri and Grohaug, 2002). The case studies should also look to obtain significant amounts of qualitative data and feedback from managers in the companies to determine what they think the main issues with postponement are at the present time, and thus how these issues could be resolved by future theoretical and empirical developments in this area.
The researcher has access to all the secondary data required for the literature review of this study which is necessary for its theoretical underpinnings. The sources of secondary data include books, journals and academic papers available in libraries or in digital formats as e-books or over the internet. Moreover, significant information for this research will be acquired through the authentic internet sources including websites of various consultancy firms and institutions. As for the primary research pertaining to the case study, the researcher has sought to acquire access to the managers of several companies which apparently practice postponement strategy to some extent.
4. How Your Work Fits Existing Published Work:
Literature Review and Initial Research
According to Wan (2006, p. 8) “a postponement strategy aims at delaying some supply chain activities until customer demand is revealed in order to maintain both low system wide cost and fast response”. This implies that a postponement strategy is a process by which the supply chain can be better brought into line with customer demand levels, thus enforcing some form of consumer pull on the chain. There are various types of postponement strategies, which include postponing the purchasing of certain perishable materials; postponing the completion of products to allow customers to customise them; postponing the completion of products until they are closer to customers to reduce lead times; and postponing the distribution of products to ensure distribution strategies can be coordinated central (Wan, 2006, p. 12). However, the emergence of e-commerce has led to a revolution in the range of postponement strategies which can be used, with virtual inventories effectively being independent of the physical location of stock and components. This allows retailers to fulfil customer orders by postponing their inventory at the factory level until a customer order is placed, at which point a range of modular components can be assembled in a variety of locations allowing for a more advanced approach to postponement (Bailey and Rabinovich 2005).
This high level of flexibility and responsiveness can provide a wide range of benefits to the companies. Some of the most obvious benefits or advantages are a reduction in inventory costs; a reduction in transportation costs due to direct distribution; a reduction in obsolescence levels and an increase in customer responsiveness (Wan, 2006, p. 22). However, perhaps an even more important potential benefit is the fact that postponement can be carried out at the point of product differentiation, thus creating a powerful strategy to improve supply chain management (Davilia and Wouters, 2007, p. 2245). Specifically, by implementing such a strategy, a company can manage to create a generic product range that is low cost and needs relatively minimal levels of customisation; whilst also offering highly customisable premium products which can be customised to specifications and offered at a higher rate. This ability to pursue two strategies at once allows companies to target multiple market segments, thus potentially achieving higher levels of customer responsiveness and better customer targeting (Davilia and Wouters, 2007, p. 2245).
The use of a postponement strategy can enhance these benefits, as well as facilitating and supporting the development of other strategies such as mass customisation and modularisation. This is because all of these strategies and fundamentally linked to the product architecture. A postponement strategy necessitates the creation of modular designs, thus making it easier for companies to produce a wide range of products whilst still using mass production techniques. As such, when these three are combined into a single supply chain strategy, they offer companies an unparalleled level of flexibility and responsiveness, with the cost benefits of postponement helping to counter the additional cost of using modularisation and mass customisation (Mikkola and Skjott-Larsen, 2004, p. 352). However, in order to successfully apply these strategies, a high level of supply chain coordination is needed. This implies that high levels of buyer supplier cooperation are also required if a company is to use postponement to meet the challenges of a demanding marketplace (Yang et al, 2007, p. 984). This can place strain on the relationships in the supply chain, as buyers and suppliers may be unable to agree on the best way to achieve postponement and customisation, and on how to share the costs and benefits.
However, once the conditions for a postponement strategy have been created, the strategy itself fundamentally revolutionises a company’s supply chain. It allows for numerous customisation strategies to be pursued in parallel and turned delivery and production lead times into a variable which can actively be managed as part of the supply chain efficiency maximisation (Brun and Zorzini, 2009, p. 205). This is because the postponement strategy works by striking a balance between the degrees of customisation achieved, the price of the product, and the delivery time to customers. Standard customisation strategies tend to create too high a level of customisation, thus increasing costs and lead times. In contrast, mass production strategies do not allow for customisation, thus reducing the level of differentiation. By using a postponement strategy, companies can strike a balance and provide their customers with their own specific balance of customisation, cost and lead time, thus boosting overall supply chain effectiveness and customer satisfaction levels (Su and Chuang, 2011, p. 24).
However, recent surveys of supply chain professionals and businesses have clearly indicated that, in spite of the potential benefits of postponement, it is still an underutilised concept amongst major businesses. Specifically, a survey by Yang et al. (2005, p. 991) of businesses in the food, clothing, automotive and electronics industries showed that most companies expected postponement to be less used as a strategy in the future. According to Boone et al (2007, p. 594) this slow rate of adoption is due to an inability to extend postponement research beyond its manufacturing context, or to provide empirical proof of the strategic benefits. As such, this is a key issue that this work will aim to address.
5. Why You Are Doing This Topic:
Postponement is a relatively common concept in logistics, marketing, and manufacturing concept, with forms of informal postponement being used by companies since the 1920s (Yang and Burns, 2003, p. 2075). The application of postponement as an operations and supply chain strategy is however in its formative stage as many companies are only starting to witness the full prospects of adopting this practice. The Council of Logistics Management defines postponement as “the delay of final activities (i.e. assembly, production, packaging, tagging, etc.) until the latest possible time. A strategy used to eliminate excess inventory in the form of finished goods, which may be packaged in a variety of configurations.” (Kong and Allan, 2007) This definition implies that postponement delays one specific step that occurs early in the production or procurement process of a product till the end. As evident from its definition, the aim of adopting this practice is to minimize or eradicate inventory by finalizing a product right before it is set off for delivery.
Many management practitioners and business executives who are closely familiar with postponement phenomenon view this concept only as an operational strategy. They regard postponement as a process of improving the production and assembly of a product. Although the practice of postponement may be certainly effective in improving production operations, postponement should be expanded and explored as a supply chain strategy. However, in modern times a more strategic approach to business and operations management has seen postponement used as a strategy for managing supply chains and maximising their efficiency. In this context, postponement can offer to companies a new way to conceptualise their product design, process design and supply chain management in order to obtain new forms of competitive advantage. However, the relatively limited use of postponement in this area indicates that more research needs to be undertaken into the factors that will drive the use of postponement as a manufacturing strategy in supply chain management. This proposal will examine the literature in the area and propose a methodology to obtain a better understanding of the use of postponement strategy, and the contributions it can make to modern supply chain management in the competitive markets.
6. Timing Mileposts
1Stage 1: Area of interest identified
2Stage 2: Specific topic selected
3Stage 3: Topic refined to develop dissertation proposal
4Stage 4: Proposal written and submitted
5Stage 5: Collection of data and information
6Stage 6: Analysis and interpretation of collected data/information
7Stage 7: Writing up
8Stage 8: Final draft prepared – submission of dissertation
9Final Deadline – nine months from classroom date.
Bailey, J.P. and Rabinovich, E., Internet book retailing and supply chain management: an analytical study of inventory location speculation and postponement. Transportation Research Part E: Logistics and Transportation Review; 2005, Vol. 41, p159-177.
Boone, C. A. Craighead, C. W. and Hanna, J. B. 2007. Postponement: an evolving supply chain concept. International Journal of Physical Distribution & Logistics Management; 2007, Vol. 37 Issue 8, p594-611
Brun, A. and Zorzini, M. 2009. Evaluation of product customization strategies through modularization and postponement. International Journal of Production Economics; Jul2009, Vol. 120 Issue 1, p205-220
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Kong and Allan (2007) More on Postponement Adapting Postponement to the Supply Chain. Available from http://kongandallan.com/en/us_pdf/MOP0707U.pdf (cited on 15th April, 2013)
Levin, D. M. (1988). The opening of vision: Nihilism and the postmodern situation. London: Routledge.
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Saunders, M. Thornhill, A. and Lewis, P. 2007. Research Methods for Business Students. Harlow: Financial Times / Prentice Hall.
Su, C. J. and Chuang, H. C. 2011. Toward Mass Customized Product Deployment in E-Commerce: The Modularization Function and Postponement Strategy. Journal of Organizational Computing & Electronic Commerce; Jan-Mar2011, Vol. 21 Issue 1, p24-49
Wan, J. 2006. Postponement Strategy in Supply Chain Management. University of Cambridge. http://www.ifm.eng.cam.ac.uk/mtms/events/documents/Johnny_Wan.pdf Accessed 15th April 2011.
Yang, B. and Burns, N. 2003. Implications of postponement for the supply chain. International Journal of Production Research; 6/15/2003, Vol. 41 Issue 9, p2075-2090
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Yang, B. Yang, Y. and Wijngaard, J. 2007. Postponement: an inter-organizational perspective. International Journal of Production Research; 2/15/2007, Vol. 45 Issue 4, p971-988
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