Management Development Institute - Gurgaon

Supply Chain Management

Case-06
Postponment Strategies
ID Name
SCM
1 20EMP1-04 Ankur Sharma
Group
2 19PT2-12 Hardeep Singh
Case Presentation
3 19PT2-23 Pankaj Jindal
4 19PT2-25 Prasanta Saha
5 19PT2-38 Vipul Bhagat

Presentation Date: 15.09.21

Executive Management Programme

EMP: Oct 2019 & Apr 2020 Batch
Term: VIII & VI (Jul-Oct 2021)
 Postponement Strategies
Delayed Decision
• Initial Component Commonality
• Late Product Customization

Customer
Supply Chain Flows without Postponement to
• Minimize gap: Orders & Inventory
• Gain better info on Demand

Supply Chain Flows with Component

Commonality & Postponement

Spectrum of Postponement Opportunity

Procurement of Manufacturing
Assembly Packaging Distribution
Raw Materials of components

Possible points of Differentiation

 Postponement Strategies
At the point of
Gaining information
postponement a
about customer demand
Delayed decision making standardized module
by waiting to customize a
about a product starts to acquire
product for a particular
customer/ market
market or customer
specified characteristics

The standard module is built-to-forecast and the finished product is built to a better forecast or even built-to-
order
• Based on two major principles of Demand
Forecasting-
 The accuracy of the forecast demand
decreases with an increase in the time
horizon
 Demand projections for a product group
are generally more accurate than
projections for individual products
Postponement Strategies
 Benefits of Postponement Strategy

 Better forecast about the end product

demand
 Ability to quickly respond to the
demand signals
 Lowered inventory cost due to risk
pooling
 Avoiding mismatch between orders and Better Demand
Forecasting
inventory on hand

Procurement of Manufacturing Assembly Packaging Distribution

raw materials of component
parts

Spectrum of Postponement Opportunity

Organisations Under Study
 General Motors
Need and opportunities for postponement strategies in Automobile industry
Modular System of Components
Individually customized vehicles have forecast variability
New models come out every year with new capabilities
High inventory holding cost of Finished Vehicle

Postponement
strategies at
GM

Post-sale
Customization
ECU accessorizatio
of Cars
n
Postponement Strategies- General Motors (ECU Software Customization)
ECUs up to 80 Nos. Power Steering Human Machine
Engine Control Control Unit Interface Battery Management
Unit Programmed to System
Door Control Unit specific Car Infotainment
Power Steering
Control Unit Speed Control Unit

Before Postponement After Component Commonality & Postponement

Costs
Supplier GM Supplier GM
Programed Specific Car 1. Supplier charged GM a
Generic ECU General Car Car Specific Specific
Car specific Assembly premium for Software
Hardware Assembly Software Car
ECU installation
2. High Repair & Maintenance
ECU1 Car1 ECU1s Car1

ECU2 Car2
Benefits ECU2s Car2
1. Inventory cost savings of
ECU3 Car3 ECUH Car ECU3s Car3
10-15%
2. Maintenance costs savings
3. Responsive to immediate
Demand
Redesigned ECUs & Assembly
Process. Time Reqd.
ECUn Carn Dealers Capability for Flash 81 secs
ECUns Carn
Programming developed
 Postponement strategies at General Motors
ECU Post-sale accessorization Customization of Cars
Systems in a car have a It provided a $28 billion Customer’s hands on
CPU consisting of various Industry involvement in building car
ECUs (30-35 Per Vehicle) Two major areas- of their dreams
Earlier ECUs were • Entertainment Systems A shift from low Cost
sourced with pre-loaded Offer key differential options Shipping to Speed of
software in Vehicles Shipping
Plug and play capability
ECUs were developed on allowed for uploading of Goal of having 60 to 80
a common hardware systems at the dealer end percent of the vehicles to be
platform Made to Order
• Wheel Set
Software installation was Specialized wheels on cars
postponed towards the make them more desirable
end of Vehicle Assembly
 HONDA
Conventionally Automobile Industries used single platform to design different
models – Difficulty in differentiating different models
Honda decided to introduce Flexible Manufacturing System (FMS)
Three major elements
• Programmable robots
• Outsourced subassembly
• One size fits all conveyor belts

Honda faced problems in the designing a Vehicle for different markets

Example of Honda Accord
Honda developed capability to design flexible chassis whose height width and
length can be modified
A truly robust chassis that could transcend into different models
 HONDA
3/5 Door Hatchback 4 Door Sedan Stream Minivan

Application of such chassis design allowed Honda to introduce three different

models of Accord – Saving nearly 20% of the cost
More local responsiveness by the car makers according to customers in different
markets
Car manufacturers moving towards industry standardization where parts and
components will come from different car manufacturers
 Reebok

• Reebok a licensed supplier for NBA and NHL

• When teams do well more team apparel is demanded - Sales of t-shirts and
jerseys not predictable – as its difficult to know which team will be ‘hot’, at the
beginning of the season
• Demand for player specific jerseys more volatile than for a given team
• Meeting customer requirement in short times a major challenge

Printed T-
Blank
shirts with
Tshirts on
Printing after the event team logo
hand before
after the
the event
event

Postponement followed conventionally in the industry

• Stable items at the retailers had expected lead time of 3 to 12 weeks
• “Hot” items expected lead time less than a week
 Postponement Strategy At Reebok

Team and player

Team only

Blank jersey
Raw Contract Finished Jerseys
Materials Manufactures Reebok WH Reebok Retailer
DC

2- 16 weeks 4 to 8 weeks 3 to12 Weeks 1 Weeks

1 to 2 weeks for “Hot” Demand
 At a price of $25 for long sleeve t- shirt and $250 for an authentic jersey, the cost of
lost sales is greater than all costs incurred from raw material to final product supply
 Manufacturing of blank Jerseys requiring low skilled labor is outsourced
THANK
S